a behind-the-scenes look at her TV program, drives one of Youtube’s top channels, thanks to highlights from her talk show. Katy Perry’s sixyear-old “Firework” video is edging in on a billion views, and her upcoming live-streamed album-release special will seek to expand upon the spectacular view-counts for her greatest hits.
Part of Youtube’s appeal to mainstream creators is its adoption by a generation of viewers for whom Youtube, Amazon, and Netflix are the new ABC, CBS, and NBC. As James Corden explained at the Brandcast, what makes The Late Late Show work was his epiphany that the program could be divided into highly shareable, fun-size entertainment. “I realized that I didn’t have to make a show for any time slot, because we had the internet,” he told the audience. “And more than that, we had Youtube.”
Corden does this as adroitly as anyone: Adele’s appearance on his “Carpool Karaoke” bit, featuring her renditions of Spice Girls and Nicki Minaj songs, was Youtube’s most viral video of 2016, with more than 155 million views. (By comparison, his TV show has averaged 1.34 million viewers in its 12:37 a.m. time slot this season.) In fact, the late-night wars, the hottest time-slot competition in television, are now effectively being waged on Youtube. Clips from Corden, Jimmy Fallon, Jimmy Kimmel, and Stephen Colbert have been viewed more than 16 billion times in aggregate, according to video-technology company Zefr.
This new reality helped inspire Youtube TV, a $35-a-month streaming service for phones, tablets, PCS, and TVS that offers more than 40 live broadcast and cable channels from the media companies behind ABC, CBS, Fox, and NBC, the same stuff you might be watching on Comcast if you weren’t perusing Youtube videos. Wojcicki unveiled Youtube TV last February at an event at the Los Angeles production studios that it built for creators, located in a 40,000-square-foot former Hughes Aircraft plant that still has a helicopter parked outside the front door. “There’s no question that millennials love great TV content,” she says, teeing up the announcement before a grid of 36 screens that cycle through clips of such mainstays as Modern Family, Keeping Up With the Kardashians, and college basketball. “But what we’ve seen is they don’t want to watch it in the traditional setting. They don’t want to watch it sitting in the living room with their families, waiting for their favorite show to come on. Younger generations want to consume TV the way they’re used to consuming TV content online.” In other words: They want to watch it like Youtube.
When Wojcicki and two of her lieutenants—product chief Neal Mohan and Robert Kyncl, the former Netflix executive who has overseen Youtube’s content and business operations since 2010—spell out the details of the service at the event, they don’t address why Youtube doesn’t have deals with Time Warner (CNN, TBS, and so forth) and Viacom (MTV, Comedy Central). Later, Kyncl says that re-creating a cable lineup simply was not a priority. “Our content offering isn’t as complete as the one you can get with your cable or satellite subscription,” he cheerfully concedes when I speak with him in his office, a mini museum of media history featuring such artifacts as a vintage announcer’s microphone, Beatles LPS, and Snap Spectacles. “We think that the older generation will gravitate toward their traditional way of subscribing to TV, and the younger audience will be happy with the offering that we have. That’s my thesis. We’ll see what ends up being the truth.”
Youtube TV launched in April in five cities (New York, Los Angeles, Chicago, San Francisco, and Philadelphia), entering an increasingly crowded market of sub-$70, cable Tv–like services delivered via the internet. AT&T/DIRECTV, Hulu, Sling, and Sony Playstation have only slight variations in channel lineup and pricing—and rumors persist that Apple will soon join the competition. Youtube hopes to differentiate itself by creating a better user experience than its rivals’, with features like a cloud DVR with unlimited storage and a search engine that’s smart enough to understand not just show titles but also concepts such as “history” and “superheroes.” In its first seven days, the mobile data-analytics company Apptopia reported that 147,300 people downloaded the Youtube TV app, a relatively promising start if they’ve actually gone on to sign up. (Sling, which has been in the market for two years, reportedly has more than 1 million subscribers.)
For now, Youtube TV is a solid rough draft. Although the service mixes conventional TV programming with Youtube Originals available on the Red subscription service, such as Lazer Team and other youth-oriented movies and series, it’s barely begun to integrate Youtube’s virtually infinite cache of entertainment, news, and how-to information, much of which could satiate the desire for any missing cable channels. In addition, its ad experience still mirrors what you’d see on cable TV rather than taking advantage of Youtube’s signature user control and variety of commercial formats. Indeed, the networks are currently controlling the ads, not Youtube. “We obviously have a lot of experience with innovative ad products,” says Kyncl. “We can bring that whenever our partners are ready.” Wojcicki points out that Youtube itself reflects more than a decade of learning and technological advances. Youtube TV just needs time to develop.
Ask Wojcicki about Youtube’s attitude toward monetizing its business, and she sounds like a startup founder. “We’re focused on getting the users to Youtube and happy with the experience, and keeping that growing, with the belief that the advertising will continue to come,” she says. “Because advertisers go where the users are.”
Given her central role in bolstering Google’s overall ad revenue, though, she has put a lot of effort into making ads both more effective for marketers and appealing to users. That’s included a migration away from formats that feel like, well, TV commercials in favor of ad units that are unique to Youtube, including sixsecond “bumper” spots. “It’s amazing the way you can tell a brand story in a short amount of time,” Wojcicki says. The service plans to phase out unskippable 30-second ads by 2018. These moves represent yet another chapter in Youtube’s history of ad innovation, which began in 2010 when the company started to let viewers bypass many spots after the first five seconds and only charge advertisers when someone didn’t fast-forward.
No Youtube ad initiative has been more important to the company than Google Preferred. Launched in the spring
“This is where the growth is,” says Wojcicki. “It’s where the next generation wants to be.”
of 2014, three months after Wojcicki’s arrival as CEO, the program allows companies to target ads to the top 5% of Youtube videos in categories such as beauty and fashion, music, and comedy, based on a proprietary algorithm involving total audience and passion level among viewers. It’s engineered to give big marketers brand-safe content that speaks, especially, to 18- to 34-yearolds, allowing Youtube to compete for TV dollars (and charge more like networks too).
Thanks to Google Preferred, during last year’s upfronts—the ad-buying season when networks presold $18.6 billion worth of commercials— Youtube was able to “negotiate side by side with the TV networks rather than being dealt with after the TV discussions were done,” says Tara Walpert Levy, Google’s VP of agency and media solutions. “That speaks to the breakdown of the silos between TV and [digital] video.”
This erosion of boundaries has implications for the entire advertising industry. As 2016’s upfronts approached, media-buying firm Magna Global, part of advertising giant IPG, agreed to spend $250 million of its clients’ money over five quarters on Youtube ads. “The initial reaction was one of disbelief on the part of some of our TV partners,” recalls David Cohen, Magna’s CEO for North America. “They thought it was negotiation [tactics] as opposed to real and substantive. When we went to the upfronts and actually had less money to spend, it was clear. It made networks hungrier for the business.”
That was 2016.
The 2017 upfronts took place less than three months after Youtube’s ad-positioning woes began, reminding marketers that embracing Youtube isn’t as simple as shifting dollars from one budget line to another. Google Preferred was designed specifically to shield advertisers from controversy, and yet a renegade creator like Pewdiepie—the Youtube superstar whose failed comedy sketch featuring two guys carrying a sign that read DEATH TO ALL JEWS initiated the trouble—presents risks that simply don’t exist on conventional TV. That said, the ad business overall appreciates that Youtube is neither antiseptic nor bland. Marketers promoting an R-rated horror film, for instance, are far less skittish about the content accompanying their ad than the marketer of baby shampoo. In fact, Rob Norman, chief digital officer at Groupm, the world’s largest media buyer, says that he doesn’t know of any instances of movie studios—among the biggest spenders for both Youtube and TV advertising—pulling campaigns in the wake of the dustup.
Although networks such as Fox and NBC have publicly trashed Youtube and its rival Facebook as being too risky for TV dollars, there are signs of recovery: Magna CEO Cohen notes that “the vast majority of clients that had paused Google activity are now back and live.” Johnson & Johnson, one of the highest-profile brands to have sidelined its Youtube campaigns, is returning to Google Preferred. Just as important, it also grabbed the sponsorship of Best.cover.ever., a new Youtube singing competition hosted by Ludacris and created by Ryan Seacrest’s production company. “We knew immediately that we wanted to be the exclusive sponsor,” Jeff B. Smith, North America company group chairman, says in a statement to Fast Company. If Ryan Seacrest–produced content isn’t brandsafe, nothing is.
The ad controversy has obscured a longerrunning, more intractable issue that Wojcicki has yet to solve: keeping the service’s community of creators happy. This constituency has chafed at a number of real and perceived slights but now fears burning out in the effort to keep pace with the Hollywood talent it’s increasingly competing against for viewers’ (and Youtube’s) attention.
The company “wants longer videos, more videos, more frequency,” says Jim Louderback, a partner at the VC firm Social Starts and former CEO of streaming TV network Revision3. Youtube’s algorithm is rewarding that kind of content, particularly if viewers respond to it. Consequently, some high-profile Youtubers fret that the service is turning against them. Last December, Matthew Patrick, whose gaming channel has more than 8 million subscribers, funneled his angst into—appropriately enough— a Youtube video. “Practically none of Youtube’s organically grown creators can stay on this treadmill 365 days a year,” he said in a voiceover. “But you know who can? Large companies with hundreds of employees who are already used to 24-hour news cycles.” While he spoke, an animation showed Youtubers tumbling off a treadmill while anthropomorphized logos for Today, Ellen, The Late Show, and The Tonight Show jogged gamely onward.
Youtube’s artistic community has long grumbled about the company taking a reputed 45% of revenue from ads placed on their videos. Now, as the company fiddles with the levers on its platform to reduce the chances of ads showing up where marketers don’t want them to, some goodcitizen video uploaders, from news commentators to wrestling fans, have seen their views and revenue fluctuate wildly—an effect they describe as the “adpocalypse.”
“It’s been tough for the creators, too,” Wojcicki acknowledges. While she isn’t budging on Youtube’s share of ad revenue, the company has greatly expanded its customer-service system for creators, with email support available to all and dedicated phone reps for those with 100,000-plus subscribers. A new feature called Community now allows creators to share items other than videos—such as text, GIFS, and polls—with their fans. Wojcicki has also expanded Youtube’s global network of lavishly equipped production facilities. There are currently nine of them, known as Youtube Spaces, located in cities from L.A. to Mumbai, India. Creators with at least 10,000 subscribers (who number in the hundreds of thousands) have free access to soundstages, editing workstations, 360-degree cameras—everything they need to ramp up the ambition and production values of their videos.
Youtube has grown so pervasive and familiar that it’s easy to lose sight of the unique value at its core. Burnie Burns, cofounder of Austin-based Rooster Teeth, which produced the Youtube original sci-fi comedy Lazer Team and its upcoming sequel, still remembers being dumbstruck almost a decade ago by what the service offered: “They completely changed the game in terms of the ability to monetize video with pre-roll advertising. That did not exist earlier.”
“You have all these people whining and complaining,” adds a cappella singer Peter Hollens, who performs popular renditions of songs, from “The Sound of Silence” to “Let It Go,” in harmony with other Youtubers or multiple recordings of himself. “When in the history of mankind have you been able to have free worldwide marketing on a platform?” Not to mention distribution, hosting, and promotion. Hollens isn’t utterly dependent on Youtube ads for his livelihood: Fans make ongoing pledges to pay for his videos via crowdfunding platform Patreon, which he calls “a quintessential part of my growth income.” But without Youtube, he would never have built the following that supports him there. (Patreon was itself cofounded in 2013 by Jack Conte, a popular Youtube musician who struggled to make a living purely through ad revenue; Fan Funding, Youtube’s own donation feature, floundered and was recently replaced by a new attempt called Super Chat.)
Wojcicki insists that she wants to hear what’s on creators’ minds, even when they’re disgruntled, and no matter what the venue. Sometimes they reach out to her directly on Twitter; sometimes one of her kids will watch a video, encounter a gripe, and relay it. A day before Brandcast, she held a summit for creators in New York. “We have to run this delicate ecosystem between the viewers, the creators, and advertisers,” she says. When I visit her office at Google’s Googleplex headquarters in Mountain View, California (where she works one day a week and really does have a mountain view), Wojcicki doesn’t start our conversation with her perspective on creators or marketers. Rather, she proudly shows me a small sculpture that her 9-year-old daughter made for her. Fashioned from Tinkertoys and cardboard, the inspirational artwork is emblazoned with slogans such as “Fairness is for everyone,” “Don’t go backward, go forward,” and, at the top, “I see the future in your eyes.” High expectations follow her wherever she goes.