Digital Video NewFronts

YouTube will begin selling ads in live TV service

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YouTube Inc. signage is displayed on a monitor after the company's new television subscription service was unveiled at the YouTube Space LA venue in Los Angeles, California, U.S., on Tuesday, Feb. 28, 2017.
YouTube Inc. signage is displayed on a monitor after the company's new television subscription service was unveiled at the YouTube Space LA venue in Los Angeles, California, U.S., on Tuesday, Feb. 28, 2017. Credit: Patrick T. Fallon/Bloomberg

YouTube will begin selling ads in its live TV stream, opening up more inventory in the streaming TV sector that can more precisely target very specific consumers. It's part of the Google-owned video behemoth's efforts to compete more directly with traditional TV and give advertisers more opportunities to reach consumers on the larger living-room screen.

Like traditional pay-TV operators, YouTube has two minutes of local ad inventory per hour on each network that it can sell. So far YouTube has let the networks themselves sell that two minutes.

Now YouTube will start selling the time as part of its Google Preferred package, which aggregates the top 5 percent of YouTube content for advertisers. It won't necessarily sell all of it, depending on the terms of its deals with networks it carries. It plans to make the announcement during its NewFront presentation on Thursday.

Advertisers won't be able to buy YouTube TV inventory as a standalone, nor can they specify that they want to buy the live stream as part of their Google Preferred package. YouTube will create a lineup of content for advertisers based on their demographic buy or affinity buy that could include YouTube TV.

After years boasting about its mobile reach, this year YouTube will be focused on the living room screen. According to research from Ipsos sent by YouTube, nearly 7 out of 10 YouTube viewers in the U.S. say they watch YouTube on a TV screen.

"This is in response to the change in consumer viewing we are seeing," says Debbie Weinstein, managing director, YouTube/Video Global Solutions. "We are seeing more people watch YouTube on TV and watch TV on YouTube; it's the ultimate convergence."

Hulu also plans to begin selling the two minutes of commercial time available in its live TV service this summer, says Peter Naylor, senior VP of ad sales at Hulu. The company plans to sell the inventory in its live stream the same way it sells its on-demand inventory, by audience, Naylor says. It will not offer targeting by show or network.

While advertisers are eager to test the so-called over-the-top space as a way to reach younger consumers who have either cut the cord or never subscribed to a pay-TV service in the first place, traditional TV still offers much larger reach.

YouTube TV has about 300,000 paying subscribers, according to a report from CNBC, while Hulu is believed to have 450,000 subscribers. Elsewhere, Dish Network's Sling TV boasts 2.2 million subscribers as of February, according to the company, while AT&T said Thursday that its DirecTV Now service has 1.5 million subscribers.

YouTube TV, which debuted in April 2017, recently began adding digital-only channels like Cheddar and The Young Turks Network to its lineup of traditional networks, which include the big four broadcasters and The CW, AMC, FX, TBS and USA.

Thus far, the commercials that air during the programs looked the same as those running in the traditional feed. But the ability to dynamically insert ads, which allows marketers to swap out commercials and show different ads to different households based on very specific criteria, is an attractive proposition to advertisers seeking ways to better target consumers on TV.

As part of its NewFront presentation this week, YouTube will also be announcing a new audience segment—dubbed "light TV viewer"—that lets advertisers specifically reach people who consume most of their TV and video content online.

It will also enable advertisers to run ads just on TV screens. Currently, brands can only target specifically to desktop, mobile and tablets. Now they will be able to add TV screens to the mix so ads can be served to people while they are watching YouTube on smart TVs, gaming consoles, streaming devices or casting.

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