Despite rapid increases in revenue during the pandemic lockdowns, YouTube is experiencing macroeconomic challenges. Google parent Alphabet’s revenue increased 13% year-over-year to $69.69 billion in the second quarter, according to an earnings statement. The quarterly results represented the company’s slowest pace of growth in more than two years.
“The quarter-on-quarter deceleration in both YouTube and network advertising revenues primarily reflects pullbacks in spend by some advertisers,” said Google CFO Ruth Porat on a call discussing the results with analysts. “We also saw a slowdown in buyer spend due to a number of factors, including lower engagement levels compared with earlier stages of the pandemic.”
Porat noted that the sluggishness could seem pronounced against the year-ago period, when spending boomed due to pent-up demand. The executive foresees “ongoing headwinds” related to buyer spending in the third quarter, along with lingering effects from changes to the fee structure of the Google Play app store.
YouTube has a number of other irons in the fire. The company held its Brandcast presentation at the upfronts for the first time this year in a more ambitious pitch for TV advertising dollars. Nearly half of adults who watched a Super Bowl ad on YouTube on game day did not see the ad on traditional TV, according to Comscore data cited by executives. YouTube also continues to invest in Shorts, a TikTok look alike feature. Early monetization efforts there have been promising, executives said, though they declined to offer more detail.
A major question to ask is whether TikTok is to blame for YouTube’s fall. One example would be makeup tutorials. I remember always looking to YouTube to watch a tutorial on a look only to find a 30 minute chat from a vlogger I wasn’t so invested in. Now, I can watch a 30 second TikTok and recreate a look to my liking. The same goes for music. Users can hear a 15 second snippet, decide if they like the song then add it to their Spotify playlist.
By the end of 2022 TikTok will generate an income of more than $11 billion dollars, tripling what it obtained during 2021. Of that figure, $6 billion corresponds to the United States where TikTok will have growth in income of 184.5%. Aware of the situation, YouTube launched YouTube Shorts in September 2020, a section within the platform that allows users to upload short videos very similar to those of Instagram and TikTok. Although Shorts has managed to substantially grow its audience (this format has more than 30,000 million daily views) it still does not have a monetization option and the presence of advertising is still in a beta phase.