YouTube competes with TikTok for short video
YouTube wants in on the short-form video game that TikTok dominates, but it’s Meta that has key advertising advantages.
With over a billion monthly active users, TikTok’s explosion in popularity over the past two years has forced other social media players to catch up, but this pivot is costing YouTube a quarter of a billion. of dollars. A new report from media analysts MoffettNathanson shows that shorter videos cannibalize viewership (and creation) of longer ones, which means sacrificing ads. MoffettNathanson now expects YouTube to lose $275 million in previously estimated ad revenue this quarter.
Researchers previously expected YouTube ad revenue to grow 9% this quarter to $7.49 billion. However, as usage trends towards its harder-to-monetize Shorts feature, MoffettNathanson now predicts that overall YouTube ad revenue will only increase by 5%. As the short form becomes the form for social video, what was once the only cellphone game in town is also facing fierce competition from Instagram and Meta’s Facebook, both of which have a strong track record of successfully monetizing new features.
Released worldwide last July, the shorts differ from normal YouTube content in that the videos are limited to 60 seconds, presented vertically, and played for users in an endless scrolling format. (You know, kinda like TikTok.) Instagram Reels and Facebook’s Shortcut Video features are similar.
With YouTube having a real “Skip Ads” moment, analysts were pleasantly surprised on Wednesday when the platform reported that more than 1.5 billion people watch Shorts every month. (TikTok hasn’t updated its user count since the fall, but recent third-party estimates put it at 1.6 billion.)
With MoffettNathanson estimating YouTube’s total monthly active users at 2.9 billion, Shorts has an impressive 50% penetration, giving YouTube a leg up on its competitors’ TikTok imitators. Snap Spotlight reaches approximately 30% of its 612 million monthly active users and Instagram Reels reaches 43% of the app’s 154.9 million US users.
Still: YouTube might have better penetration compared to Instagram, but MoffettNathanson thinks Instagram users are spending more time on the app’s short videos. “With an average view likely lasting only a few seconds, we estimate that this audience represents only a small fraction of the more than one billion hours consumed daily on YouTube,” the report said.
YouTube and Meta are now forced to think about audience as much as penetration. The popularity of TikTok shows that users like short videos; if YouTube can’t offer them, it risks losing its dominant position in the social video space.
Meta and Alphabet executives both warned in recent earnings reports that short selling would cost their businesses. YouTube’s recent decision to prominently place Shorts right next to its app’s Home button is part of the reason analysts expect the shortened hit to arrive for Alphabet this quarter.
Compared to Instagram Stories, Facebook Reels serve only one-tenth the number of ads. TikTok videos come with a third of the number of ads as Instagram stories. And on YouTube Shorts? Ads are “apparently non-existent,” MoffettNathanson wrote, as YouTube appears to be “only testing ad solutions at this time.”
This isn’t the first time major social media players have been forced to pivot. When Snapchat’s 2013 Stories feature quickly overtook its original messaging feature in popularity, Instagram created its own imitator in 2016. Facebook introduced its version the following year. They needed to introduce the features to be competitive, but Meta needed to scale user engagement before they could monetize them further.
“The pain Meta and YouTube are feeling today largely mirrors the pain the former went through several years ago when it transitioned to stories. It took advertisers and advertising demand time to settle. adapt, but those few turbulent quarters have since paid off many returns,” MoffettNathanson wrote.
Even for abbreviated leader TikTok, analysts note that monetization is in its infancy. Advertising on the platform forces brands to create different ads than they use on existing platforms, thanks to TikTok’s new format. Still, MoffettNathanson notes that TikTok shows three times as many ads as Reels.
Analysts expect the loading of short ads to increase over time on YouTube, Facebook and Instagram. But they note that Meta has one key benefit: Meta Ads Manager allows advertisers to turn their existing Newsfeed or Story ads into a Reels ad with the click of a button. It’s up to you, YouTube.