YouTube Changes: Are We Killing the Golden Goose?
Hyper-targeting, 1 Billion+ users, engaged audiences, & record low CPMs!
You may (or may not) have heard a wide swath of YouTubers coming forward over the last week with concerns about rapidly declining views on their new content. Pewdiepie, for instance, saw his latest vlogs generating under 2 Million views (so sad, I know).
But Pewdiepie wasn’t the only YouTuber to be hit with these sudden declines. And while some were quick to jump to the subscriber “glitch”, leading to hundreds of people being unsubscribed from channels on every upload, that isn’t the real culprit. So what’s causing this?
tl;dr explanation: Suggested Videos
YouTube tweaked their algorithm, and it seems to have affected the views generated by suggested videos drastically. Previous Pewdiepie videos generated nearly 30% of his views from suggested videos, while that percentage on new videos has dropped to under 1%. And that decline hasn’t been offset by anything else, which means he essentially lost 30% of his views overnight. So where did those views go?
Clickbait
While we’re all familiar with the practice of making clickbait-y titles and thumbnails to get views, the problem hasn’t directly affected the livelihood of YouTube’s core creators so dramatically. But this latest algorithm change seems to suggest a much greater emphasis on click-thru-rate over Relevance. Instead of Pewdiepie’s videos being the primary suggested videos alongside similar content, they are instead finding much more unrelated content, but content that seems geared toward generating more clicks.
(If you want a more thorough explanation of this change, I will refer you to Pewdiepie’s NSFW explainer below)
What does this have to do with advertising?
I imagine many of us would agree that the ability to reach more people more efficiently is a good thing. Previously, TV was the gatekeeper to reaching those people. But with the widespread adoption of the internet and it’s related content proliferation, people are spending more time than ever consuming content on a wider variety of platforms. Which means competition. Which means more competitive CPMs.
But there’s got to be an anchor point, the lowest amount companies (and in YouTube’s case their content creators) are willing to accept with regard to CPMs. This poses the first big thought: YouTube has reached their lowest CPM threshold.
Consider as well that YouTube’s parent company Google is facing the very strong likelihood of declining ad revenue (or at least declining growth) in both Search and Display within the next few years. And I think we can all agree that video is where much of that revenue will be migrating. Which poses my next thought: YouTube is being pressured to generate greater profit.
Finally, we have to look towards the overall category landscape. YouTube is no longer the undisputed video content king. Facebook is ramping up it’s efforts and commanding more time from consumers (and subsequently advertising dollars). Services like Netflix, HBO Now, and Amazon Prime Video offer ad free services and increasingly compelling catalogs of content. And there are only so many hours in the day one can watch videos (and ads). YouTube launched YouTube Red to try and compete with some of these ad-free services, as well as subsidize the low CPMs generated by ads for their creators. But that will only ever be a small part of YouTube’s overall revenue.
With the category landscape in mind, let’s consider some ways in which YouTube can generate greater profit while keeping CPMs competitive:
1. Get consumers to spend more time on YouTube (steal time from TV)
This is the method they were moving forward with, as their previous algorithm change seemed to favor longer content and creators/videos who were generating higher retention. But this solution only generates more revenue if it leads to more ads served. And since YouTube doesn’t have a good solution for mid-roll ads, they were relying on an indirect increase in videos watched. Apparently that wasn’t working (or at least not enough), because we are now at option 2.
2. Get people to watch more videos on YouTube (more clicks)
If option 1 was a surgeon’s scalpel to the problem, then option 2 is the blacksmith’s hammer. This option is less consumer friendly as it moves away from long-term consumer experience (watch time) to instead focus on short-term actions (clicks). The latest algorithm change seems to give the greatest weight to click-thru-rate on suggested videos. And while it might seem like that’s simply giving consumers what they want, in reality it encourages even more click-bait tactics. And even more unfortunately, it discourages community, consistency, and creativity, which have all been hallmarks of YouTube, and their true differentiation from the previous TV-centric model.
Why should advertisers care?
Because “content is king” right? If you agree with that idiom, then this inevitably leads you to the conclusion that YouTube is nothing without it’s content. And therefore nothing without it’s content creators. And while subscribers give creators some level of security, the algorithm is the true arbiter of success on YouTube. And channels, both big and small, need to feel like the algorithm is, if nothing else, aligned with their interests if they are to continue investing in the platform.
Articles like the one above should terrify YouTube. And they should terrify advertisers too. Because there’s a high likelihood that if he, and others like him, were to leave YouTube, some amount of their fan bases would follow. And if enough creators leave, then YouTube loses its competitive advantage: it’s creators, their content, and their community.
And that matters to advertisers because as we have seen with the category landscape, more and more video services are ad-free. And ad-free services can offer higher revenue margins to content creators. And companies like AT&T and Disney own the multi-channel networks that manage these creators. And it certainly would be enticing to add a pewdiepie channel to Disney’s potential ad-free VOD service. Or add every Fullscreen creator to AT&T’s new DIRECTV Now service, which would include a zero-rating on mobile data usage (something YouTube currently can’t offer).
For YouTube, they need to figure out how to generate profit in a way that doesn’t alienate their creators and users. And that might mean higher CPMs.
As for advertisers, we need to align with tactics that lead to the long-term health of our industry, which also means the long-term health of the content industry. Devaluing our CPMs is essentially devaluing our consumers as well as the content creators. And if a consumer can pay a small fee to get what might amount to hours of their time back by avoiding ads, a simple cost/benefit analysis would lead many people to do just that.
Disclosure: AT&T is a BBDO client, but all of the information above is pure speculation and my own personal opinion. Additionally, all of the information about YouTube’s algorithm is also speculation based on observation. But it totally makes sense, right?
If you enjoyed this brief rendezvous, why not recommend it? And check out other articles myself and my colleagues have written around the ever changing media landscape on our Communications Planning Blog.
