YouTube’s advertising revenue has yet to peak in its remarkable growth. In Alphabet’s latest earnings call, the company claimed $8.9 billion in quarterly revenue from YouTube ads alone. At this rate, YouTube’s ad revenue could equal that of the entire broadcast advertising industry by 2024.
Meanwhile, the television market continues to decline due to cord-cutting—which bodes well for YouTube’s long-term vision.
A good short-term and long-term vision
YouTube advertising revenue is about to reach a new high. With $8.9 billion in Q3 revenue, the company reported $25.7 billion in revenue for the year to date. That puts YouTube more than $3 billion ahead of where it was at this time last year. (For reference, it added $2 billion in revenue between 2022 and 2023.)
Television commercials are airing at the same time. By 2023, the entire broadcast industry will generate $33.84 billion in ad revenue; YouTube made $31.51 billion. Almost every major television company, from Warner Bros. Discovery to NBCUniversal, saw a significant drop in advertising in 2023. There’s something basic about marketing: As YouTube rises, television falls.
Although YouTube also manages its advertising revenue by dividing that revenue among creators, there is no centralized “television” industry that collects advertising revenue. Instead, it’s a collection of channels that all work independently, making business operations even more difficult. That $33.84 billion in streaming revenue doesn’t belong to one firm; rather, it is grouped by a few small companies.
In marketing, the 18-49 age demographic is often considered the prime viewing age. YouTube sits here in the pack, with 25 to 34-year-olds making up the largest age group in the area. YouTube is very popular with children, which bodes well for advertising on the horizon. Not so in the world of linear TV, where audiences continue to grow. (The average viewer for MSNBC, for example, is 70.)
Why TV commercials are now dominated by pharmaceuticals
Currently, many advertisers expect that linear television ads will only reach older audiences. The most important ad groups in the market now are pharmaceuticals, telecommunications, and professional services. Demand from international markets, such as automotive and retail, has softened. Feel like the TV commercials are all selling the latest drug? Those advertisers are responding to an older audience.
But television is not dead. Instead, audiences have moved on, embracing mainstream broadcasters such as Netflix and Amazon. These streamers have ad-supported sections, too, where consumers can pay a low price. But Netflix’s ad-supported category has 40 million active users worldwide, compared to the company’s 270 million subscribers. Because of that shrinking audience, many ad buyers never left.
All of this leaves video marketers in a difficult position. Online TV audiences are shrinking, and their demographics are not good. But the broadcast audience is small, given the unpopularity of ad segments. What you’re leaving is YouTube—and sure enough, the revenue is skyrocketing.
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