YouTube will earn $1.13 billion in net video advertising revenue in the U.S. this year, up nearly 40 percent accounting for 18.9 percent of the of the video ad market, according to new research from eMarketer. The company, a unit of Google, has spent big over the past year to promote stars like Bethany Mota, Michelle Phan and shows like "Epic Rap Battles Of History" to better compete with TV for ad dollars.
Overall revenue, including international and display ads, is up 56 percent to $5.96 billion according to the firm, but YouTube's take of the market is expected to slide as the video ad market grows and alternatives proliferate. Amazon is investing big in original content and just purchased online gaming network Twitch for $1 billion.
Television advertising continues to be a dominant factor with a 2014 total of $68.54 spending this year compared to a digital grand total for online video that falls south of $6 billion. But TV advertisers are looking for ways to reach young audiences who aren't tuning into traditional TV in the same numbers.
YouTube, with its 1 billion monthly users from around the world, has created cause for concern in the TV industry when its stars find fame while totally ignoring the more traditional medium. Mota, for instance, recently appeared on the cover of Seventeen magazine and a series of billboards after finding a YouTube audience attracted to her fashion tips.
“It shows that traditional media companies have an interest in reaching their users online,” Susan Wojcicki, YouTube’s CEO, told Ad Age in April. “They are interested in access to this endemic YouTube talent, native YouTube talent, and they think there is opportunity to bring those together…As the platform matures and we have better monetization, we want to be able to continue to grow the whole ecosystem in a way that’s good for advertisers, good for publishers and good for users.”
YouTube is projected to make up 19.4 percent of the U.S. ad market in 2015, then 18.3 percent in 2016, eMarketer said. YouTube’s net revenue will grow from $2.8 billion worldwide to $3.5 billion in 2015, according to a previous report from the Wall Street firm Jefferies & Co. highlighted by Variety. That total would give the site a valuation of between $26 billion and $40 billion, whereas Netflix (NASDAQ: NFLX) has a current market cap of $29 billion.