India's unexpected digital growth story has had an unlikely effect on the monetisation of YouTube videos. The YouTube community in India has seen a 50-60 per cent drop in monetisation over the last couple of years. This comes at a time when video consumption is booming and India and is the second-largest online market in the world with close to 500 million internet users.
Explaining this decline, Samir Bangara, Co-Founder & Managing Director - â€ŽQyuki Digital Media, said, "The decline is a function of two things, the ad rates and the fill rate (inventory utilisation.) The entire telecommunications ecosystem has improved by leaps and bounds in India, bringing more users to the platform. On television, a scenario like this would have led to an exponential increase in ad rates from broadcasters. "The digital ecosystem with infinite inventory functions very differently from that of television with finite inventory and therefore this boom in internet users has resulted in excess supply of inventory and a corresponding decline in ad rates and fill rates."
According to Bangara, the effective fill rate on YouTube, which might have been at say 30 per cent prior to the entry of Jio, has dropped by half because digital spends of brands are not growing at the rate at which the market is growing. This led to a sharp drop in ad rates, Bangara noted. Recognising that it is not logical to expect advertisers to divert funds from TV and Print to Digital overnight, Bangara explained, "This is how a free economy works. If there is excess supply of stock in a market, the stock price will decline."
He is confident that the scenario will improve over time. "It's a problem but it's a good problem," said Bangara. He said that there will be a time gap between the drop in fill rates, ad rates picking up and brands and agencies devoting bigger marketing budgets to digital and YouTube.
The story although is not just about fill rates. Brand safety concerns have significantly affected ad revenue for YouTubers in certain categories. "While for some it could be around a 20 per cent drop, for others, it is to the tune of around 70 per cent. On an average there has been a decline of around 50 per cent," said Russell Pinto, VP, Audience and Studio Operations, Culture Machine.
Pinto felt that YouTube's attempts to curb bad actors by placing strict thresholds for monetisation has also contributed to this decline. He too felt that the decline is not a sign of trouble but of better times to come. "Bad content and click-baiters that were attracting traffic were pulling ad inventory as well. This was hurting good content creators. Now, YouTube is trying to ensure that ads are directed to quality content creators," he explained. YouTube has put in place a review mechanism that will screen bad content. While the algorithm learns to distinguish good content from bad content, creators are bound to face glitches and see a decline in revenue.
In addition to these factors, agencies and advertisers have begun preferring Facebook over YouTube for video content. "Facebook being a better content discovery platform is preferable for brands over YouTube. Not just that, ads on Facebook are more native in nature," said Rashmi Putcha, co-founder LIQVD ASIA and CEO of DMTI. Facebook's focus on video content has increased and the social media platform serves more video content, said Putcha. "Earlier Facebook was not even an option as a platform to disseminate videos. But now spends are getting diverted to Facebook as well," she pointed out.
The one and obvious message to content creators is that those who have been purely dependent on ad revenue will need to look at other avenues to monetise their content. In the immortal words of Bangara, "Online popularity is like a Digital TRP." "Google monetisation is just one part of that revenue model. If you build a business that is only based on Google, you will be in trouble in the foreseeable future. Content creators will have to find more innovative monetisation models to leverage the growth that they are experiencing," he said. Bangara added that creators could use their digital TRP to collaborate with brands to make custom deals for video content and demand premium rates for higher reach.
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