YouTube’s business is growing – though perhaps not as quickly as markets would like.
The video streaming service’s parent company, Alphabet, reported YouTube ad earnings of USD $8.66 billion in Q2 of this year, a 13.0% increase from the same quarter a year earlier.
The double-digit jump is a far cry from where YouTube was a year earlier, when it was reporting year-over-year declines in revenue.
Nonetheless, the latest ad revenue numbers fell short of analysts’ expectations, which were at $8.93 billion, per a survey from StreetAccount, as cited by CNBC.
The increase also marks a slowdown from YouTube’s ad revenue growth in the prior quarter, which came in at 20.9% YoY, at $8.09 billion.
The “Google subscriptions, platforms and devices” segment of Alphabet’s earnings, which includes YouTube Music and YouTube Premium subscribers, came in at $9.31 billion, up 14.37% YoY.
On Alphabet’s earnings call after market close on Tuesday (July 23), Alphabet/Google CFO Ruth Porat attributed the segment’s growth to YouTube TV and YouTube Music Premium.
She noted that year-over-year growth in the segment would have been even stronger, had it not been for a price hike to YouTube TV that fell out of the year-over-year calculations in this quarter.
“But at the heart of it are people interested in the subscription offerings, and it’s a takeup that’s significant. We are really pleased with it,” Porat said.
She added: “In YouTube, we are pleased with the growth in the quarter. We had healthy watchtime growth, continued to close the monetization gap in Shorts, and had continued momentum in connected TV with brand benefiting in part from an ongoing shift in budgets from linear television to digital.”
Much of what Alphabet execs said about YouTube focused on its video (rather than music) offerings, with Google Chief Business Officer Philipp Schindler citing Nielsen data showing that YouTube “is the number one most-watched streaming platform on TV screens in the US for the 17th consecutive month.”
Alphabet/Google CEO Sundar Pichai noted that views of YouTube Shorts on connected TVs “more than doubled last year, and we’re making it easier for creators to add captions, and turn regular videos into Shorts.”
Shorts is YouTube’s bet on short videos, widely seen as a response to the dominance of TikTok among younger audiences.
“This quarter, we continued to see an improvement in Shorts monetization, particularly in the US. We’re also seeing a very encouraging contribution from brand advertising on Shorts, which we launched on the product in Q4 last year,” Schindler said on the earnings call.
“At the heart of it are people interested in the subscription offerings, and it’s a takeup that’s significant. We are really pleased with it.”
Ruth Porat, Alphabet/Google
Another big bet for YouTube is Shopping, a feature that Google launched in 2022 with ecommerce platform Shopify that is, in effect, an online version of cable-TV shopping channels.
Schindler said viewers last year watched 30 billion hours of shopping-related videos, with a 25% increase in watchtime for videos that help people shop.
“While it’s still early days, Shopping remains a key area of investment,” he said.
Schindler noted that Google had rolled out a number of updates to the Shopping platform, including “product tagging, where creators can tag products in their videos for viewers to discover and purchase, product collections, and a new Affiliate Hub, a one-stop shop for creators to find deals and promotional offers from brands and track their affiliate earnings.”
Overall, Alphabet’s earnings came in close to analysts’ expectations, with total revenue coming in at $84.74 billion, up 14% YoY. Of that, $64.62 billion was ad revenue (including Google search and other products), which was an increase of 11.14% YoY.
Net income grew 28.26% YoY, to $23.6 billion, or $1.89 per share.
As of 11 am EDT Wednesday – the first day of trading after Alphabet’s earnings release – the company’s stock was trading down 3.64%, at $176.94. The slump was attributed to YouTube’s earnings miss.
Commenting on YouTube’s positioning in his opening remarks on Tuesday’s earnings call, Pichai said that the platform “is focused on a clear strategy: connecting creators with a massive audience, and enabling them to build successful businesses through ads and subscriptions, while helping advertisers reach their desired audience.”Music Business Worldwide