YouTube still king
By Chris Waters, Senior Investment Analyst, International
07 April, 2017
In 2006, Google (now Alphabet) acquired YouTube, the most popular video site in the history of the internet.
At the time this acquisition drew plenty of criticism, given the high purchase price ($1.65bn) for what was a loss-making company with little revenue and a collection of user generated content and cat videos.
Google however saw something different. They saw a growing share of leisure time spent online and a strong source of video content and user data to ultimately monetize through digital advertising. Time has proven them right on both counts.
However, recently YouTube has been in the headlines for the wrong reasons. A number of large brands such as Pepsi and McDonalds have been pulling advertisements from the site, after a newspaper investigation found that ads from terrorist organisations and other offensive content were appearing on videos. Part of this issue stems from the fact that over 400 hours of video is uploaded every minute (or 65 years' worth each day!). This sheer quantity of content makes it difficult for the company to properly screen each video, allowing these kinds of mistakes to occur.
While these headlines have been unfortunate, the enormous volume of content on the platform is one of YouTube's strengths. Users watch over 1 billion hours of content a day, increasingly shifting viewership away from traditional television. YouTube's most watched video, the 2012 music sensation Gangnam Style has generated 2.8 billion views to date. This far outstrips even the most watched television event — the Super Bowl with 160 million viewers worldwide.
While unfortunate, we are not too concerned about the recent controversy. A large and growing audience and the ability to target advertisements to viewers means that advertisers cannot afford to ignore this platform. We have owned Google for a number of years now — and believe that we are only partway through this secular shift to online advertising, and still see plenty of growth ahead for the company.