Six Ways YouTube Is Primed For The Future (And Four Areas That Need Work)

The video giant is entertaining the planet and diversifying its revenue. But it’s not easy to keep advertisers and creators happy.

Six Ways YouTube Is Primed For The Future (And Four Areas That Need Work)
YouTube CEO Susan Wojcicki [Photo: David Black]

Since becoming YouTube’s CEO in 2014, Google legend Susan Wojcicki has been busy shaping a service that long ago captured the world’s eyeballs into a business built to last. (She explains her strategy in our in-depth feature.) Though the company has made progress on an array of fronts, it’s also still working on some major challenges that are key to fulfilling Wojcicki’s vision.


What’s Working

1. YouTube is catering to its most passionate fan groups. Wojcicki has pushed the company to tailor services for some of the most popular ways people use YouTube, creating dedicated apps for kids, gaming enthusiasts, and virtual-reality early adopters.

2. YouTube generates revenue from more than just advertising. Red is a premium service that’s ad-free and costs $9.99 a month. YouTube offers Hollywood movies and TV shows to buy or rent (just like Amazon), and YouTube TV provides 40 broadcast and cable channels for $35 a month. In October 2016, Google acquired the influencer marketing firm FameBit to help YouTube match brands and stars.

3. YouTube is building a deep slate of original programming. Wojcicki has quietly undertaken the most ambitious content initiative in YouTube history. She has funded dozens of Red Originals, which target YouTube’s core audience of teen viewers, a market that’s been underserved thus far by Netflix and Amazon. The programming is often created by some of YouTube’s most successful producers and features homegrown stars.

4. YouTube is now a mobile-first experience. Wojcicki has pushed significant user-interface enhancements designed with smartphone or tablet consumption in mind, such as double tapping on the video to fast-forward and rewind 10 seconds and embracing vertical video once Snapchat popularized it. The result: Mobile views now exceed desktop ones.

5. YouTube’s rebuilt algorithms have led viewers to watch 1 billion hours of video a day. YouTube is optimized for what it calls “watch time,” which encompasses what users view, how long they tune in, the length of their overall YouTube session, and so forth. Together, these signals help YouTube algorithms decide which videos a user is most likely to watch shortly after they’re posted and which will lead to the longest overall viewing period.

6. YouTube has built a modern, global studio system. Creators can access full production facilities called YouTube Spaces in nine entertainment hubs including Tokyo and Toronto. YouTube enables HDR video and 360-degree audio and video, and mobile live-streamers can even broadcast 360-degree video in 4K resolution. Wojcicki has also made a big bet on virtual reality, amassing hundreds of thousands of immersive videos.


What Needs Work

1. YouTube needs to rebuild trust with advertisers. This March’s revelations of advertisements monetarily supporting (and appearing to tacitly endorse) hateful content led to a vocal brand backlash. Although the hubbub has quieted down, it’s prompted changes to how YouTube supports the brands that buy spots. There will be more pressure to deliver better, more transparent viewing metrics and to continue to create tools that let marketers control where their ads appear.

2. YouTube’s relationship with its creators remains fraught. In exchange for the reported 45% cut it takes from ads that run against videos, YouTube has added more tools and services, including human support, community moderation, and a non-video feed to interact with fans. But creators still feel like they have trouble communicating with the company. YouTube algorithm adjustments can radically impact the popularity of a channel, and those changes haven’t always been relayed effectively. The company overcorrected in the wake of the brand-safety controversy, decimating revenue for news and politics programming.

3. YouTube’s bid for the living room remains elusive. Wojcicki has led two overhauls of its TV app since taking over, and she’s succeeded in getting the likes of Comcast to embrace it. A year ago, she reported that living room watch time had doubled year over year, and YouTube TV’s well-reviewed bundle of broadcast and cable networks could improve that further. The company says TV is its fastest-growing screen. For the overwhelming majority of YouTube users, though, the service remains a mobile or computer-based experience.

4. YouTube is the biggest music streamer in the world—and that’s the problem. With an estimated 800 million people consuming music on YouTube, according to a music trade organization, the service dwarfs Spotify, which has 100 million registered users (half of whom subscribe). Although YouTube touts that it paid out more than $1 billion to the music industry in 2016 (from advertising) and it’s doing more to spotlight emerging artists on the service, overall, musicians and labels complain that it’s not enough given YouTube’s might, especially as Spotify cuts more favorable deals with the industry.