Has YouTube Stolen Ad Revenues From Legacy TV? Not Yet

Mull a major ad-supported free video platform like YouTube — and consider whether it is the real TV world champ when it comes to traditional national TV advertising from big players.

YouTube scored big results in its first-quarter period -- up 33% to $4.04 billion versus a year ago ($3.02 billion). At the same time, it was down 14% from the previous fourth-quarter 2019 period.

Though still strong overall, it could it have been stronger.

Mark Shmulik, media analyst for Bernstein Research, says: “The narrative that YouTube was going to steal ad dollars away from TV hasn't materialized and ad growth here slowed to [high single-digit percentage] by end-March.”

Somewhat lower-than-expected results were due to a certain virus spreading.

Are more serious problems on the way?

Bernstein Research say 80% of advertisers on YouTube are big brand advertisers. And that could be a problem, should those markets continue to pull back -- as they are expected to do on traditional linear TV -- from COVID-19 issues.



Shmulik says activity from those big advertisers “remains pressured,” though he adds: “Direct response is showing strength on the back of app download ads.”  

While there has been a surge in viewership -- for virtually everyone in the TV space, traditional, streaming, connected TV and over the top platforms -- YouTube experienced “significant CPM declines,” says BMO Capital Markets analyst Daniel Salmon.

Bernstein Research says CPMs in January-February were already down around 20%, weeks before advertisers (and the economy) overall felt the effects of COVID-19 business disruptions.

In that light, BMO Capital Markets expects more softening over the next two quarterly periods for YouTube, down 24% year over year in the second quarter to an estimated $2.7 billion, and a 12.1% drop in third-quarter 2020.(versus the same period the year before) to $3.2 billion.

Not until later in the year and into 2021 does BMO expect better results in terms of narrowing revenue losses -- $4.5 billion in the fourth quarter (down 4.6%) and $3.97 billion in the first-quarter 2021 (down 0.5%).

While Bernstein’s Shmulik is still positive on the Google video unit, he cautions that it will be good to closely watch “brand” advertiser moves. “Pricing power of legacy TV shows that reach and existing relationships still matter for brand dollars, these dollars will churn more slowly.”

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