YouTube’s evolving strategy to woo advertisers

Two years ago YouTube distributed over $100 million in grants to fund originalpremium content, the majority of which was provided to traditional media companies, celebrities, and production companies diving into YouTube for the first time. Since then the native YouTube creators continue to grow and thrive, while most of the traditional media companies have largely disappeared.

At the time, the grants were considered by many to be an attempt on YouTube’s part to bolster its premium content to woo advertisers to the platform.

Now, rather than bring traditional media companies and celebrities into YouTube, YouTube is turning its top creators into celebrities. In order to gain mindshare among advertisers and bring in bigger budgets YouTube has launched an ad campaign dedicated to featuring many of its top creators.

YouTube’s new CEO Susan Wojcicki stated that, “If you look at our top creators, they have a lot of subscribers; it’s all categories like entertainment, health and beauty, food, cooking, and yet I think a lot of times advertisers and users don’t know about these channels.”

Wojcicki’s comments, and YouTube’s evolving tactics, highlight the lack of understanding of the YouTube ecosystem that many advertisers are continuing to face. YouTube has changed the face of media, content, and celebrity but dollars haven’t caught up with the times.

YouTube is wildly popular with Teens and Young adults, and according to a recent study, “74 percent of 14-18 year-olds and 68 percent of 19-24 year-olds in the U.S. use YouTube, which is above Facebook and significantly more than Twitter.”

While ten years ago teens were watching Jon Stewart instead of 60 minutes, this generation is watching Phil DeFranco in favor of Jon Stewart.

So what’s the holdup?

YouTube is doing everything it can to spur adoption of the platform. In many ways Google Preferred is a step back for advertisers. It’s not the best way to buy ads on the platform – in fact, its more than likely worse. However, its clear Google is adapting to advertisers, but advertisers are not adapting to the times.

The Google preferred program is manufactured scarcity. YouTube has rolled up channels, verticalized them, and packaged them to advertisers in a way that makes sense to traditional media buyers. It’s limited inventory (by design), making it feel more akin to TV buying vs digital.

The irony is that with 100 hours of content uploaded each minute, and an audience of over one billion users, there is so much inventory that CPM’s on the platform are in decline. Also, a recent article brought to light the fact that the Google Preferred program is filled with a number of channels that are of dubious quality. In the end, most advertisers would be best served by logging into TrueView and bidding on the open marketplace on an as needed basis (or hiring someone to do this for them).

With YouTube’s glut of inventory and audience, it’s a buyers market.

However, advertisers are unwilling or unable to buy advertising on YouTube in a way that doesn’t follow their existing habits and infrastructure.  They’re working with media buying agencies who have no incentive to optimize and make brand dollars work harder.

Most media agencies businesses generate profit by receiving a percentage of a total spend. As a result, they’ll want to keep margins low – a great way to do this is to buy your media upfront. The problem is, the ecosystem has changed, and the dinosaurs haven’t figured out that they’re already extinct.

In the long term, both brands and Google will come out further ahead once brands get a better understanding of YouTube (and digital media as a whole). The losers will be the brands and media companies who fail to evolve.

Brands may start to get a lot more bang for their buck as they learn to unbundle the outdated bureaucracies of yesteryear and begin leveraging the advantages digital has to offer.