When Google bought YouTube from three ex-PayPal employees in 2006 at a purchase price of $1.65 billion, little did they know how much their former brainchild would be earning today.
YouTube is a $15 billion business
Launched as a simple video hosting website, which was relatively ground-breaking at the time, YouTube has grown under Google’s curation into a media giant, eclipsing decades-old media corporations in terms of revenue alone.
“To put the platform’s size in perspective, last year YouTube pulled in more money than all of the ABC, NBC, and Fox broadcast networks combined and was around $5 billion short of Netflix’s overall 2019 revenue of $20 billion,” Business Insider noted.
We have actual confirmation on this because Google-parent company Alphabet has finally revealed how much it’s video streaming subsidiary earns.
According to Alphabet’s Q4 2019/FY 2019 earnings report, as reported by CNBC, “YouTube ads generated $15.15 billion in revenue in fiscal 2019, with $4.72 billion in the fourth quarter alone. The segment generated $11.16 billion in revenue in 2018, including $3.61 billion in the the fourth quarter of that year. The segment does not include YouTube’s nonadvertising revenue, like subscriptions for YouTube TV, which are included in Google’s other revenue segment.”
Google has been tightlipped about the platform’s ad revenue ever since it purchased it, and this sudden reveal has come as a bit of a surprise. Alphabet has not revealed, however, how much prodit YouTube earns, or the percentage of ad revenue that its creators are given, which has not sat well with industry pundits.
“While the new disclosures made analysts happy they were finally getting what they’ve been asking for for years, some said they didn’t get some key points stakeholders need,” CNBC reported. “For example, Alphabet CFO Ruth Porat said on the company’s earnings call Monday that the majority of YouTube’s ad revenue goes back to the creators, but she declined to give any specifics. That caused analysts to question YouTube’s profitability.”
Besides YouTube, Alphabet also revealed its revenue earnings for their Cloud services for the first time, which totalled $8.92 billion during the fiscal year (FY) 2019. This rose from $5.84 billion in 2018. Chief Financial Officer Ruth Porat said during the earnings call that Google plans to triple the size of its cloud sales force.
Google will be looking to put pressure on cloud rivals Amazon Web Services (AWS) and Microsoft Azure.
AWS’ hold on the cloud market continues, earning around $40 billion during 2019. Microsoft Azure, which is the market’s next biggest cloud player, earned $35 billion last year. While AWS still leads, its growth rate has been decreasing in recent quarters, while Google Cloud’s has been improving. Still, the search giant’s cloud service has a lot of ground to cover before it reaches its rivals market dominance.
Why release the results now?
After the report was released to the public, the media and industry members began questioning the timing of Alphabet’s move to disclose revenue after years of silence.
“The decision to finally disclose YouTube’s revenue after 15 years is likely motivated by a desire to highlight YouTube’s growth amid an earnings miss and declining search ad growth,” Business Indsider said. “YouTube’s ad revenue nearly doubled in the last two years, rising from approximately $8 billion in 2017 to $15 billion in 2019, with annual growth of around 37% and 36%, respectively.”
“The excitement over new disclosures probably put a mask on the weakness — but it was not a good quarter on the top line at all,” Jefferies analyst Brent Thill told Fortune magazine.
Google, like many other tech companies, is under constant scrutiny by regulators for data privacy concerns. Similarly, YouTube has faced concerns over risks to children on their platform. Big advertisers like Procter and Gamble also threatened to pull their ads from the platform in fear of their ads appearing besides controversial content that has mired YouTube. Google could be trying to ease concerns regarding performance following those bouts of controversy.
“To appease investors, it’s important for Google to remind onlookers that its business isn’t solely dependent on its search engine, and that it has fast-growing and separate businesses like YouTube and its cloud computing division to pick up the slack,” the Verge noted.