Youtube is easily one of the most popular websites on the internet, a constant parade of music videos, viral hits and other crowd-sourced content that generates a tremendous amount of revenue both for Google and for the most-watched content producers.
The entirety of this revenue currently comes from advertising, but Google has been noticing ad-related revenue declining consistently thanks to the rise of a type of browser plugin that is designed to block ads from being shown.
Obviously this is troubling news for Google, content producers and the advertisers who count on Youtube video ads as their primary marketing channel, but Google has chosen to look at the problem as an opportunity and opted to launch a brand new ad-free version of Youtube known as Youtube Red on October 28th, 2015.
The Rise of Youtube Red
Instead of following the typical ad-driven funding model Google uses for the rest of its websites, Youtube Red costs $10 USD per month for access.
Users will receive a huge range of benefits, first and foremost of which is the ability to watch all Youtube content without advertisements when logged in, a feature that may cause concern among many Youtube advertisers.
The other two primary benefits of Youtube Red for subscribers are the ability to download videos to your device for up to 30 days for offline viewing, and the ability to play audio from the Youtube app with the screen of your device turned off.
That last point might just be the most commonly requested feature of the standard Youtube app, meaning that a large number of users may join the service for it alone.
The biggest new feature of the service will be unveiled in early 2016 when members-only paid content launches.
Most of this original content will be episodic, starring some of the most popular Youtube content creators, including the ever-popular gamer PewDiePie (aka Felix Kjellberg), Superwoman (aka Lilly Singh), and the Fine Brothers, among many others.
Whether or not these shows will be able to hold their own in this new format remains to be seen, but Youtube Red’s future may hang upon their every episode.
Eventually, this paid members-only content will be made available with ads for those users who choose not to sign up for the new service, but otherwise nothing will change in their daily usage of the free ad-driven Youtube site or app.
Currently, Youtube Red is only available in the United States during a trial period, but there are plans to release an international version of the service in the coming months once the initial launch bugs and copyright negotiations have been ironed out.
How Does This Impact Online Advertising / Marketing?
The launch of Youtube Red is a huge step for Google, and not just because of the features the service offers. Far more important is the fact that they are taking a financial risk and branching out into new territory by moving to a paid subscription model.
This new strategy may indicate a coming shift for the rest of their digital offerings, and it should make every online marketer and advertiser sit up and take notice.
Google is following a trend that has been seen in all areas of the media sphere lately as consumers transition away from older ad-driven models towards paid subscriptions services in almost all areas of media.
Newspapers that formerly offered free ad-driven access now place their best articles behind subscription paywalls, and more and more customers are dropping their cable service for subscription streaming TV services like Netflix every month.
The impact of this trend on online advertising and marketing is going to be somewhat extreme, as advertisers will need to develop entirely new ways to get their message out to potential customers.
Advertising as a whole has been shifting rapidly thanks to the meteoric the rise of the internet and social media over the last decade, powered mostly by the Millennial generation and its inherently tech-savvy lifestyle, a group who also happen to be the primary consumers of Youtube content.
Traditional advertising models completely fail to motivate them, with less than 1% of millennials polled responding favorably to their messages.
Ad block software is just one of the ways that they tune out ads, as even before the software was commonplace a phenomenon known as ‘banner blindness’ was already drastically affecting online advertising efforts by inadvertently teaching viewers to ignore certain areas of the websites they visited.
This may seem like terrible news for advertisers and marketers, but every problem can be an opportunity if viewed in the right light.
While the millennial generation and their growing purchasing power may not be susceptible to messages delivered via traditional marketing models, they are still just as keenly interested in the products and services that are available as their less media-savvy forebears.
New models must be developed that are capable of reaching them, and leveraging social media and so-called ‘influencers’ – individuals who have personal sway with a particular social group – presents the most viable alternative for reaching the most jaded end of the market.
The content producers named above as the new stars of Youtube Red are just a few possible examples of social influencers, although it remains to be seen if they will retain their unique draw now that they are officially endorsed.
Any advertisers who aren’t already exploring new marketing possibilities are likely to be in for a rude awakening over the next few years.
Fortunately, there is still some time to formulate new strategies, as even with the launch of Youtube Red it’s going to take some time for the transition away from current advertising models to become widespread.
Even after that point, it’s unlikely that Youtube will ever cease to be a viable marketing channel. There will always be some level of demand for its ad-driven content model, but if the usage of ad blocking software continues to increase at its current rate, those ads may rapidly lose whatever effect they have left on consumers below the age of 35.
No matter how it plays out, the public is always going to love online video.