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Why YouTube Is Shifting Its Ad-Supported Strategy

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YouTube shifts its strategy

Last Thursday, Alphabet’s (GOOGL) YouTube announced a new original TV content strategy wherein its upcoming original series and programming will be shown to users on a free, ad-supported basis. The company is planning to make nine new original programs and series for YouTube users this year. Other programs also include a third season of the Karate Kid-inspired Cobra Kai, an investigation show from media startup Vox, and a set of standalone films from The School of Life YouTube channel.

Earlier, the original shows were available to YouTube Premium subscribers, who pay $11.99 per month for the streaming service.

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The decline in ad revenue growth

In Q1 2019, YouTube parent Alphabet reported a sharp decline in ad revenue growth to 15% as compared to 24% ad revenue growth in the year-ago quarter, due to lower engagement related to the changes in YouTube’s algorithms to prevent the spread of fake news. The shift in the strategy will thus likely help the company to connect with more advertisers.

Like Alphabet, Facebook (FB) and Twitter (TWTR) also earn the majority of their revenues from its advertising business. In Q1 2019, Facebook’s advertising revenue growth rate also declined to 26% YoY from the preceding quarter’s advertising revenue growth of 29.9%. Twitter’s advertising revenue grew 18% YoY to $679 million in Q1 2019.

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