YouTube disclosed its ad revenue earnings for the first time since… ever. Yes, that’s right. YouTube generated $15.1 billion in ad revenue in 2019, $4.7 billion last quarter alone. Until now, YouTube’s annual earnings have only been viewed by a select few. This begs the question, why are we suddenly seeing this now?
Why haven’t we seen YouTube’s earnings before?
Alphabet, YouTube and Google’s parent company, has done a great job keeping YouTube’s earnings under tight wraps. Revenue Recognition Rules were approved in 2014 requiring companies to report their revenue to investors in the same manner that they were reported to the chief executive. These rules went into place in 2017, and shortly after the Securities and Exchange Commission (S.E.C.) sent three letters to Alphabet, asking why YouTube’s earnings were not publicly disclosed. In response, Larry Page, its chief executive, exclaimed that he did not receive weekly updates on YouTube’s business performance as those figures were beneath him and reported to the CEO of Google, Sundar Pichai. Thus Alphabet was able to avoid disclosing YouTube’s annual revenue through a loophole of sorts, for the past 2 years since the Revenue Recognition rules were put into place. This left investors in the dark with mere speculation…until now.
Why are we seeing YouTube’s earnings now?
In December 2019, Google Co-Founders Larry Page and Sergey Brin stepped down, passing the torch onto Sundar Pichai who took over as CEO of Alphabet, while also maintaining his existing role as CEO of Google. It had been previously disclosed that Pichai had seen YouTube’s annual earnings, thus the loophole would no longer work as an alibi.
In an effort to appease investors (albeit, there was seemingly no other option), Pichai has opted to be more transparent with both YouTube and Cloud revenue. For better or worse, this revenue disclosure and leadership transition come at a trivial time. Alphabet and Google are undergoing investigations by the state, federal, and EU regulators.
What does this mean for marketers?
While YouTube’s annual revenue for 2019 might appease the S.E.C., it disappointed Wall Street. Alphabet’s (GOOGL) stock dipped 4.65% following the release of its 2019 earnings. $15.1 Billion in annual revenue is quite an impressive year by most standards, but it is less than the $16-25 Billion investors had previously speculated. The stock market is renowned for being highly volatile and these numbers should be taken with a grain of salt. That said, if there’s anything to take away from all of this, it’s that things can change quickly.
For all of the small businesses, solopreneurs and even larger companies that rely on YouTube as a source of income, this should serve as a reminder of how quickly things can change in the world of social media.
As marketers, we often rely on social media channels like YouTube to find leads who have an interest in the value proposition that our brands offer. Whether we use YouTube ads to target these individuals, or leverage SEO best practices to find them organically, we must remember that this is just a rented audience. YouTube can remove accounts or entire channels at a moment’s notice, or heaven forbid, YouTube could follow in the footsteps of Vine and disappear altogether. YouTube is a rented channel that can be leveraged to reach a larger audience and gain subscribers, but you do not own that channel, YouTube does. Your goal should be to drive traffic to a channel you own; your website, your podcast, or email opt-in.
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