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YouTube Touched by TikTok Competition, Apple’s Change That Hit Facebook -By ASC

Executives said YouTube is seeing a slowdown in the growth of direct -response ads. Bloomberg

For months, investors worried about the twin powers plaguing Facebook’s business-a ban on targeted advertising on the iPhone and the rising popularity of TikTok.

Concerns should also be directed to Google’s YouTube. Combined with the economic turmoil resulting from the war in Ukraine, the pressure contributed to a sharp slowdown in sales for the world’s largest video service and a rare revenue loss for Google’s parent company, Alphabet Inc. Shares fell about 3% in extended trading Tuesday after the company reported first-quarter results.

Over the past year, Apple Inc. has elevated the position of social media companies by placing strict restrictions on third -party ads on the iPhone. That hit Meta Platforms Inc., which operates Facebook and Instagram, and other mobile -focused social networks like Snap Inc., while leaving Google relatively sheltered because it relies less on that form of targeted advertising.

But not YouTube. Previously, Google said Apple’s privacy changes had little impact on its video site, but Tuesday its executives said YouTube saw a slowdown in the growth of direct -response ads, a marketing format that uses targeting to reach users. YouTube advertising was the weakest link in Alphabet’s first quarter results, only registering a 14% increase to $ 6.87 billion, more than $ 500 million over analyst estimates. A year earlier, video units reported a 48% jump in the same quarter.

“Youtube [is] now feels the pain, “said Dan Morgan, senior portfolio manager at Synovus Financial Management. That’s particularly worrying for the stock since YouTube, along with Google’s cloud division,” is expected to be the next level of growth, “he added.

Google executives linked some of YouTube’s problems with Russia’s invasion of Ukraine. Political unrest led to a “pullback” in spending across Europe, said Chief Financial Officer Ruth Porat. During the quarter, the company’s overall sales in Europe and the Middle East increased 19% compared to 33% in the previous year.

In February, Google suspended its sales operations in Russia, citing the war. The company maintained its search and YouTube services in the country, but the freeze had a “huge” impact on YouTube’s business, Porat said in a conference call after the decision was released. He shared that Russia accounts for about 1% of Google’s total sales and declined to offer any predictions about the duration of its impact. “I think it’s still too early to comment,” he said. “Sadly, it’s still going on.”

While Google executives discussed Apple’s war and sanctions, they didn’t mention another threat to YouTube: TikTok, a popular video app from China -based ByteDance Ltd that has forced Meta to pour resources into Facebook and Instagram, and challenged YouTube’s dominance of the creator industry online .

On Tuesday, Google leaders happily discussed YouTube’s response to TikTok – Shorts. YouTube launched the feature in 2020 as a space for short form videos on its apps and website. The company keeps Shorts free of ads, paying creators out of funds based on their performance metrics.

The ad -free experiment will end. Now YouTube is starting to test ads in Shorts, Google head of sales Philipp Schindler told investors. He said the company was “encouraged by the feedback and early decisions of advertisers.”

Executives also touted YouTube’s growth potential in online shopping and on TV screens, key investment areas. But most of the focus – and questions from analysts – are on competition with TikTok.

“There was also a lot of excitement about Shorts in the TikTok era, but clearly it was a very early day for them,” said Joanna O’Connell, an advertising analyst with Forrester.

Google said that Shorts gets 30 billion daily views, a fourfold increase from a year earlier. But the increase in viewership has taken some of the traffic away from YouTube’s longer mainstream videos, where it makes all its money, Porat said.

Porat said the business team at YouTube is working to “close the gap” between its main commercial service and its trial service that resembles TikTok. “So we’re excited about the new opportunities with Shorts,” he concluded.


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