In Q1 2023, PARQOR will be focusing on four trends. This essay focuses on "The definition of scarcity is continuously evolving away from linear. What happens next?" and "Hollywood’s future lies in the creator economy, but who is the talent?"
Upfronts are two months away, and the most-reported story for upfronts has been a competition between alternative currencies to Nielsen that measure cross-platform viewing. Currencies are an agreed-upon standard of measurement for paying for the performance of an ad campaign.
The need for new currencies has emerged as more advertisers and media agencies are demanding a tabulation of audiences with narrower characteristics than age or gender. The needs of advertisers in an increasingly programmatic world have evolved well past linear TV’s measurement capabilities. There are no guaranteed winners as the market sorts itself out: Warner Bros. Discovery just announced that it was dropping iSpot.TV and would rely on Comscore and VideoAmp, but iSpot.TV has a major alliance with NBCUniversal to measure video audiences.
The other takeaway is that all this messiness points to the best and broadest solutions winning, and YouTube currently offers one:
Reach of 135 million people on Connected TVs in the U.S., according to Nielsen
NFL Sunday Ticket across YouTube TV and YouTube (and highlight clips on YouTube Shorts), and
A sophisticated ad-targeting platform.
Despite these advantages, two funny dynamics have played out for YouTube over the past two weeks.
Key Takeaway
The mixed signals of YouTube's story leading into Upfronts might suggest flaws in its strategy and execution. Or it may reflect a market misalignment changing the TV and digital video ad marketplace in real-time.
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Total time reading: 5 minutes
The first is that it offered the marketplace its own standards for video currency provider measurement, and unsurprisingly has found itself butting heads with broadcasters. The second emerged in last week’s The Colin & Samir Show podcast for creators, where they complained about missing “the old YouTube”. when “creators discovering new ways of creating videos”.
YouTube vs. everyone else
YouTube’s ad inventory is different from every one of its competitors — its TV inventory is a mix of its virtual cable network YouTube TV, YouTube videos, YouTube Primetime channels, and YouTube Shorts. But its inventory also has the most scale. So it is proposing that an impression counts when an ad is viewable on-screen for at least two seconds, as per the MRC standard. It is also hesitant to support alternative currencies because it is a walled garden.
Let's repeat some math I did last week and assume 50% of YouTube consumption on TVs is creator content, as YouTube CEO Susan Wojcicki revealed to YouTuber Hank Green in a 2020 interview. According to Nielsen’s most recent The Gauge, YouTube made up 7.9% of total TV and streaming consumption. So creator content made up 3.45% of its content. That is higher than every other streaming service on Nielsen’s The Gauge except Netflix (3.3%).
Notably that 7.9% excludes YouTube TV (its share is 9.1% with YouTube TV). Linear and broadcast make up 54% of TV usage, or 52.8% without YouTube TV. That leaves 47.2% that is not cable or linear.
7.9% amounts to about one-fifth or 17% of that 47.2%. So 8.5% of all TV viewing outside of cable or linear is creator content. YouTube is not in a position to redefine ad impressions or “premium content” for the broader TV ad marketplace, but it is increasingly in a position to shape it.
But, Creators?
Co-host Colin Rosenblum recently lamented on the Colin & Samir Show that he missed the era of YouTube when “Everything felt new to me… and creators were discovering a new way to make videos.” He added:
“I think one of the reasons it’s so hard to break into the 1% [of creators] is because when I get onto YouTube now, everything feels like everything. Nothing feels unique to me…. And now today everything is a reinvention of something I’ve already seen on YouTube… So it’s like “oh that’s like MrBeast but X.” ”
Samir agreed and added:
“It’s hard for me to click on a video thumbnail right now because I know what the video is going to be about… or what it’s going to be like… I miss the time where you would click on a YouTube video and you had no idea what it would feel like. When it wasn’t so formulaic… I’m not looking to be distracted. I’m looking to learn. I’m looking to be inspired. And I don’t need something that is worried I am going to click off at this point. I’m looking for something honest and new and that is difficult to find.”
The exchange highlights a surprising takeaway: YouTube’s ecosystem of 2MM creators feels creatively less dynamic to its leading creators as it grows. It should be evolving into something more dynamic. But two of its most active users and creators (their show offers advice and how-to for creators) believe it is not. The obvious question is, why is that happening now?
Changes at YouTube
One answer may be YouTube has had three significant changes in the past six months. First, last September it expanded its Partner Program for creators to YouTube Shorts and expanded the number of creators who could be in the program to 3 million. Second, in January it announced the NFL Sunday Ticket deal. Last, CEO Susan Wojcicki stepped down last month and has been replaced by Chief Product Officer Neal Mohan.
Three weeks ago Mohan wrote an open letter to creators telling them “Creators and artists are the heart of YouTube, and I’ll continue to put them first.” It also talked about “meeting the viewer where they’re watching content. More and more, that leads back to the largest screen in most households, the TV. TV was our fastest growing screen last year, and we're seeing growth and momentum internationally.” So creator content is a strategic priority of the new CEO, and so are streaming and connected TV.
Leadership is prioritizing the CTV ecosystem as a growth opportunity where it can also capture advertiser dollars. So why would this strategic shift impact creator content?
One answer is that YouTube management needs the ecosystem to be “brand safe” for advertisers and it has been taking more steps to ensure that. Last November it rolled out “Advertiser-friendly content guidelines” that include restrictions on monetizing content with swearing in the first minute. The guidelines are the product of a long and tumultuous relationship between YouTube and advertisers that has involved demonetizing creator videos and cancel culture (which I last wrote about in October 2021). Until Q3 2022, when YouTube’s ad revenues declined 2% year over year, followed by Q4 2022, which declined 7% year over year.
So the uniformity of creative that Colin and Samir are complaining about is in part, or even very much, a reflection of that policy. And the moment they pine for is a moment when annual ad revenues were 27% ($8.15 billion) of what they are now ($29.24), but were growing.
A misalignment
With the upfronts looming and demand for linear inventory softening, there is a big opportunity for YouTube to capture a greater share of Upfronts than it did in 2022. YouTube does not want to miss it, and it is leveraging a mix of carrots and sticks to incentivize the creator community to make the story of brand safety as tight as possible.
But, it may be killing the consumer value proposition of its creator community’s dynamism in the process. This may reflect how there is a “misalignment” in the streaming marketplace, as the head of an ad tech company described it to me last week. That misalignment is summed up by the interplay of three forces:
Linear networks continue to sell linear inventory while lacking sophisticated ad targeting solutions;
Tech companies are increasingly disrupting both the linear distribution model and the market definition of “premium content”, and
Major marketers like P&G are shifting spending away from Upfronts into real-time and programmatic.
The first and second forces are pulling away from each other, and the third force — ad spend — seems be accelerating the rate at which tech companies are succeeding at the expense of linear companies.
The mixed signals of YouTube's story leading into Upfronts might suggest flaws in its strategy and execution. But it also may reflect the sheer magnitude of the forces that are changing the TV and digital video ad marketplace. The next few months will be interesting.