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Despite a flurry of first-quarter activity on the subscription front, advertising accounts for the lion’s share of digital video revenues and will continue to do so in the foreseeable future. According to a new eMarketer report, “Q1 2015 State of Video: Monetization, Audience, Platforms and Content,” this is true even for some of the companies that have recently launched fee-based plans.
eMarketer estimates that US digital video ad spending will climb to $14.38 billion in 2019, from $7.77 billion in 2015. Even though growth rates are slowing for this maturing category, they will remain at double-digit levels throughout eMarketer’s forecast period.
YouTube will reach $1.99 billion in net US video ad revenues by 2017, up from $1.55 billion in 2015. However, as more competitors enter the field, the channel’s revenue growth will slow to 6.2% in 2017, from 39.0% in 2015. These figures represent net revenues after subtracting acquisition costs for traffic and content.
Revenue to YouTube’s content partners has increased by 50% year over year for the past three years, according to Robert Kyncl, vice president and head of content and business operations at the company. Speaking at the February 2015 Code/Media conference, he said, “We’re seeing tremendous growth in revenue. And because of our revenue sharing, we are passing on a majority of the revenue to content creators, so they, too, are growing at the same rate.”
Growth notwithstanding, some YouTube creators have expressed dissatisfaction with the company’s revenue share, which is widely estimated at 55% for partners, but not confirmed by YouTube. Facebook and Twitter, among other platforms, are actively trying to attract video talent and brand marketers away from YouTube, and other competitors such as Vessel and Vimeo are offering more attractive terms to creators.
Besides increasing competitive pressure on YouTube, these moves have raised the stakes for marketers. As they continue to spend more on video ads on a growing range of platforms, marketers are employing increasingly sophisticated targeting methods. A study by Videology found that 97% of US video advertisers on its platform employed demo and advanced targeting criteria in Q4 2014—something other than simple demographics. Geotargeting was the most widely used method, followed by behavioral and domain targeting.
Further findings of the Videology study included:
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