Youtube’s revenue is falling and could become a problem for Google

YouTube is in the doldrums, and its latest quarterly results are the best proof of this. The video platform par excellence has seen its advertising revenue greatly reduced in the first quarter of 2022 compared to the last three months of 2021, as reflected in its public financial results, something that has greatly weighed down Alphabet’s overall results, which has earned 8.3% less from January to March than in the same period last year.

YouTube’s revenue in the first quarter of 2022 reached $6.87 billion, which is $870 million more than in the same period of 2021 ($6 billion), but $130 million less than in the second quarter of last year ($7 billion), $335 million less than in the third quarter ($7.2 billion) and $1,763 million less than in the fourth quarter ($8.63 billion).

The data is as striking as it is worrying for Pichai’s company, which has had YouTube as one of its most solid revenue pillars since Google acquired it in 2006. In fact, the video platform contributes almost 10% of the company’s global revenue.

For this reason, Alphabet has rushed to explain to its investors and have assured that they have been harmed by inflation and the general concern about the deterioration of the economy as a result, precisely, of this price increase, the problems in the supply chain and the uneasiness of the markets due to the impact of the war in Ukraine.

Some valid arguments, since the deterioration of the economy would be undermining advertising investment, to which must be added that the huge difference between the last quarter of 2021 and the first quarter of 2022 is due to the fact that during Christmas advertising spending soars and always represents a revenue peak for companies like YouTube. But there are other factors that Alphabet doesn’t talk about.

All of the above undoubtedly must have affected YouTube’s revenue decline in the last quarter, but they are all cyclical factors that put the blame on context and timing, not on Alphabet’s failure to deal with two rivals in the audiovisual market that are taking advertisers and content creators away from them: TikTok and Twitch.

TikTok’s growth continues to soar, and, in fact, the market research firm Insider Intelligence has estimated that by 2022 the Chinese social network will reach revenues of more than 11 billion dollars, three times more than the 3,880 it billed in 2021. But that’s not all, because the same report estimates that by 2024 this platform could equal YouTube’s revenues. Insider Intelligence estimates that both will bill around $23.5 billion by that date.

As for Twitch, its revenue figures are unknown, but its growing presence in our daily lives is evident, and the strong competition it is giving YouTube is not only demonstrated by its growing number of users and advertisers, but also by its ability to attract some of the most important youtubers of all time, who have changed Alphabet’s platform for Amazon’s to create their content.

YouTube is aware that its preeminence in audiovisual content on the Internet is in danger, and that is why it has tried to launch products similar to those of its rivals, so far without much luck. Its live videos have never really taken off, while it is now betting heavily on its own TikTok-like short video format, Shorts.

In fact, in May 2021, Alphabet said it would set aside a $100 million fund to pay creators who make popular videos in this format. In its latest earnings presentation, Alphabet officials said that Shorts has about 30 billion views per day, but did not give financial figures because, they said, it is still in its early stages of monetization.

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