Google Gives Good News on YouTube Advertising

By Markets Fool.com

Continue Reading Below

Mobile video watch time is up 100% at YouTube. Source: YouTube

Despite the sudden rise of Facebook in the digital video market, YouTube is still the dominant player, according to Google's chief business officer, Omid Kordestani. He released several notable metrics during the company's second-quarter conference call, showing how little of an effect Facebook is having on YouTube's business, particularly on mobile, where Facebook dominates time spent.

By the end of the first quarter, Facebook reported that its users viewed 4 billion videos per day on its platform. That's up from 1 billion per day in September. And YouTube says its watch time has accelerated during that period, up 60% year over year last quarter. That's the fastest growth rate for the company in two years. On mobile, watch time is up more than 100% year over year.

That kind of growth indicates that Facebook might not be making as big of an impact as originally thought.

The value of a video view
Facebook's decision to focus on total views doesn't tell us much, but as long as that number continues to climb, we can assume people are responding well to video on the platform. But a view on Facebook can be anywhere from three seconds to three hours, and Facebook doesn't tell us anything about how many people are really engaging with videos.

Continue Reading Below

Still, that was better than the details YouTube posts on its statistics page, which include vague statements like this: "Every day people watch hundreds of millions of hours on YouTube and generate billions of views."

Earlier this month, however, Google provided some more meaningful statistics about how its "billions of views" are actually affecting the business. Advertiser commitments to YouTube's Google Preferred program -- which targets the top 5% of video creators -- increased three times this year over last. Total advertisers increased 40% year over year, and average ad spend among YouTube's top 100 advertisers increased 60%.

Not only is YouTube attracting more advertisers, but it's also attracting a bigger portion of their budget. Meanwhile Facebook still lacks a direct means of monetizing video views, and its video ad products operate on the same bidding system as its other display advertising

Many expect growth in video ads on Facebook to provide a boost in revenue because of the premium price they can demand. The opposite is true with Google, which sees a negative impact on cost per click from TrueView ads on YouTube, where advertisers pay only when someone watches the video. The growth in YouTube is still additive to Google's revenue, but reports indicate that the video site may have trouble turning a profit.

Is there room for both?
The biggest growth driver for YouTube appears to be its NewFronts Brandcast, YouTube's equivalent of television upfronts, where network execs invite advertisers to see what's coming down the pike and buy advertising time. YouTube credited its presentation with helping to drive the growth in commitments to Google Preferred. And there's a clear reason brands are willing to spend money to reach YouTube's audience.

On mobile alone, YouTube reaches more 18- to 49-year-olds in the U.S. than any cable network. The average viewing session on mobile is now 40 minutes -- up more than 50% year over year, according to Google during its recent conference call. That probably includes a lot of music listening, though, where users aren't paying as much attention to their device. Indeed, YouTube is going after television advertisers as users shift their attention to mobile devices.

According to eMarketer, the amount of time spent consuming digital video will increase 20% this year to 1 hour, 16 minutes per day. Average mobile viewership is expected to reach 39 minutes per day, up 30% year over year. Research from Mary Meeker at Kleiner Perkins Caulfield Byers found that the amount of time spent watching TV declined last year, offset by time spent on mobile devices.

That's a trend that is certainly benefiting YouTube, but Facebook can take advantage as well. As a company that accounts for about 20% of time spent on mobile, increasing the amount of video viewership on its platform will help it attract those valuable TV ad dollars. Television advertisers are expected to spend about $80 billion in the U.S. alone this year. There's plenty of ad money to go around.

The article Google Gives Good News on YouTube Advertising originally appeared on Fool.com.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.