Google Inc (GOOG): YouTube’s Disruptive Impact

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YouTube is increasingly becoming a major force in disrupting network TV. Google Inc (NASDAQ:GOOG)’s video streaming site has become a major outlet for the portrayal of video advertisements, many of which are shifting over from regular TV and other offline and online media outlets. YouTube’s active user growth has been rock solid and just crossed 1 billion users. With roughly one out of every two Internet users visiting YouTube, the streaming giant has a bright and rosy future ahead.

Google Inc (GOOG)

The number one video site in the world has been growing at a strong rate from all angles. The monthly traffic to its platform had reached the highly coveted 1 billion user mark, from a previously reported 800 million in 2011. YouTube is increasingly getting a lot of attention from advertisers as a result of the huge traffic to its site.

Google Inc (NASDAQ:GOOG) doesn’t break-down the revenues generated by YouTube but almost certainly it’s a multi-billion dollar business for Google with some sell-side analysts projecting that the division generates roughly $4 billion in revenues. And all the big marketers are spending a lot of money through various Google sites. Google Inc (NASDAQ:GOOG) did reveal that its top 25 advertisers are spending more than $150 million a year, across Search, Display and YouTube.

YouTube is increasingly attracting more and more creators and now has more than 1 million creators from more than 30 countries that are uploading an astonishing 72 hours of video on YouTube every minute. YouTube’s revenues from partners have doubled for the 4 years in a row.  Thousands of these content partners are doing very well financially in part due to YouTube’s revenue share arrangements.

To help its partners earn more revenue, one of YouTube’s officers stated that the company might consider experimenting on its platform, by allowing some of the content creators to charge the user a subscription fee. YouTube gets roughly 70% of its traffic from outside the U.S. and this power to reach a world-wide audience is increasingly attracting more global advertisers.

A very interesting data-point revealed by Google Inc (NASDAQ:GOOG)‘s management team, clearly shows the power and the scale of YouTube; Google’s top 100 global advertisers’ increased advertising spend on YouTube by 50% more in 2012 from the previous fiscal year. If advertisers didn’t get a satisfactory ROI for their marketing expenditure, they wouldn’t increase their budget on YouTube by such a big margin.

YouTube has been a high traffic website for a long-time, but the monetization of this large user-traffic has taken-off substantially only in the last 2-3 years. Thanks to an ad-format called TrueView, YouTube’s revenue generation scale has grown substantially. This ad format enables users to skip ads, and advertisers pay for only the ones which have been streamed. It has been a great success, as roughly 70% of YouTube’s in-stream ads use this format.

At the end of Q3 2012, Google disclosed that YouTube had more than 200 times more video advertisers than the average U.S. TV network. YouTube boasts of more than 1 million advertisers on its platform, of which a majority are small businesses.

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