YouTube Red and the World of Online Advertising

By Greg Bortkiewicz, Landis Communications
In October, YouTube took steps to cement itself as a media juggernaut with the introduction of YouTube Red, a paid subscription service. For $9.99 per month, users receive a range of perks, including:

  • Ad-free videos (more on this later…)
  • Offline viewing
  • Background play
  • Free subscription to Google Play Music
  • Original shows

At first glance, this seems to be fairly reasonable. Offline viewing is a great option for those who make long commutes (especially on BART, where cell signals can be unreliable), background play means you can listen to music while using other apps on your device, and the Google Play Music offering arguably makes this a better deal than rivals such as Spotify.
The introduction of original shows follows in the footsteps of video-streaming sites like Netflix, which has produced shows including House of Cards and Orange is the New Black to critical acclaim. YouTube will be pairing the existing stars of its network, including PewDiePie and the Fine Brothers, with television executives to create content exclusive to Red members.
I’m not an avid user of YouTube, but with Netflix starting at $7.99 per month and also being ad-free, the YouTube Red price seems a little high. Per Sjofors, CEO of the leading pricing research company, Atenga, agrees, suggesting that even $4.99 might be pushing it (see comments for his opinion).
But what really interests me is the offer of ad-free videos. I’m sure this will be a major incentive for people to sign up – after all, how frustrating is it to have to watch an advert before every video (especially if the video itself is really short)?! That said, will YouTube Red really be as ad-free as they are keen to promote?
First of all, it doesn’t apply to paid content on YouTube. This includes paid channels and TV/movie purchases and/or rentals. Secondly, native advertising and brand-sponsored content will still be present. While this may not be as pervasive as traditional adverts, they are adverts nonetheless – which calls into question YouTube Red’s claim of an ad-free platform.
Numerous popular YouTube channels and stars make use of brand advertising as a crucial part of their revenue. YouTube has already made attempts at clamping down on brand-sponsored videos, but it would be virtually impossible to prevent anyone from plugging a brand in their video, whether they outright mention the brand or use product placement.
So YouTube Red will be ad-free to an extent. Is it still worth the $9.99 monthly subscription fee?
I will confess that for some time now I’ve used an ad-blocking extension on my browser. I’m aware that many sites rely on advertising revenue as a major source of income, but I also feel like after years of annoying and garish adverts and pop-ups, no one can be blamed for using an ad blocker. Every now and again, my wife will show me a YouTube video on her laptop and it I’m reminded about how frustrating it is to have to sit through an advert first – even if it’s just a few seconds before you can skip it.
I believe that for many potential subscribers it will be a moral decision on whether they sign up. How does the desire to support websites and YouTube channels weigh up against paying the fee when there are free alternatives?
As I already mentioned, I’m not a frequent enough user of YouTube to consider becoming a member of Red, but I would love to hear the thoughts of people who have signed up, in particular their experiences with the ‘ad-free’ side of the platform.
Let me know your thoughts in the comment section below or tweet me @greg_borko.

5 thoughts on “YouTube Red and the World of Online Advertising

  1. I remember that when cable TV first started, the promise was that it would be ad-free. Some premium channels still are, but the rest, 100s of them, are not. It will be interesting to see how much adoption YouTube will get for the ad-free subscription.

  2. Greg – I agree. Offering a paid ad-free environment is an interesting option but not sure how well it will work. It’s worked for Pandora and other such streaming services but the difference there is they always had both options for customers. Time will tell. Great post. Cheers, David

  3. YouTube red is really good in my opinion. I’m make YouTube gaming content but only have a small subscription base at the moment however since YouTube red started my revenue has increased significantly, this wouldn’t probably be the case for larger youtubers but for small channels like myself it is great. Also add free is brilliant as I watch a lot of YouTube the ads are annoying, however the price is a little high especially when ad blockers are free.

  4. Greg,
    Fantastic blog. In my opinion ‘background play’ should ALREADY be in the YouTube App itself (extremely frustrating) — On another note, the $10 a month price tag for YouTube Red doesn’t make sense. As you pointed out the monthly fees for Netflix are less and the consumer gets WAY more for their money spent. I believe Google may have to go back to the drawing board on this one and make it around $5 a month (maybe even $2.99) with more incentives — possibly start competing with Netflix and Hulu for TV shows and movies… we will wait and see what Google has planned next.

  5. Greg, I completely agree and it will be interesting to see how this service evolves. I was able to preview this service a while back at Google — I thought it was a bad idea then and I’m still not convinced otherwise. We shall see!

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