For Google's YouTube and Yahoo Screen, mobile ad strategy takes key role

Online video advertising, shifting TV ad budgets and the growth of mobile video are all driving revenue strategies for OTT players including Google (NASDAQ: GOOG) and Yahoo Screen. For Google, online video ads are of prime importance for its YouTube platform. Yahoo, meanwhile, is banking on committed ad dollars and announced a number of new series for Yahoo Screen this year.

Google saw a 45 percent growth in new advertisers for its YouView ad platform last year, which was developed for YouTube. And the online search giant announced during its first-quarter earnings call that it is splitting out YouTube ad revenue results from its other ad revenues, such as CPCs and paid clicks.

For the first quarter of 2015, Google posted total revenues of $17.3 billion, and earnings per share of $6.57, coming in slightly below Wall Street estimates of $17.5 billion and $6.67 EPS. The company saw total advertising revenues of $15.5 billion--up 11 percent year over year--with total operating expenses of $6.45 billion and capex of $2.9 billion.

Omid Kordestani, SVP and chief business officer for Google, said he was very excited about the continuing shift of content and advertising from television to digital. "The place where 1 billion people come to watch video is a natural home for video advertising budgets," he told analysts on the company's first-quarter earnings call.

Google will also be expanding its Google Preferred premium advertising program, which makes the top 5 percent of all YouTube videos available to advertisers, he said. The program, launched in spring 2014, sold out its advertising slots by early October. Its Partner program revenues also jumped 50 percent year-over-year.

"We have run over 6,000 brand live studies to date across some of those largest brand advertisers, and in studies we have run for Google Preferred campaigns, we found that 94 percent of the campaigns we studied drove a significant lift an average of 80 percent in ad recall," Kordestani said. "That's why we're bringing it back this year and expanding it to more than 10 new markets."

Patrick Pichette, Google's CFO, called the shift in mobile behavior around ads, compared to TV viewer behavior around ads, "very, very dramatic" compared to behavior of TV or desktop audiences. "There's an immediacy having this device always with you, using it as your assistant, using your voice to make commands and getting results, using the maps and being in a moment of purchase decision," he said.

Kordestani pointed out that eight out of 10 smartphone users will whip out their phone to research products while they're in the store, about to make a purchasing decision. Gaining that type of knowledge will help advertisers target consumers far better. "It's often more valuable to know someone is shopping for a new SUV than it is to know basic demographic information about them," he said.

Yahoo, in the meantime, is continuing to boost its ad strategy around Yahoo Screen. After a first quarter in which its MVNS (mobile, video, native, social) revenue, at $363 million, approached that of its more established display ad revenues, at $381 million, the company added two more video advertising products to its portfolio. It is moving ahead with co-branding campaigns, such as one it recently did with Kia across its platforms.

The variety of campaigns Yahoo offers was highlighted at its Newfronts presentation in New York City this week. Yahoo announced a slurry of new online video series, including Thug Kitchen, I Am Naomi and Riding Shotgun. Top of the content pack this year, however, is Ultimate DJ, a competition created by American Idol's Simon Cowell that may tap directly into a young, music video-friendly viewer base.

Yahoo is banking on its diverse content mix to attract advertisers, who can buy "according to show, as Honda did with Community, the cult-hit TV show Yahoo bought last year. They can also advertise by channel--tech, finance, food, fashion--and by audience, which is the automated side of the platform," an Adweek article noted.

For more:
- Forbes has this analysis
- see Google's earnings release
- and this Seeking Alpha transcript
- Adweek has this Yahoo story

Related articles:
Google looks to TV screen to rake in YouTube revenues
Google signs 30 media companies, 20 advertisers to Partner Select online video program
Yahoo, AOL debut new series as original content race enters next stage
Yahoo pushes digital video advertising forward as display-ad revenue falls to $381M