Overtaken by TikTok, YouTube revenue plummeted

During the pandemic, YouTube is one of Alphabet’s key growth drivers as more and more people are forced to stay home and glued to screens. The video streaming platform continued to grow rapidly last year as the economy reopened and ad spending skyrocketed.

YouTube used to be Alphabet’s main growth driver during the global pandemic (Photo: CNBC).

However, by the first quarter of 2022, everything was over. Initially, Alphabet forecast YouTube’s growth to reach 25%. However, the actual number only stops at 14%. This has contributed to a decline in Alphabet’s revenue and stock value.

Specifically, Alphabet’s revenue reached $68.01 billion, up 23% year-on-year but still lower than initial forecast. Meanwhile, YouTube’s ad revenue only reached 6.87 billion USD, lower than the 7.51 billion USD predicted by analysts.

The YouTube metrics are the latest sign that the digital media advertising market is taking a hit. Last week, Snapchat CEO Evan Spiegel said the first quarter was challenging for competitor YouTube. The company also forecast that sales may be lower in the next quarter.

With both YouTube and Snapchat, more and more competitors want to take their market share, especially TikTok. Meanwhile, many other large and small media companies are also launching video and streaming services, aiming to win back this lucrative piece of cake.

“Although the company’s cloud and search businesses performed well in the first quarter, the business for the YouTube platform fell much lower than analysts’ forecasts. due to increased competition from other social platforms like TikTok and a lot of premium entertainment services like Disney+,” said Paul Verna, an analyst at Insider Intelligence.

Looking back at the second quarter of 2021, YouTube revenue reached more than $7 billion, up 83% year-on-year, roughly equal to Netflix’s quarterly revenue. YouTube’s disappointing recent results have dragged down Alphabet’s profits.

Now, YouTube is betting its future growth on a short-form video product called Short. This move is intended to compete directly with rivals such as TikTok, Snap or Instagram’s Reels.

TikTok is considered YouTube’s biggest competitor (Photo: Tom’s Guide).

In May 2021, the company said it would pay $100 million to content creators on the platform. During the meeting just took place, senior managers at YouTube revealed that Short has received more than 30 billion daily views. However, the service is still in the early stages of monetization.

According to CNBC, a lot of different factors have influenced the digital advertising market. These include iPhone privacy changes, supply chain disruptions, labor shortages, inflation, and rising interest rates.

Ruth Porat, Alphabet’s CFO, said that the Russia-Ukraine conflict also reduced Google’s presence in the region, which in turn affected YouTube’s revenue.

“The most direct impact is that we have had to suspend most of our commercial activity in Russia as announced in early March. Right from the start of the conflict, there has been a drop in spending. by advertisers, especially on YouTube in Europe,” Porat said.

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