Alphabet CEO Sundar Pichai was one of the company's executives touting the importance of YouTube subscriptions during the company's fourth-quarter earnings call.
Search advertising is as central to Google's identity as the Big Mac is to McDonald's. But on Tuesday, the tech giant revealed that another venture it has been secretly preparing for years is now bringing in big profits.
Google CEO Sundar Pichai said during the company's quarterly earnings call on Tuesday that paid subscriptions now generate $15 billion in annual revenue.
Pichai credited YouTube with growing the largest share of subscriptions thanks to its combination of paid services such as live TV, music, ad-free online content and live sports.
For context, Google's subscriptions are bringing in more than twice the revenue that Yum Brands, the parent company of fast food companies Taco Bell, KFC, and Pizza Hut, made in 2022.
This subscription increase is a bit shocking because the video platform, and parent company Google, have historically made the majority of their revenue from advertisers rather than charging consumers. This shows that people are ready to pay for YouTube, with premium partnerships such as the NFL Sunday Ticket offer and ad-free consumption options.
YouTube isn't moving away from advertising. The video site's advertising revenue totaled $9.2 billion in the fourth quarter, up from $7.96 billion a year earlier.
“We're obviously pleased with YouTube's ad revenue growth in the fourth quarter and the strong subscription revenue growth,” YouTube Chief Business Officer Philip Schindler said on a conference call.
YouTube's paid subscription services vary in access and pricing. The lowest priced option is YouTube Music, which allows users to listen to music and watch music videos without ads and reportedly pays artists $0.002 per stream. Next up is YouTube Premium (previously known as YouTube Red). It allows individuals to watch her YouTube videos ad-free for $13.99 per month, with 55% of that paid to the content owners these subscribers watch. At the highest price point is NFL Sunday Ticket, a partnership between the NFL and YouTube, which gives subscribers access to games for $449 per season.
Subscription revenue is part of Google's broader “Subscriptions, Platforms and Devices” category, a new line item the company previously called “Google Other.” In the fourth quarter of 2023, our Subscriptions, Platforms and Devices business generated $10.8 billion, an increase of 23% year over year. The company wouldn't say how much of the total quarterly totals subscriptions accounted for, only that the subscription portion generated $15 billion on an annual basis.
Alphabet, the parent company of YouTube and Google, reported better-than-expected fourth-quarter results on Tuesday, with total revenue of $72.5 billion, above analysts' expectations of $71 billion, according to Bloomberg, and earnings per share on the wall. The price was $1.64, compared to the city's forecast of $1.59. Alphabet shares fell more than 6% in after-hours trading as results from Google's core search business fell short of expectations, according to Bloomberg.
Google's subscription, platform and device businesses and YouTube advertising business all outpaced Google's search growth rate of 12.7% in the quarter. Some investors may have been bracing for less positive news from YouTube after the company laid off 100 employees, mostly in creator management. This is part of his two-year plan to cut Google's workforce, with him already cutting more than 12,000 jobs in 2023.
When asked about overall headcount reductions, Ruth Porat, the company's chief financial officer, said that severance accounts accounted for $700 million of expenses in the first quarter, but that going forward, “we will continue to work as we continue to work.” “will be held,” he said. [they’re] yeah, I'm doing it. ”
Much of this effort is an investment in motivating YouTube viewers to become subscribers. The company believes the strong growth in subscription numbers is partly due to YouTube's growing popularity on connected TVs, where users stream paid services such as his NFL Sunday Ticket and YouTube Premium. . Schindler said the company will continue to invest “significantly” in these living room YouTube experiences.
Schindler believes that creators of both free and premium video content are the common factor driving YouTube's business.
“YouTube's success starts with the success of its creators,” Schindler said, explaining that “more creators means more content, which translates into more viewers.”
