Google Inc (NASDAQ:GOOG) has recently started experimenting with a paid YouTube subscription service, and this has generated growing interest by Wall Street analysts and the specialized media about the business potential of the world´s biggest video website. Subscription services could make some money for Google Inc (NASDAQ:GOOG) in the middle term, but make no mistake YouTube is much more than that.
Google Inc (NASDAQ:GOOG) has admitted that its YouTube subscription service is still in experimental phase, and the company is taking a slow and incremental approach to the project. When looking at the list of subscription channels, it doesn´t sound like YouTube will become a big threat to established players like Netflix, Inc. (NASDAQ:NFLX) or Amazon.com, Inc. (NASDAQ:AMZN) anytime soon.
Both Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX) offer a wide selection of content for a convenient price: while Netflix charges a flat a $7.99 per month for unlimited consumption, Amazon Prime subscribers pay $79 a year for unlimited streaming and free two day shipping on Amazon products, which is a great deal for regular Amazon shoppers.
With more than 75,000 movies and TV tittles, Netflix has a bigger library, and it has been the first to move into original content with its successful House of Cards. The online streaming pioneer has been changing its focus when it comes to content; Netflix is putting more attention to quality over quantity, and this seems to be the way to go judging by subscribers’s responses.
Amazon has been closing the gap lately, the online retailer has been aggressively bidding for content, and it has nearly 40,000 titles in its library. Amazon also provides access to current TV shows for an extra cost, and the company is venturing into original content too. Amazon is bringing its well-known competitive drive into the online streaming video, and it has made amazing progress in the last years.
Even if YouTube widens its subscription service over time, it won´t be spending the same amounts of money that Netflix and Amazon are investing in content. YouTube subscription services may be a good alternative for niche low cost content producers, and it could be particularly convenient for established YouTube stars looking to make some extra money, but this will hardly be a game changer for the industry.
Maybe as years go by, and if the service manages to be successful, YouTube can attract some big content producers to its subscriber service platform which could be a big thing for the company. But it´s not going to happen anytime soon, if it ever happens at all.
The strategic value of YouTube
Google Inc (NASDAQ:GOOG) makes most of its money from advertising, and that´s where YouTube is an invaluable strategic asset. The online video platform announced in March that it surpassed the barrier of 1 billion unique users per month. To put that into perspective: if it were a country, YouTube would be the third largest in the world behind China and India.
According to its own statistics, over 4 billion hours of video are watched monthly on YouTube, the service is available in 53 countries and across 61 languages and it gets more than 70% of traffic from outside the US. When it comes to mobile, YouTube is one of the most popular apps on different platforms, and more than 25% of its global traffic comes from mobile devices.
YouTube is much more than a video platform; it’s also a music streaming service – according to Nielsen it´s the preferred music discovery tool among teens – and a social network where people upload all kinds of content and interact with each other.
Hangouts was formally a part of Google +, but is often streamed and uploaded to YouTube, providing users a unique opportunity to interact with world leaders like President Obama or Dalai Lama.
Nearly one out of every two people on the internet visits YouTube to do anything from uploading personal videos to watching live world events or listening to music, so it´s only reasonable to assume it will continue to leverage this vehicle for ad revenue growth over the long term. YouTube has incalculable strategic value for Google Inc (NASDAQ:GOOG) way beyond subscription services.
Andrés Cardenal owns shares of Google and Amazon. The Motley Fool recommends Amazon.com, Google, and Netflix. The Motley Fool owns shares of Amazon.com, Google, and Netflix.
The article Google: Unleashing the Power of YouTube originally appeared on Fool.com and is written by Andrés Cardenal.
Andrés is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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