Should advertisers be concerned about YouTube’s subscription service?

This week YouTube quietly announced the introduction of a subscription service that (as far as we can tell) allows users to skip advertising, and potentially access exclusive creator content.

This is not YouTube's first foray into premium ad-free content. In 2013 they launched film/TV rental service, and the recent Music Key product allowed subscribers to skip ads on music videos for a small monthly fee.

But this is the first time the service has allowed users to avoid advertising across the wider network – a move that could greatly impact the availability of paid advertising.

So, should advertisers be concerned about this move?

Subscription services make more money

Paid for subscribers makes a substantial amount more revenue for a media company that an ad-funded non-subscriber. It’s the reason services like Spotify and LinkedIn constantly push heavy users to subscribe – you can avoid some, if not all of the advertising, for a small fee and the service becomes more profitable.

What is particularly interesting about the introduction of YouTube's service is that content creators may possibly take a bigger cut of subscription revenue (currently it's 55% of ad revenue, less if working an MCN). This is an area of great concern for YouTube as competitors such as Facebook and Vessel are also venturing into content creation and offering a bigger slice of revenue.

This potential increase in revenue, coupled with Google’s move to control how advertisers work with content creators, means that there is strong incentive for the creators to move away from a pre-roll only revenue stream and create more premium content for subscribers.

This of course will have a drastic impact on the amount of ‘eyeballs’ advertisers have access to. Surely this spells a disaster for advertisers?

A different approach for subsctiption services

As anyone who regularly works with digital news providers can tell you, a subscription only service has a massive impact on inventory availability.

However, advertising spend against these subscription only sites did not cease – it continued in another form, shifting from banner/display advertising to ad-funded content and sponsorships. Less ‘eyeballs’, but more ‘engagement’ – time spent with the brand.

In many ways, YouTube has already been pioneering this mentality with their successful ‘skippable’ pre-roll ads.  On a cost per view basis, these are actually more expensive than the typical CPM bought pre-rolls. But advertisers have generally been more receptive to the skippable format.

Why? Because it’s not purely about eyeballs - it’s about engaged eyeballs. And with current industry trends around increasing ad viewability (including new publishers like Adform only charging for viewed ads), we need to stop looking purely at ‘impressions’ as a success metric, and focused on other metrics (including wider brand measures) as a way of assessing campaign performance.

Less views. More opportunity

It is worth noting that this isn't a move towards a 100% subscription model.

Yes, it will impact on view numbers for advertisers (albeit a low impact for the first 12 months or so). 

But it could potentially open up more opportunities for advertisers in the long term

• Tighter integration with content creations
• Ability for brands to 'fund' premium content (advertising as a service)
• Greater scale brands who create their own (free) content

Time will tell whether this will be successful move for Google. But if there is one company who has the data to prove whether this a good idea or not – its Google.

Advertisers won’t have to panic just yet. But in this era of ongoing disruption, it will be the brands who act quickly to these changes and take advantage of new opportunity that will win out in the long term.

Liam Brennan

Follow me on LinkedIn for more updates, or on Twitter @LCBrennan