Google received widespread praise for its advancements in the AI market following its first-quarter earnings report, but the results also highlighted its significant progress in another competitive arena: video streaming.
In the first three months of the year, Google’s subscriptions increased by 18%, largely driven by the growth of YouTube, with the platform’s ads business seeing a 21% increase. Company executives underscored various metrics and milestones to demonstrate advancements in streaming.
YouTube’s subscriber bases are reaching critical mass, with its TV service, cable-plus television streaming, now boasting 8 million users, and Music and Premium collectively surpassing 100 million users, including trial members. EMarketer predicts that this growth will lead to YouTube subscriptions generating $3.12 billion in revenue this year, compared to $2.87 billion in 2023.
Chris Ballard, managing director at Check Capital Management, noted the increasing trend of people watching YouTube from their living rooms.
Driving much of this growth was the demand for NFL games via YouTube’s expensive Sunday Ticket offering, as well as its cable alternative YouTube TV and ad-free Premium version. YouTube TV subscribers have access to over 100 TV channels and on-demand content, starting at $13.99 per month, while YouTube Premium subscribers unlock an ad-free experience and access to YouTube Music.
These subscription offerings complement Google’s ad-supported business, diversifying its revenue streams and strengthening its position in the streaming market.
While other streaming companies like Netflix and Disney are exploring ad-based models, YouTube is taking a different approach, according to EMarketer senior analyst Ross Benes. He stated that streaming services benefit from both consumer payments and advertising revenue, making them less dependent on either.
Netflix has seen success with its new ad tier, with ad business increasing by 65% quarter-over-quarter in Q1, contributing to overall revenue exceeding analyst estimates.
Competition for streaming ad dollars is intensifying, causing concerns among investors, particularly after Roku hinted at this challenge in its earnings report, leading to a drop in its stock price.
For Google and YouTube, advertising remains the cornerstone of the business, supported by advanced technology. YouTube’s advertising business grew by 21% in the first quarter, demonstrating its continued attractiveness to marketers.
YouTube’s subscription revenue declined slightly in Q1 compared to Q4 2023, attributed to the shorter duration of Sunday Ticket revenue. However, with substantial cash reserves, YouTube has the potential to expand its sports partnership subscription offerings.
As YouTube TV nears its one-year anniversary of a price increase, EMarketer’s Benes predicts it will become the largest TV and cable provider globally, strengthening its position in partnership negotiations with TV networks.
Despite the growth of subscription revenue, Check Capital Management’s Ballard believes that YouTube’s ad business will remain significantly larger, given users’ preference for free ad-supported services over paid subscriptions.
