News & Views

Opinion / YouTube bets Red

by Contagious Contributor
Will consumers pay for YouTube Red? Millward Brown's global brand director, digital, Duncan Southgate assesses whether ad-free viewing or premium content will determine its success

Will we soon pay for YouTube content the way we are happy to pay for Netflix? That’s certainly what Google is hoping with the launch of YouTube Red, a new $9.99 a month service offering a premium, ad-free content.

While Netflix has proved the appeal of premium content with the likes of Kevin Spacey’s House of Cards and Amazon Prime has looked to the Top Gear trio to boost its video offering, YouTube is hoping that exclusive and long-form content from existing and future YouTube stars will provide the spice that attracts subscriptions.

Regardless of the appeal of YouTube’s new premium content, the remaining question is whether ad-free viewing will also be a powerful motivation. Right now Google is working hard to defend its position as an ad-friendly environment. For example, it is reported to have forced adblockers to watch ads in full on YouTube by removing the opportunity to skip.

Millward Brown analysis of consumer response to video ads, however, suggests that YouTube is perhaps as immune as it can be to antipathy to digital advertising.

Data from Adreaction Video – our global study of viewing across all screens – shows that digital screens suffer when it comes to favourability towards advertising. Comparing positive with negative attitudes to video ads for computers, tablets and smartphones results in scores of -25%, -26% and -30% respectively (i.e. 25% more people are negative than positive).

YouTube’s predominant ad approach, TrueView, however, gives consumers the control they crave by offering the chance to skip ads after a short time, transforming that negative score in to something broadly neutral. On average, across the 42 different countries surveyed we found that consumers are consistently more positive towards skippable pre-rolls (+1%). This is more positive than people are towards TV ads (-4%). Only by rewarding viewers to watch the ads could YouTube make consumers significantly more positive about ads; mobile app reward videos scored highest in our study (+26%).

So AdReaction Video reveals that YouTube’s current video advertising strategy is broadly as inoffensive as it can get and certainly more popular than more intrusive formats which remove user control such as mobile app pop-ups (-47%) and non-skippable pre rolls (-45%).

So how well is YouTube Red likely to perform? Perhaps the best parallel here is Spotify, the audio service that offers both ad-funded and ad-free experiences. While some people no doubt upgrade to Spotify premium to avoid ads, a large number must also be doing it to take advantage of the other benefits (unlimited access, higher quality, ability to download and play offline, ability to create and share playlists and ability to travel abroad). However even with all of these reasons to upgrade, Spotify has converted just over 20 million subscribers, out of a total of more than 75 million active users.

Consumers who pay for YouTube Red also get additional benefits, namely the chance to view content offline as well as access to YouTube Gaming and a new YouTube Music app. Google's streaming music service, Google Play Music, will also be included.

Despite this, it would be surprising if YouTube could sign up more than a quarter of its billion users. My hunch is that those that sign up will be driven more by the premium content, the download option or the music than by the ability to remove ads.

It would seem risky for YouTube to make a significant move away from providing advertising opportunities given the $4bn it’s reported to have earned in ad revenue in 2014.

Advertisers clearly value the fact that YouTube already delivers high-reach and a popular, consumer and advertiser-friendly video format across online and mobile devices. Millward Brown case studies also show it can be highly effective at building brands, especially as a cost-effective way of reaching and influencing light TV viewers.

YouTube Red seems like a sensible hedge alongside advertising revenues, allowing them to understand what appetite consumers have for ad blocking at the same time as evolving a self-funding model for their premium content offering. Unless Red is a runaway success, the YouTube platform is likely to remain a popular brand-building video platform for years to come.