Pressing Play
YouTube (GOOGL) is making two significant changes to its advertising strategy. The video platform generated $5 billion in advertising revenue last quarter and the changes will likely boost its advertising profits even higher.
YouTube plans to place more ads on videos with small viewership numbers. However, it will not pay these creators—a decision which has sparked debate in the YouTuber community. The company is also rolling out audio ads to target consumers who use the platform to play music and podcasts.
Placing Ads on Content With Less Viewership
Starting yesterday, YouTube began placing ads on more videos made by content creators with small viewership numbers. Until now, most YouTube ads were placed on videos created by people participating in YouTube’s Partner Program. To participate in this program and be paid by YouTube, a content creator must have over 1,000 subscribers and have accrued more than 4,000 total hours of watch time over the past 12 months.
YouTube pays creators who are part of the Partner Program, but it does not pay smaller YouTubers, and it does not plan to do so even as it incorporates more ads into these videos by less high-profile YouTubers. This strategy will give YouTube more space for advertising at no cost to the company.
Launching Audio Ads
Many consumers use YouTube not just to watch video content but to play music and podcasts ambiently. Now the company is developing an advertising strategy for these situations in order to compete with Spotify (SPOT), Apple Music (AAPL), and other music streaming services for audio ad dollars.
The company is offering 15-second audio ads as well as opportunities for advertisers to target consumers based on what people are listening to. For example, a running shoe company could place ads on a workout playlist, or a toy company could place ads on a children’s music playlist.
Youtube is likely to see high traffic this winter as people look for ways to entertain themselves at home. This trend combined with the company’s new advertising strategies could give YouTube’s ad revenue a massive boost.
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