Google's second-quarter results pleasantly surprised investors Thursday, sending its share price soaring more than 11 percent in after-hours trading, and a lot of that was due to powerful growth by its YouTube unit. The online video service saw its mobile watch time double since June 2014 while overall watch time grew more than 60 percent year to year -- the service's fastest growth rate in the last two years.
YouTube saw its average viewing session surpass more than 40 minutes, up more than 50 percent year to year.
YouTube has always dominated the online video market, but for years, many have wondered if YouTube would ever be able to contribute to Google's bottom line. More recently, there's been concern over how YouTube might be affected by the rise of Facebook video, but with its strong showing for the second quarter, YouTube proved it is still a force to be reckoned with.
"It’s really a combination of all of YouTube's strengths coming together. It starts with having over a billion users -- really almost one-third of the people on the Internet -- every day watching hundreds of millions of hours on the service. That creates billions of views," Google's Chief Business Officer Omid Kordestani said on the company's earnings call. "We're doing also a much better job with our products and our sales force."
Google Chief Financial Officer Ruth Porat said YouTube's strong growth led to increased sales of the service's TrueView ads, which allow viewers to click "skip." This is great news for YouTube: TrueView ads are its most expensive because they show advertisers that users are engaged and paying attention to the videos and, more importantly, the ads that run with those videos. "Advertisers go where the eyeballs are and based on the metrics we heard from management in the call they are definitely flocking to YouTube," said Jason Moser, an analyst for Motley Fool.
Much of this growth comes from a number of YouTube strategies over the past couple of years that are designed to make watching the online service feel more like watching TV. YouTube has done this by working with creators to help them produce higher-quality content, adding auto-play features, as well as improving the mobile experience, said Paul Verna, a senior analyst for eMarketer. "This speaks to the success of their transformation from a repository of very hard-to-find and very hard-to-monetize user-uploaded content to more professionally produced and easier to monetize content," Verna said.