February 11, 2020: YouTube discloses how much it pays creators and invests $100M in children’s content; Instagram announces plans to monetize IGTV; Pinterest releases Q4 2019 earnings; Amazon launches custom voice option for Alexa
Here’s what’s worth knowing this week:
YouTube Pays Creators More than $7.5B Per Year
For the first time ever, Alphabet, YouTube’s parent company, disclosed the size of the platform’s advertising business.
Alphabet reported that YouTube generated $15.1 billion in ad revenue in 2019. To put things in perspective, Instagram generated $20 billion in advertising last year — and unlike YouTube, where the majority of ad revenue generated went to the creators and media companies publishing content on its platform, Instagram shares no portion of its ad revenue, despite pulling in $5 billion more than YouTube.
Talk to me about YouTube’s rev share model
Since 2012, YouTube has been paying creators more than half of the ad revenue generated. The general model is that YouTube gives 55 cents of each ad dollar back to the person who made or owns the video and keeps the rest for itself. While there are certain restrictions about who it will share its money with, specifically around extremist/unsafe content on its site, YouTube has clearly defined its monetization policy.
While YouTube isn’t without flaws, this basic monetization structure has allowed the platform to grow extremely fast. In 2006, Google bought the site for $1.56 billion and, on average, users uploaded 2.1 million clips per month. Fast forward to 2019 and YouTube is worth $15 billion (up more than 85 percent from two years earlier) and users upload 500 hours of content every minute.
One benefit of increasing regulation? More transparency. While a call for transparency may benefit platforms like YouTube that pay the majority of their ad revenue to creators, it also redirects the spotlight and places more pressure on Zuck & Co. to offer creator monetization opportunities. Additionally, it sets a new precedent for platforms to disclose creator payouts on earnings calls — something that is not dissimilar to the inclusion of influencers in IPOs in demonstrating their impact on the business.
Like we’ve always said, the platform that optimizes creators’ experiences will become creators’ platform of choice – and let’s face it – this puts the pressure squarely on Instagram. While Instagram has built creator-specific tools to streamline the creation of “high quality” content for its platform, it has failed to share the ad revenue with creators whose content is literally making the platform money. While one factor in becoming creators’ platform of choice includes tools to make “high quality” content, the other side of this equation (and the piece that Instagram is missing), includes clear and defined ways to monetize that content.
Not Unrelated: Instagram May Share Revenue with Creators Through IGTV
Instagram may, finally, share a piece of its $20 billion ad revenue with creators. Last week, Instagram announced plans to let creators monetize their IGTV videos.
Instagram confirmed with TechCrunch that it internally prototyped an Instagram Partner Program that would let creators earn money by showing advertisements along with their videos. While it’s not exactly clear if and how IGTV’s monetization policies would differ from Facebook’s, it’s hypothesized that the program could work similarly to Facebook Watch, where video producers earn a 55 percent cut of revenue from “Ad Breaks” inserted into the middle of their content.
Previously, Instagram only worked with a limited set of celebrities paying to “offset production costs” for IGTV content, but didn’t offer a way to earn any profit. The only real way to earn a profit was to partner with brands to create sponsored content or to direct their followers to platforms like YouTube where they could earn a cut of ads.
What would the rev share be?
While there’s no word on what the exact revenue split would be for IGTV, since Facebook tends to run its ads across all of its apps via its Facebook Ads Manager, it might just stick with the 55 percent approach so that it can say it gives creators the majority of the cash earned. As well, given what we now know about YouTube’s revenue share, in which creators earn 55 cents per every dollar, it makes sense that Facebook would follow the same logic to stay competitive.
What’s Instagram saying?
“It’s no secret that we’ve been exploring this. We focused first on making sure the product had legs — else there would be little to monetize in the first place. IGTV is still in its early days, but it’s growing and so we’re exploring more ways to make it sustainable for creators.” – Adam Mosseri, Instagram CEO
Eighteen months since the launch of IGTV, Facebook appears to finally be ready to grant creators the tools to monetize IGTV after realizing a steep learning curve and that long-form video creators aren’t going to create content for free. The timing of this announcement is also no coincidence — YouTube just disclosed that it pays creators the majority of its ad revenue.
As previously mentioned, creator-specific tools are not enough to drive creator adoption long-term. Without clearly defined ways to monetize that content, it’s unlikely creators will continue to invest long-term. While, over the last 18 months, Instagram has released multiple tools to make creating long-form IGTV content easier (i.e., support for landscape videos, support for series, Facebook integration, simplification for video uploads, IGTV previews in-feed), the inability to monetize this content led to minimal creator adoption and an overall lack of great content on IGTV. The IGTV videos dubbed as “most popular” are repurposed YouTube or TV clips, which have led to subpar view counts, only 7 million of Instagram’s billion users downloading the standalone IGTV app — and even Instagram dropping the IGTV icon on the homescreen.
Will creators’ ability to generate a real income from IGTV be enough to reverse its subpar performance? Too soon to tell, but we’ll be watching (no pun intended).
Still Related: YouTube Invests $100M in Children’s Content
In September, YouTube announced a $100 million fund to invest in new children’s video content on the platform, following its $170 million settlement with the FTC over children’s privacy law violations. Last week, YouTube offered the first bit of insight into what type of content (and types of creators) it plans to back with the fund’s resources.
What type of content?
The $100 million investment will be distributed over the next three years and is meant to fund videos that set the tone for the types of children’s content YouTube wants to see on its platform — content that drives outcomes associated with positive character strengths, like courage and compassion. Today, some of the most popular creators in the kid’s space are capturing childrens’ attention by creating videos of toy unboxings, pranks and vlogs and YouTube is aware that parents don’t want their kids watching consumer-driven content.
What’s YouTube saying?
“All programming will seek to support kids in uncovering their unique strengths and passions. Specifically, we want to develop content that inspires children to develop life skills and pursue their passions; establish healthy habits and care for themselves; increase their understanding of culture and diversity; and/or engage with and care for their community.”
This investment could significantly help or hurt creators based on the type of content they’ve invested in, especially knowing that most parents don’t want their children engaging with consumer-driven content. This being the case, brands and creators who have invested in more consumer-driven content will probably be de-prioritized from this mix, if not eliminated entirely. As a result, brands will have the opportunity to create and fund videos — through creators — that drive outcomes associated with character strengths. As well, with the understanding that as part of this initiative, YouTube will likely prioritize more episodic content with channel or series sponsorships, brands have the opportunity to lean into integrated product placements (instead of “sponsored” posts), deeper creator collaborations and sponsored takeovers.
Pinterest’s Q4 2019 Earnings: The TLDR
Last week, Pinterest released its Q4 2019 Earnings Report and it’s safe to say the platform had a big year, reporting better-than-expected earnings. Below we break down the highlights:
Growth, Growth and More Growth: At the end of Q4 2019, Pinterest reached 335 million MAU and its user growth rate outpaced Snapchat, Twitter, LinkedIn and Facebook. As well, the number of active advertisers on the platform more than doubled year-over-year, with Pinterest noting its Conversion Optimization products have been a large driver of this growth. Last, but certainly not least, Pinterest brought in $400 million in revenue in Q4, an increase of 46% year-over-year, bringing its total revenue to $1.14 billion.
Brands Uploading Product Catalogs: Pinterest also noted the rise in brands uploading their entire product catalogs to the platform, an option that Pinterest rolled out in March last year. Pinterest says that the catalog feed uploads “increased 70% sequentially in Q4,” while clicks on related pins were up 2x YoY.
Video is Top-Performing Content: Video is the top-performing content type on all social platforms and Pinterest is no exception. Pinterest says that there were 6x as many video views in 2019 as there were in 2018.
New and Next: Pinterest Verified Merchants: Pinterest also noted plans to launch the Pinterest Verified Merchants (VMP) Program, which will be focused initially on fashion and home decor. Pinners will see VMP checkmarks next to all merchants in the program so they’ll know that they are shopping from a brand that meets Pinterest guidelines.
In addition to Pinterest’s strong earnings performance, what’s particularly interesting to note is how Pinterest is thinking about leveraging signals of social proof, through its VMP Program, to increase consumer trust and credibility. Once the program launches, Pinterest will have its own version of a verified checkmark for approved fashion and home decor brands, which is another solid step for the platform as it continues to grow. In the coming months, it will be interesting to see if Pinterest begins to extend these verified check marks not only to brands in other verticals, but also to prominent creators on the platform — something that virtually every other social media platform has done.
Even for marketers whose brands don’t fall within the fashion or home decor verticals, it’s not too early to start preparing for the launch of the VMP Program, as the “Verified” badge will undoubtedly help brands stand out in the feed. In order to become eligible, marketers must upload their product catalog, install the Pinterest tag and make sure they meet Pinterest’s merchant guidelines.
Alexa, Your Voice Sounds Different
Amazon has announced it will work with brands to help them make custom text-to-speech voices for their Alexa skills.
The new feature, called Brand Voice, is offered through Amazon Polly, an AWS service that previously supplied text-to-speech services for companies to add realistic voices to their apps. KFC, for instance, has worked with Amazon to integrate Colonel Sanders voice into Alexa, so that consumers can order food from Colonel Sanders himself, because who really wants to order fried chicken from Alexa?
What’s KFC saying?
“We are one of the first brands to adopt the Amazon Polly enhanced text-to-speech voice technology to create a seamless and distinctively KFC re-ordering experience for our fans. The Colonel was passionate about his fried chicken and this new skill makes re-ordering KFC menu items easier than ever.” – Jason Cassidy, marketing director, KFC Canada
Although Amazon wasn’t first-to-market with a voice assistant, it did have a first-mover advantage in smart speakers in the U.S. with the introduction of Echo and built-in voice assistant Alexa in 2014. Since then, it has continued to release new features to make both the speaker and voice assistant easier and more intuitive to use, resulting in Amazon owning 70% share of the smart speaker market.
Amazon’s Brand Voice feature also offers brands the first step in integrating influencers with a voice experience and the foundation is laid for influencers to quite literally become the voice of the brand. Although Amazon may be initially launching its Brand Voice feature with brand mascots (i.e., Colonel Sanders for KFC) it’s not unlikely that influencers, too, may be brought into this experience.
As brands continue to incorporate voice into new touchpoints throughout the customer journey, it’s important to consider the most important ranking factors for brands to be selected by Alexa in voice search. Ultimately, for Amazon’s Alexa, it comes down to three factors: search relevance, sales performance and order history. While ratings and reviews don’t directly play into the voice search selection (currently), they do, however, play into recommendations – which are selected by 85 percent of Amazon customers when voice shopping. Specifically, Alexa recommends products with the “Amazon Choice” badge for the given search term, which is obtained by having a “popular product” as determined by positive customer reviews, in addition to having a high sales velocity.