Share

YouTube's Wojcicki needs to make her business a TV star

New York - Susan Wojcicki will forever be part of Google's history.

The company literally started in her home and garage, which she rented in 1998 to two graduate students, Sergey Brin and Larry Page.

Now in her third decade at Google and entering her fourth year as YouTube's CEO, the 48-year-old executive has the best shot in 2017 to prove YouTube can translate its huge audience into more revenue and to lead the remaking of television into a video-everywhere model that appeals to a younger generation weaned on smartphones and Netflix.

It feels cruel to ding a business that has more than a billion monthly users globally, has become a verb and generates multiple billions of dollars in revenue each year.

Yet Wojcicki hasn't changed the fact that YouTube helped popularize digital video but hasn't yet lived up to its enormous financial potential. 

Consider this: Facebook Inc. is on track to generate more than $27bn in revenue this year, nearly all from advertising messages on Facebook and Instagram.

That will work out to an average of about $16 for each person using Facebook and its sister app, Facebook Messenger.

Parent company Alphabet Inc. doesn’t disclose YouTube’s revenue or specific user numbers, but we can make some rough assumptions.

Research firm eMarketer estimates YouTube will generate about $5.58bn in 2016 revenue, excluding the share of advertising dollars YouTube splits with the companies that make its web videos and with distribution partners.

If YouTube has somewhere between 1.2 billion and 1.65 billion monthly users, that is roughly $3.50 to $5 in revenue from each user. 

Granted, YouTube's business model is different from that of Facebook or Google web search. For one, YouTube doles out a significant chunk of its revenue to the creators of many of its videos.

But the gap exists, and it spotlights the broad challenge for Wojcicki: YouTube could be so much more as the world's biggest web video hangout tethered to the internet's best money machine. 

The opportunity is there if Wojcicki can take advantage of it, because the winds are blowing in YouTube's favor.

Younger people are spending less time watching traditional television and more time glued to their smartphones - including YouTube. Advertising revenue will eventually follow those viewers into digital video hangouts.

Wojcicki has also continued YouTube's success in reshaping entertainment by coaxing large media companies such as NBC Universal to devote more programming to YouTube, and by minting YouTube personalities like PewDiePie and Lilly Singh, whose videos can draw more people than those from traditional entertainment companies.

Fulfilling YouTube's potential lies in building a bridge to television, where 40 percent of advertising budgets are spent and where the rules of the game have sometimes eluded Google.

Yes, huge audience size matters, but so does the mix of large numbers of people, the kind of people that the advertisers want to pitch to, and the shelter of programming that advertisers want to get behind.

Google and YouTube have never fully embraced the rules of so-called brand advertising. 

Under Wojcicki, YouTube has been working to change that.

YouTube two years ago started to let advertisers plant their commercial messages next to popular video channels from professional entertainment companies or personalities, separate from the flood of mass market videos.

It's not perfect, but the new advertiser option made YouTube operate a bit more like TV, and analysts say the ad rates YouTube generates are in the same range as television ad prices.

YouTube is working with the advertising industry on standardising viewership ratings across traditional television and web video -- another step to get advertisers comfortable with YouTube.

YouTube is also creating a new business model, with the creation of its first significant subscription video service - and soon to be a second - including programming exclusive to YouTube. That makes YouTube dip into the same business as cable television and Netflix. 

Even while the winds are at YouTube's back, it has more competition than ever for people's leisure time and advertisers' money.

Facebook, Netflix, Snapchat, AT&T, Twitter, Amazon, Verizon, Apple and many of the traditional TV networks are also vying at least to some degree with their own digital video features, and in some cases for the same crop of professional new media stars and the advertising money that follows. 

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.15
-0.7%
Rand - Pound
23.82
-0.6%
Rand - Euro
20.39
-0.5%
Rand - Aus dollar
12.30
-0.5%
Rand - Yen
0.12
-0.6%
Platinum
950.40
-0.3%
Palladium
1,028.50
-0.6%
Gold
2,378.37
+0.7%
Silver
28.25
+0.1%
Brent Crude
87.29
-3.1%
Top 40
67,190
+0.4%
All Share
73,271
+0.4%
Resource 10
63,297
-0.1%
Industrial 25
98,419
+0.6%
Financial 15
15,480
+0.6%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders