Tech Here's how YouTube can justify its higher ad prices (GOOGL, GOOG)

  • Published:

YouTube plans to raise ad prices for some of its premium inventory by as much as 20% starting in 2018

Alphabet Earnings play

Alphabet Earnings

(BI Intelligence)
24/7 Live - Subscribe to the Pulse Newsletter!

This story was delivered to BI Intelligence "Digital Media Briefing" subscribers. To learn more and subscribe, please click here.

YouTube plans to raise ad prices for some of its premium inventory by as much as 20% starting in 2018, according to sources familiar with the matter, per Business Insider.

Specifically, the price increases will affect YouTube’s “reserved inventory, which allows advertisers to guarantee prominent ad placement ahead of time, target specific audiences, and select the content their ads run next to. This inventory differs from ads bought in an auction, which are sold to the highest bidder and which brands can't control the placement of.

YouTube’s reported plan to raise its ad prices comes shortly after the company came under fire for a slew of brand safety issues. In late November, big brands including Deutsche Bank and Adidas pulled their YouTube ad campaigns after discovering their ads were running next to videos of young children that attracted sexually predatory comments. Other advertisers found that their ads were running next to objectionable content on Google Preferred, which was initially pitched as a close replica of TV advertising, Business Insiderreported earlier in November.

Despite its brand safety issues, YouTube can justify its higher ad prices for a couple of reasons:

  • The company is making progress on its effort to crack down on objectionable content. YouTube has removed 150,000 videos and terminated over 270 accounts from its platform, and it turned off comments on over 625,000 videos targeted by sexual predators, Vice reports. Additionally, a record number of brands are using Google Preferred to advertise on YouTube after the platform took steps to remove channels hosting objectionable content, the company told BI Intelligence earlier in November.
  • YouTube alone accounts for a sizable portion of over-the-top (OTT) hours. The platform garnered 18% of all US OTT viewing hours as of April 2017, according to comScore. That's only second to Netflix, which captured 40% of US OTT viewing hours. YouTube's high command of US consumers’ online viewing time makes it difficult for brands prioritizing reach to turn their back on the platform.

Meanwhile, YouTube’s increasing ad prices represent the company’s latest goal of "premium-ifying" its top digital ad inventory. This gives YouTube a better shot at luring brands that are wary of the company’s brand safety issues and brands that are accustomed to the premium ad environments of traditional TV.

To receive stories like this one directly to your inbox every morning, sign up for the Digital Media Briefing newsletter. Click here to learn more about how you can gain risk-free access today.