YOUTUBE IS THE STANDOUT STAR
of Google’s extensive portfolio of holdings.
SAN FRANCISCO — YouTube has emerged as a breakout star in Google’s cast of services as the online video site upstages cable television for a younger generation of viewers looking for amusement, news and music on their smartphones.
The trend is contributing to an advertising shift away from traditional network television programming to the more eclectic and diversified mix of clips ranging from cute cat videos to sobering shots of street violence found on YouTube.
As more advertising dollars flow to YouTube, it’s making the already hugely profitable Google even more prosperous.
In a third-quarter report released this week, Google’s corporate parent, Alphabet, said it earned $5.1 billion, or $7.25 per share, a 27 percent increase from the same time last year. After subtracting advertising commissions, revenue climbed 21 percent to $18.3 billion. Both figures topped analyst projections.
All that money gives Google more financial firepower to buy the rights to stream cable networks’ shows on YouTube, too, something likely to reel in even more viewers.
It also is helping to finance Alphabet’s investments in far-flung projects ranging from self-driving cars to internet-beaming balloons. That segment, known as “Other Bets,” lost $865 million during the third quarter, narrowing from a $980 million setback during the same period last year as Alphabet imposed more expense controls.
YouTube already has proven to be one of the best bets that Google has ever made since it bought the video site for $1.76 billion a decade ago. At that juncture, YouTube consisted mostly of crudely made videos shot by amateurs and clips pirated from movie and TV studios that were threatening to sue the site into oblivion. It had built a worldwide audience of about 72 million viewers when Google took control in November 2006.
Since then, YouTube has evolved into a far more polished channel that has spawned unlikely stars such as “PewDiePie” (Swedish comedian Felix Arvid Ulf Kjellberg), while largely making peace with studios by creating an automated screening system that detects pirated content. YouTube says it has paid more than $2 billion to studios that have chosen to leave their material on the site and share in the ad revenue generated by their clips.
Meanwhile, YouTube’s audience has surpassed 1 billion, with 80 percent of the viewers outside the United States.
YouTube also boasts that its site reaches more people between the ages of 18 and 34 years old — the millennial generation — than any cable network.
Alphabet doesn’t disclose how much money YouTube is making, but RBC Capital analyst Mark Mahaney estimates its annual revenue has reached $10 billion and is increasing by as much as 40 percent a year.