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Risks and Opportunities for Alphabet’s YouTube TV

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Live videos at $35 a month

Alphabet (GOOGL) is stepping up its campaign for video advertising revenue, with its Google branch announcing plans in February to launch a live video service called YouTube TV. The service will launch in the United States (SPY) at a cost of $35 a month, offering more than 40 channels. YouTube TV will take on OTT (over-the-top) video services such as DIRECTV Now by AT&T (T), Sling TV by Dish Network (DISH), and PlayStation Vue by Sony (SNE).

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YouTube TV’s opportunities

Google is expected to serve ads against YouTube TV content. According to research company eMarketer, US advertisers will spend $11.2 billion on digital video advertising in 2017, double the $5.2 billion spent in 2014.

YouTube TV’s greatest advantage is that it is owned by a digital advertising powerhouse. Google is not only a well-known advertising company, but also controls a third of the worldwide digital advertising market, according to eMarketer. Google’s profile alone implies that YouTube TV has a head start against the competition in pursuing video advertising budgets.

YouTube TV is also advantaged in that it has an enormous pool of potential customers. YouTube is used by billions of people each month.

The risks facing YouTube TV

One of the risks for YouTube TV is that Google may have to surrender a large portion of ad revenue generated through the platform to media partners to encourage them to contribute their content to the platform. Additionally, the recent outrage over Google serving YouTube ads against controversial videos could make some major brands hesitant to buy ads. Pay-TV companies, which are already feeling the heat of marketers shifting their spending to digital channels, will compete with Google for video advertising funds.

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