YouTube's short and smart future: Here're challenges, opportunities

In its 15th year, India's largest OTT is trying to master the world of short video before new competitors chip away at ad growth

The kid is around a year old. He mimics his dad who is cheering what sounds like a football match on TV. Suddenly the dad holds his head in despair and slumps back on the couch. The baby slumps too with his hand on head and his diaper on full display. This hilarious short video on YouTube has been watched hundreds of thousands of times; many of those views were on smart or internet-enabled TV screens.
 

That sort of captures where YouTube is in its 15th year of existence in India. At 453 million users a month (Comscore), YouTube is India’s largest OTT player. It is also the gateway to the internet for millions of people joining the online party and a part of the country’s largest media firm — the estimated Rs. 25,000-crore (FY22) Google India.
 

According to Media Partners Asia, YouTube brings in roughly Rs. 9,000 crore or over a third of this topline. That is about 18 per cent of the total digital adspend in India. But the world’s first streaming service competes not just with Meta, Twitter, Netflix or other digital players but with Disney-Star and Sony-Zee among the traditional media behemoths. It straddles the worlds of broadcasting, digital, news, entertainment and information.
 

The rise in short videos and growing viewership on smart TVs are among the big trends it is staring at, says Ishan John Chatterjee, director, India, YouTube.
 

These present both challenges and opportunities. Marija Masalskis, senior principal analyst, TV, video and advertising at London-based Omdia, explains. “YouTube along with Meta dominated the global online video market outside of China for the last five years. The explosive growth of TikTok in 2022 mounted a significant growth challenge to the duo. Barring major legislative intervention, Omdia expects TikTok to account for nearly a third of global online video advertising revenue, disrupting the duopoly of Google and Meta in this space. As a response, we expect YouTube to double down in their focus on Connected TV (CTV or smart TV) platform. It captures about a quarter of the CTV advertising market globally already,” she says.
 

India simply mirrors that. More than a fifth of the time spent on YouTube in India was on smart TVs in April. It is, in terms of time, the fastest-growing screen for You­Tube. “While watching YouTube on the TV screen in December 2022, Indian viewers watched videos that were on average over 2.5 times longer than those viewed on mobile and desktop. And the average session was over four times longer,” says Chatterjee. He doesn’t say it but YouTube is for many viewers the default option when they can’t figure out what to watch on Netflix, Amazon Prime Video or other OTTs. At the top end it is attracting premium streamers and at the bottom end it is becoming the default TV for millions of Indians who watch it on low-end smartphones.

Unique visitors (in mn) in April 2023

 

It commands roughly double the advertising rate per thousand viewers compared to other digital media, according to media agency Lodestar-UM. But its rising viewership on TV presents a quaint problem. “The digital TV/CTV overlap is making it difficult to distinguish what we thought of as TV,” says Shrikant Shenoy, associate vice president, Lodestar UM. Trying to figure out the equivalent of the 20-second TV ad on YouTube has meant redefining media planning and working hard at upskilling its team, he adds.
 

The importance of  being YouTube

YouTube, estimated at $30 billion in revenues, globally, is a mirror of media consumption and the wor­ld’s audition theatre. From feeding poor children through village kit­chens to discovering music from Nagaland, its impact on popular culture is much like that of cinema or TV in their early decades. YouTube creators are idolised and followed much like film stars. Many of them like Prajakta Koli or Bhuvan Bam make it to mainstream films, TV or OTT shows simply because of their overwhelming popularity on YouTube. It created 750,000 full jobs and contributed Rs. 10,000 crore to India’s GDP in 2021, according to a recent presentation by Chatterjee.
 

This hold that YouTube has over the creator economy is why advertisers like it, Shenoy said. It spots a genre that is trending and starts nurturing it — from comedy a decade back to “how to” videos five years back to cooking and a host of other communities. The ones showing huge growth currently? Gaming. “Earlier, gaming on YouTube used to be all about live streaming your gameplay but now if you go into some of our popular creators, they’ve taken, say, Minecraft, one of the big gaming titles, and they do elaborate scripted storytelling. We had 20 billion hours of Minecraft consumption in a single year from India alone (2021),” says Chatterjee.
 

Then there is “Shorts as a category that did not even exist three or four years ago. And now we have 1.5 billion monthly active users (April 2022) on Shorts globally and 50 billion views (January 2023) a day,” Chatterjee adds.
 

What does that mean strategically? “It means investing in lowering barriers for creators to make, upload and monetise videos,” Chatterjee explains. For example, use of artificial intelligence or AI to clean up extraneous sounds on videos made by creators.
 

In both Shorts and smart TV, YouTube faces significant headwinds. “CTV advertising is also a strategic growth area for broadcasters, premium streamers and CTV platforms such as Samsung TV, LG and Roku,” says Masalskis. Just like TikTok in the US, in India Instagram Reels, Josh and other apps could chip away at ad revenues. That is why that baby video being watched on a smart TV matters. It is, as of now, an area where YouTube is the context of free content. If it can dominate this big screen much like it does the mobile, it should sail through.

YouTube & the free content ecosystem
 

The growth in the free programming ecosystem is one of the biggest shifts in the Rs. 2-trillion Indian media and entertainment business. DD Freedish, a state-controlled DTH operator, YouTube and Meta are at the centre of this ecosystem.
 

DD Freedish, a free, linear DTH operator, has grown from 40 million homes (192 million viewers) in 2020 to about 58 million homes (278 million viewers) in 2022. This is, largely, the small town and rural, Hindi-speaking belt. YouTube reaches over 453 million people every month. That is over 90 per cent of the people using the internet regularly for news, entertain­ment and other purposes going by Comscore data.
 

Their growth emphasises the migration of audiences at the top end to subscription-driven streaming and at the middle and bottom end to free content either on digital (YouTube, Meta et al) or linear TV (DD Freedish).
 

The size of the market? The total national ad pie of Rs. 1 trillion (2022).