1. YouTube Hits A Bump
YouTube reported losses this quarter for the first time in well, forever, with revenue dropping a full 2%.
But before we get into that, there’s another piece of YouTube data that needs clearing up.
Many people, it seems, were taken in by the latest edition of Nielsen’s The Gauge report that showed YouTube had 8% of streaming viewership, which put it ahead of Netflix, at 7.3%. This resulted in numerous headlines proclaiming “YouTube beats Netflix!”
Not actually the case.
Nielsen’s number includes viewership on YouTube TV, Google’s vMVPD, (see graphic below) which, given that it has around five million subscribers, is why the number of people watching “YouTube” on their TV set is so high.
It’s a misleading stat—they also included Hulu’s Hulu Live TV vMVPD in Hulu’s 3.8% share—as vMVPD views are very different from single app views. Sort of like comparing a single network to an entire MVPD.
Point being that YouTube is not the top streaming platform among TV viewers and the decline in ad revenue seems to be further proof of that.
Why it matters
In the various panels I moderated at the TV of Tomorrow Show this month, the question of what exactly is “TV” frequently came up (mostly because I asked, but still…)
You see, it seems that some brands and agencies (correctly) place streaming TV (CTV) in the same bucket as traditional pay TV, while others make it its own separate category, while others still lump it in with “digital video” which includes YouTube and web- and social-based video.
More confusing still, YouTube is sometimes lumped in with CTV and sometimes lumped in with digital video.
Making any kind of spending comparison all but impossible to calculate.
That said, most companies do seem to put YouTube in the “digital video” category as it is still mostly viewed on non-TV devices (phones and laptops) and spending in that category is down.
This is not all that surprising in that video ads on YouTube are frequently short and to the point—there’s a sense of “please don’t hit skip!” there, or, worse, they are unskippable and thus annoying AF to the viewer who only wants to find out how to reset the clock on their car.
Compare that to TV commercials where the emotional impact is much greater and the annoyance factor is somewhat less.
And where things like “branding” can still happen.
Even in periods of ad cutbacks, big brands like television because it allows them to engage in brand building, running commercials like Nike’s “Just Do It” spots that burnish the brand’s reputation rather than trying to sell a specific product. TV is uniquely positioned for that in a way that digital video is not.
Finally, there is the success of YouTube’s TikTok imitator “Shorts” which seems to be a better vehicle for advertising, given the ability of platforms with very short form video to make the ads in the platform seem less onerous.
All of which may leave YouTube in a sort of no-man’s land for advertisers.
That doesn’t mean their ad revenue will implode—it’s still an incredibly popular platform and that shows no sign of slowing—it’s just that they are unlikely to see the sort of 43% growth they saw in Q3 2021 again.
Especially given the growth of ad-supported streaming which can offer a different and arguably better value proposition.
What you need to do about it
If you are a streaming programmer, time to go in for the kill and sharpen up your decks about TV’s advantages over digital video. I know many of you sell digital video together with your streaming inventory, but there’s a way to slant that in order to make it clear that having both is far more advantageous than just going the digital video route.
If you are Google, the key right now is to figure out how to make the most out of Shorts, something you are no doubt already doing. That, and you might also want to think about amping up your lobbying efforts against TikTok, there would seem to be a lot of support for getting them banned.
If you’re an ad agency, time to develop a POV around digital video versus streaming, ideally one that understands that streaming TV and traditional pay TV are one and the same in the minds of consumers, even if the former allows for more precise targeting and metrics.
2. The Battle Over The TVOS Goes Global
You know how we’ve been telling you that the TV operating system is the next big battleground and how that battle is going to look very different outside the U.S.? Well there are some more skirmishes this week.
Last week, the Competition Commission of India filed a very sharply worded report wherein they accused Google of preventing smart TV OEMs from using Amazon’s Fire TV OS. It was something Amazon had been pushing pretty hard on—they filed a 293-page doc in support of their position— and the Commission seemed to reject Google’s claim that it was just protecting the Android software’s purity so as to avoid the confusion of multiple versions. (Fire TV is built on the Android platform but on a “forked” or somewhat different version and the Android thing is to prevent issues on mobile phones, not the TV OS..)
Fast forward a few days and TCL, one of the big Chinese TV OEMs, announced that it would soon be rolling out Amazon Fire-powered TVs, something it had not been able to do previously, allegedly because of Google intimidation.
So that deal, along with similar deals with Chinese OEMs Xiaomi and Hisense, seems to indicate that Google and Amazon have reached a truce, albeit a temporary one.
Why it matters
Google and Amazon are fighting to get their TV operating systems installed on smart TVs around the world, with Europe and Asia being two current hot spots.
While they are fighting each other, they are also battling Samsung and LG, both of whom have more experience making television sets and can also offer free content via their robust FAST services, along with advertising and the data that comes with it.
So a four-way race for now, though Roku allegedly still has big plans for Europe.
As for why the interface matters, there’s a simple one-word answer: data.
If you control the interface, you control what apps are on the TV, what order they appear in on the home screen and how those apps and shows are promoted to your audience.
You also control the home screen experience and so your FAST is the centerpiece of that home screen and of the entire user interface.
Meaning you stand to make a whole lot of money from owning said interface.
With Amazon and Google, the issue is that the Chinese OEMs who make most of the TVs on the lower end of the market don’t have their own operating systems. So they rely on Google and Amazon to provide it for them, much as they rely on Roku in the U.S.
Having a Fire TV or Google TV interface makes the sets more marketable and allows them to charge a higher price while still moving more inventory.
This battle is only going to heat up further as Amazon and Google look to expand into more of the world, taking on established OEMs like Samsung and LG for control of the smart TV market.
Also notable is that the Roku-branded TVs in the US are made by Hisense and other Chinese companies. And the more comfortable they become with Amazon overseas, the easier it will be for Amazon to strike deals with them in the US.
What you need to do about it
If you are an OEM, remember that user experience matters a lot, that many consumers gave up pay TV back in the day because they found they were paying “Nordstrom prices for Kmart service” and that control of the operating system gives you a goodly amount of power in the ecosystem along with the opportunity to make a lot of ad revenue, both from brands advertising on your FAST service and from programmers who want to promote their shows to your audience in the TV equivalent of a point-of-sale ad.
If you are Google, remember that there’s a lot of sentiment against you now, that your use of data is often suspect and that the Android OS doesn’t have many competitors right now. Point being, move wisely, be more accommodating to your rivals and you can avoid governments cracking down on you while still successfully growing your business.
Alan Wolk is co-founder and lead analyst at the consulting firm TV[R]EV. He is the author of the best-selling industry primer, Over The Top: How The Internet Is (Slowly But Surely) Changing The Television Industry. Wolk frequently speaks about changes in the television industry, both at conferences and to anyone who’ll listen.
Wolk's Week in Review is an opinion column. It does not necessarily represent the opinions of Fierce Video.