• by John Tuchtenhagen , March 27, 2015

I was recently invited to sit on a Google agency panel designed to solicit my perspective — as a cross-channel video media buyer — on what obstacles remained for the company’s YouTube product to unlock the large-scale television dollars that have eluded it thus far. 

YouTube is growing at an enviable clip, with an estimated $4 billion in revenues in 2014: a 33% increase year over year. But estimated total TV revenues were over $69 billion in 2014 — an almost 18x bigger opportunity. And given the immense pressure YouTube is facing from competitors like Hulu and Vessel, there’s a growing sense of urgency to crack the television nut very soon.

The good news is that with predictions of a shaky TV upfront market, given weak Q1 scatter pricing and the continued erosion of network and cable ratings, now may be the best time in a generation for disrupting the TV upfront process and making bold moves to steal away brand dollars from the traditional broadcast and cable companies.

The real reason YouTube isn’t seeing substantial growth at the expense of the TV industry can be explained by three basic tenets of television buying I am calling The Three Ps:

1.     Premium: Not enough premium content compared to TV by a factor of over 20.

2.     Price: More expensive than most cable and much of broadcast prime.

3.     Proof: No definitive proof of its ability to drive in-store sales at scale.

Television has all three Ps while YouTube, unfortunately, has none.

Premium:

A very small amount of YouTube’s inventory is truly comparable to premium TV programming. Inventory regularly available on Google Preferred is premium from an online video perspective, but not when compared to television. Huge pockets of inventory are more “Chopped” or “Rizzoli & Isles” than NFL playoffs. The bold move YouTube must make is to invest in major events, sports, and premium original programming in a big way. 

YouTube needs to buy the exclusive rights to three or more of the following: the Academy Awards, the World Cup, NFL Sunday ticket, the next “House of Cards.” (I realize many of these properties are not for sale, but you get the picture.)

Price:

Five years ago, it was easy to sell clients on investing small budgets into YouTube — you could get sight, sound, and motion ads for prices lower than anything on television. But times have changed. Prices on YouTube non-exchange inventory run from $17–$30 CPMs, which effectively prices themselves out of television buys that routinely can be bought for less than $15 CPM.

YouTube must lower prices substantially for one year in an effort to steal share from premium cable and broadcast networks that would be unable or unwilling to match.

Proof: 

For decades, television has proven itself a reliable driver of scale. But in many cases, the proof is more qualitative than quantitative. Run a lot of TV in a week, see sales go up. Run no TV in a week, sales go down. It must have been the TV that was driving it.

Digital video, by contrast, has an opportunity through technology and persistent location data to directly and definitely prove its value in driving offline sales -- beyond panel data, beyond survey work, beyond small-sample local market tests.

With mobile phones increasingly emitting location data in huge volumes, and with Google having established itself as one of the biggest sources of mobile location data in the world, a simple focusing of Google’s engineering resources into creating a geo-location-based, foot-traffic efficacy product would prove YouTube’s impact on driving offline sales in a way television simply cannot.

YouTube must commit to focusing its resources here in a significant way.

As leaders in the video space, we must call upon YouTube to make big, bold changes in the way it brings its premier video product to market.

Whether we ultimately shift TV dollars to YouTube or to competitors like TubeMogul, Simulmedia, Adapt.tv, or others who have provided true next-gen, data-driven approaches to cross-channel video buying, the acceleration of money moving from offline to online is happening, and it’s happening now.
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