Between new streaming services, massive increases in CTV ad spending, and growing investments from major tech players, the digital video ecosystem is moving quickly and showing no signs of slowing down. Amidst this turmoil, however, YouTube stands above the fray as a seemingly immovable giant. The company’s revenue increased by 84% year-over-year in the second quarter of 2021, driven in large part by a rebound in online advertising. 

YouTube’s advertising success can be credited to its automated auctions, which are proving to be extremely effective at selling ad space. According to a recent article from The Information, this effectiveness is due to YouTube underpricing publishers that sell spots directly on the platform.

“One digital media executive told The Information that his firm is now selling as little as 10% to 15 of its YouTube ad space directly, down from as much as 40% three years ago. That’s because YouTube charges as little as a quarter what the publishers charge for spots they sell on their YouTube programs, the executive said.”

By undercutting those publishers that sell directly on their own content, YouTube is seeing outsized benefit from its growth. So what are publishers to do about it? If the trend continues, these publishers will continue to see diminishing returns; forward-thinking content providers must identify new opportunities before their business suffers irreparable harm.

Understanding the Value of YouTube

The fact that things have gotten this dire for publishers indicates a fundamental misunderstanding of YouTube’s value to publishers and marketers. Consider YouTube’s business model and why it makes certain decisions: the company exists to maximize viewing time, and to get viewers to watch content that maximizes revenue yield for YouTube. It is not a distribution channel for publishers looking to grow direct revenue; instead, it’s best utilized as a
marketing channel.

Recent studies indicate that YouTube doesn’t provide the best outcomes for marketers. In a joint study conducted by Fox and Research Measurement Technologies, researchers analyzed the return on $48 billion of ad spending, tied to $2.2 trillion in consumer spending across the auto industry, quick-service restaurants (QSR) and consumer packaged goods (CPG). The results of the 5.5-year study showed that the most valuable format was premium CTV by a wide margin, followed by linear TV and then digital video. According to the study, premium CTV saw 9.4 times Return on Ad Spend (ROAS) compared with linear TV and digital video in CPG spending; 9.1 times ROAS in QSR spending; and 4.7 times ROAS in automotive.

We can assume some of the reasons why digital video underperforms compared with linear TV and CTV — easier to skip and lack of addressability — but the key takeaway is that marketers were already seeing decreased value in their digital video investments before YouTube began undercutting them. Marketers are also concerned about brand safety and measurement on YouTube, as the opaque platform has drastically limited the use of third-party measurement tools and content transparency solutions like those offered by DoubleVerify and Integral Ad Science.

Developing New Demand

For publishers exploring new opportunities for selling advertisements outside of YouTube, there are a few key strategies that will help to attract new demand. Taken together, these techniques can effectively increase the value of a publisher’s inventory across both CTV and owned-and-operated distribution channels. 

Augment your first party data with video-level content data 

Publishers can begin with their own data, but marketers will ultimately want to use the datacurrencies they trust for targeting and verification. Thankfully, contextual intelligence providers are innovating, bringing some of the leading AI-backed technologies to video for the first time. GumGum and Silverbullet 4D were some of the first companies to effectively use AI to categorize content, while Kerv Interactive is working to identify products and unearth the sentiment and emotion of the content itself. These tools will prove invaluable for publishers as they seek to demonstrate utility to marketers on new platforms.

Ask your SSP to provide access to contextual intelligence solutions

With innovative new contextual intelligence tools making targeting and measurement more effective, publishers need to ensure access to them. When publishers have visibility into their category performance at the video level — which is now more readily accessible with contextual targeting — they can then use that information to package direct deals and participate in private marketplaces. Information is currency in this hectic video marketplace and being able to show value is essential for success.

Increase your presence on FAST platforms

It’s clear that audiences and advertisers are flocking to CTV. In particular, FAST platforms (Free, Ad-supported Streaming TV) like the Roku Channel and Tubi are seeing rapid growth from consumers who are otherwise experiencing subscription fatigue. Publishers should make every effort to be on these platforms as well; however, without content categorization, buyers will only see app-level data and will be less likely to spend. Content categorization and contextual intelligence are necessary to earn a piece of this expanding pie.

Manage your YouTube expectations

Finally, publishers shouldn’t plan to give up on YouTube entirely. Given the massive amount of time spent on the platform by premium audiences, it’s important to maintain some level of visibility. However, marketers must manage expectations: YouTube will never be their primary revenue driver; instead, it is a search tool. It’s fantastic for discovery of content and it’s a great place to promote any entertainment brand. It’s not where you want to make a significant amount of money as a publisher. The best use of YouTube is to drive awareness of your best content, using teasers and clips of shows to drive traffic to more premium offerings on other platforms like FAST streaming services. This model is evolving quickly and innovative companies like Amagi and OTTera are leading the way to help publishers leverage and expand their distribution.

While publishers may have despaired over their diminishing YouTube returns, it’s important to bear in mind that nothing stands still in the chaotic video marketplace. Those publishers that can move with the current and take advantage of new opportunities will find themselves wondering why they ever worried about their YouTube investments.