Alphabet reported that YouTube’s third-quarter ad revenue rose 9% year over year to $11.2 billion, falling short of analysts’ average estimate of $11.43 billion. Growth also slowed from the previous quarter, even as YouTube’s Music and Premium subscriber base continued to expand and streaming rivals adjusted their advertising and long-form video strategies.
Ad growth eases from 13% to 9%
YouTube generated $11.2 billion in ad revenue in the third quarter, up 9% from a year earlier. Analysts had expected an average of $11.43 billion, leaving the result about $230 million below forecasts.
In the prior quarter, ad revenue was about $11.1 billion, up 13% year over year. So while the latest quarter brought a modest increase in revenue, its growth rate slowed. The shortfall and deceleration highlight pressure on YouTube’s advertising business, though one quarter’s results alone do not establish what comes next.
Music and Premium subscribers surpass 150 million
YouTube said the combined number of subscribers to YouTube Music and Premium has topped 150 million, up from 125 million announced in March. Subscription growth gives the platform a revenue stream beyond advertising. Alphabet did not provide a separate breakdown of subscribers or revenue for the two services.
YouTube also continues to command a sizable share of viewing on television screens. Nielsen recently estimated that in August, YouTube accounted for about twice as much U.S. TV viewing as Netflix. TV viewing is an important battleground for platforms seeking users’ attention and advertising budgets, but viewing share is not the same as ad revenue or profitability.
Netflix revises ad outlook as Instagram pushes long-form video
Streaming competitors are also changing their strategies. When Netflix reported results last week, it cut its ad-revenue expectation from $3 billion to $2.7 billion, citing delays in rolling out its advertising product. Earlier this month, Netflix also laid off about 1,000 employees.
Instagram this week announced changes to its long-form video offering, in what appears to be an effort to strengthen its presence on television screens and compete with YouTube for longer viewing sessions. Ross Benes, a senior analyst at EMARKETER, said streaming players are trying to catch up with YouTube and that Instagram is adjusting its strategy in response to YouTube’s success.
The latest figures point to two contrasting trends: YouTube’s ad revenue is still growing, but at a slower pace and below expectations, while its Music and Premium subscriber base is expanding and its TV viewing remains strong. The pace of ad growth and the continued expansion of subscriptions remain key measures to watch as the platform’s performance develops.