YouTube and the Future of Advertising

YouTube and the Future of Advertising

How 15 Seconds of Your Time Has Changed an Industry

We all live in the apex of human entertainment, watching YouTube videos. Basically every type of video in every kind of field is available. On this virtual database, over 300 hours of video are uploaded every hour by users who keep the content rolling in by the barrel.

And while we in 2017 have the most access to the most content in the history of the world, it comes with a catch. That catch? Ads. Few people on this Earth hate bureaucracy more than Joshua L. Siegel and the working behind the ads on YouTube videos may as well be the visual representation of bureaucracy.

YouTube is littered with ads. Most of the time when you click on a video of any genre, you receive a 15-30 second (and sometimes even longer) video that advertises some product or service. The good folks at the internet created a downloadable ad-blocker (insert champagne emoji), but t it turns out that YouTube ads are a part of a digital advertising and economic trend that we simply cannot ignore.

It turns out that the 15 seconds you have to endure before watching your video aren’t the only thing to hate about ads! These ads are actually being used to censor on the videos so even if you utilize the God send that is Ad Blocker you will still feel the ads wrath in content other ways. Want to use a particular sports or politics channel to get an uncensored opinion from your favorite off-the-cuff YouTube personality? Those days may be coming to an end…

It’s no secret that the youths of America seem to be following the trend of cord cutting, or rejecting the often expensive cable packages that their parents generation subscribed to. Those young adults happen to coincide with the highest YouTube usage rates, with the 25-34 year and 35-44 year olds using it at rates of 23% and 26% respectively.

Interestingly enough, it’s estimated that half of all viewers under 32 will have cut the cord and gone without a traditional viewing package by 2025. With such high rates, that happen to surround the demographic that is most likely to give up the traditional television route, it’s no surprise that companies would turn to YouTube to push their products.

I know what you’re thinking, “Josh, this is a finance website, Alex is going to kill you for not including anything about money.” Well here’s the money part.

We’ve all heard of the YouTube sensations that have hit it big with large subscriber bases and millions of views. It’s not YouTube that’s paying them directly though; it’s the advertisers. But despite the huge number of YouTube viewers and cord cutters, YouTube is not nearly as big of a payout as it once was for these popular pages. That is because YouTube acts as a middleman, pricing the particular channels in a tier based system.

YouTube uses a lot of the same principles that networks take to advertising, but they’ve added their own spin because of their unique and vast medium. Of course, the more popular your YouTube channel is, the more money you’re slated to make off of it, just like a television show. The premium for a slot at the Superbowl is a lot bigger than that of The Price is Right (no offense to Bob Barker or Drew Carey). In the

YouTube realm, channel hits or views are the same type of indicator of advertising price as television ratings, and advertisers are charged as such.

What’s different for YouTube is how they divide up their channel packages too. Instead of offering a particular channel to an advertiser, they do portfolio packaging. These portfolios are known as verticals, and feature packages based particular genres such as cooking, how to, sports, gaming, etc. In those verticals, particular channels are offered on a tier based on the amount of views they have, meaning the advertisers don’t necessarily know on what channel their ads will show up.

Those vertical packages are established for the simple fact that the folks who run these pages are amateurs, not professionals who have been prepped their whole careers to be on national television. This is an important detail in how advertisers do business because the last thing SC Johnson (a family company, if you haven’t heard) would want is for some YouTube star to go rogue and share controversial content or remarks on their page. There is simply less of a boundary between the content posted on YouTube channels and that of even live television because at the very least Jimmy Fallon has been groomed to stay off of certain topics.

Now, this isn’t to say that television isn’t completely safe for advertisers. We’ve seen several massive TV stars lose their media empires over controversy (Bills Cosby and O’Reilly). And once the advertiser finds an appropriate outlet, they aren’t completely off the hook when it comes to producing an ad that will sell their product without flacklooking at you Pepsi.

YouTube has long been an avenue for users to post basically whatever views or statements they felt necessary. As previously mentioned, they didn’t have to run it through anyone else (let alone the FCC) before posting. Unfortunately for the YouTube stars trying to make a living off of those ads, that freedom doesn’t exist.

When a high profile YouTube star gets in trouble, they reserve the right to cut that channel from a particular tier, meaning less ad revenue for those who once thought this medium a free domain to express themselves. The almighty dollar speaks the loudest and when you threaten YouTubers by censoring them with lower returns, then their response should be obvious censoring. And at the end of the day, this is a loss for the common man.

Sources:

Blumenstien, Howard. O’Neil-Hart, Celie. “The Latest Video Trends: Where Your Audience Is Watching.” 2017. Accessed July 27. https://www.thinkwithgoogle.com/consumer-insights/video-trends-where-audience-watching/.

Rosenberg, Eric. 2015. “How Youtube Ad Revenue Works.” March 26. http://www.investopedia.com/articles/personal-finance/032615/how-youtube-ad-revenue-works.asp.

Sawyer, Michael. 2017. “Why YouTubers Are Losing so Much Ad Money (and How They Can Survive the Crunch).” May 10. https://www.polygon.com/2017/5/10/15609660/youtube-youtuber-ad-money-google.

Youtube Statistics – 2017.” 2016. March 19. https://fortunelords.com/youtube-statistics/.