YouTube ad revenue, disclosed by Google for the first time, topped $15 billion in 2019
YouTube drove $15.1 billion in ad revenue in 2019, according to Google's fourth-quarter report, and most of the money went to creators who make videos for the service.
On Monday, Google, which operates under the parent company Alphabet and owns YouTube, announced earnings, with total revenue of $46 billion in the fourth quarter, up from $39 billion during the same period in 2018. Google also revealed YouTube revenue for the first time since it bought the company in 2006 for $1.65 billion.
The revenue disclosure was the first official look at the video platform's advertising and subscription business. On top of $15.1 billion from advertising, subscriptions to ad-free YouTube, YouTube Music and YouTube TV generated $3 billion in 2019, according to Google.
Google's stock price took a nearly 5 percent hit in after-hours trading partly because overall revenue missed Wall Street's expectations.
YouTube ad revenue rose 36 percent year over year, according to Google. "We pay out a majority of our revenue to our creators," said Ruth Porat, Alphabet's chief financial officer, speaking during a call with Wall Street analysts on Monday.
YouTube splits ad revenue with the publishers and independent video makers. Google keeps 45 percent of the revenue from the ads shown in the videos, according to its terms of service.
There are 20 million subscribers on YouTube's premium services, and 2 million subscribers to YouTube TV, Google disclosed. YouTube Premium and Music typically cost $10 a month. YouTube TV, a subscription service that includes programs from TV networks like a cable plan, costs $50 a month.
"We're pleased with YouTube's growth in advertising and subscriptions," said Sundar Pichai, Alphabet's newly appointed CEO, who took over for co-founder Larry Page last year.
YouTube is becoming an important part of Google's ad business, competing with major digital players like Amazon, Hulu and Facebook. YouTube participates in the yearly rush for advertisers at the Digital Content NewFronts, where brands commit to spend big on internet programming for the year. In 2019, money coming into NewFronts rose 20 percent year over year, while TV's Upfronts grew 2.5 percent, according to eMarketer. Of course, total advertising from TV Upfronts still dwarfs its digital counterpart.
Most of YouTube's advertising revenue comes from brand advertising, while direct-response advertising is growing, according to Porat. Direct-response ads lead to sales, downloads and other immediate consumer actions.
YouTube costs a lot to operate, however, including payments to the creators and infrastructure costs, Porat said. Costs of revenue, which includes expenses like content acquisition costs, were $21 billion in the fourth quarter, up from $18 billion at the same time in 2018.
Google is spending money to clean up YouTube, too. On Monday, Google announced its latest steps to reform the site with policies that it says will lead to the removal of more misinformation as the 2020 election heats up.
Google also broke out cloud revenue for the first time. Google Cloud computing services are running at a $10 billion yearly run rate, the company said. That means that as of last quarter the business was on pace to generate $10 billion a year.