Some YouTube creators are seeing their earnings drop, adding yet another data point to a darkening picture for Internet advertising.
Despite heavier traffic to YouTube, many YouTube content producers are seeing much lower ad rates since the onset of the coronavirus in the U.S. As reported by the tech publication OneZero, a number of prominent YouTubers have described declines of between 30% and 50% in CPM (cost per thousand impressions) recently, even as viewership has grown.
Facebook (FB) - Get Report, Twitter (TWTR) - Get Report and Pinterest (PINS) - Get Report have each warned of falling ad revenue in recent weeks, and it appears inevitable that the coronavirus will take a bite out of YouTube’s financial results as well.
The Interactive Advertising Bureau estimated that between March and June, overall digital ad spending will fall 33% owing to a combination of withdrawn or reduced advertising budgets. The group projected a 37% drop in spend on digital video ads in March and June, and a 41% drop in digital display ads, as compared to pre-coronavirus budgets.
YouTube is a top destination for advertisers nowadays, as well as a rising star on Alphabet’s balance sheet.
Alphabet (GOOGL) - Get Report revealed for the first time in February that YouTube generated $15.15 billion in advertising revenue in 2019, including $4.72 billion in the fourth quarter alone, and Alphabet has touted the platform as a major contributor to the company’s overall top line growth, along with mobile search.
The pandemic has highlighted a seeming irony across Internet advertising, however -- that increases in traffic don’t necessarily translate into more revenue. According to the New York Times, traffic to YouTube grew by about 15% between late January and late March 2020.
Facebook, for instance, said weeks ago that despite usage increases across its apps in countries hard-hit by the virus, economic dislocations associated with the virus meant falling demand for ads and lower first-quarter revenue. It also said that some of the biggest spikes in usage were happening on apps like WhatsApp or video calls that aren’t well monetized.
Investors will learn more soon whether increases in YouTube viewership were enough to offset any drop in advertising demand. Alphabet is expected to release its March quarter financial results in early May.
For the time being, analysts have been slashing outlooks for Alphabet and other ad firms in response to the weaker ad environment, and speculating on when advertising budgets might fully rebound.
Calling the pandemic’s impact on advertising a “shock to the system,” SunTrust analyst Youssef Squali wrote recently that the weaker ad environment is likely to persist until the fourth quarter of this year, although the exact time of a bounce back remains murky.
Shares of Alphabet are down 11% year to date.