Saturday, 24 June 2017 | 22:36 WIB

How YouTube TV Could Help Google Finally Crack The TV Ad Market

On top of that you will get what Google hopes will differentiate YouTube TV from the pack (FlatpanelsHD)

NETRALNEWS.COM - YouTube TV, Google’s new skinny bundle of live-streaming broadcast and cable channels, is clearly the company’s attempt to challenge traditional pay-TV distributors and appeal to cord-cutters.

It’s also a backdoor for Google to squeeze its way into the traditional TV advertising business. Google has long wanted to steal a chunk of the more than $70 billion U.S. TV ad market. The company of late has clearly tried to position YouTube as a viable alternative for TV advertisers looking to reach young people, with limited success.

“Google doesn’t grow into its market cap over time without taking a chunk of TV advertising,” said Dave Morgan, chief executive at Simulmedia, a company that helps marketers use data to buy TV ads.

Even as YouTube has announced staggering growth, with viewers watching more than 1 billion hours of video a day, “it’s hasn’t impacted TV,” he said. “Maybe it’s down a single point in viewership. Advertising hasn’t budged.”

Now, as part of the $35-a-month package of 40-plus channels that will roll out in the next few months, analysts have speculated that Google may have access to about two minutes of commercial time each hour to sell to advertisers on the cable networks featured in the service. It’s the time typically allowed to cable providers such as Comcast Corp., which runs local ads from marketers such as car dealerships and personal injury lawyers.

While Maureen Bosetti, chief partnerships officer at the ad buying firm Initiative, said her team is still sorting through what YouTube TV will mean for clients, she said Google’s motivation is clear. “They do want to take TV money,” she said. “They want to play in the TV space.”

YouTube TV will be available across the U.S., allowing it to sell ad inventory on a national basis, unlike cable operators that have geographic limitations. Plus, it should be able to use better targeting technology and vast reams of consumer data to deliver ads to specific audiences. It’s an opportunity for Google to begin experimenting with selling linear TV advertising and potentially prove it can do so better than others.

“As TV shifts from linear feeds to streams, we see an opportunity to improve the ads experience for everyone,” said Neal Mohan, YouTube’s chief product officer. Selling ads for the streaming service may also provide the side benefit of giving YouTube more credibility with marketers and helping them remove the stigma that its videos aren’t the same quality as TV. That could draw more advertisers to the main YouTube site, said Ms. Bosetti.

Scott Ferber, chief executive at the video ad tech firm Videology, concurs. “If I’m YouTube, I just got premium. I can package up the [user generated videos] and monetize the crap out of the long tail.”

The details of YouTube TV and its ad strategy are far from clear. But analyst Michael Nathanson said Google’s primary play with YouTube TV is to “break into the in-home and television advertising market,” selling targeted advertising in the network ad slots that typically go to cable operators.“If they can offer advanced audience targeting on those two minutes, that’s going to be a big win,” said one buyer.

Ad buyers cautioned that it will take a while for YouTube TV to scale, meaning that the ad opportunity will be limited in 2017. And pricing will be a factor. Google has a history of aiming high when it launches new products, like it did with Google Preferred, its three-year old YouTube offering that lets advertisers pay to run ads only on the top 5% of YouTube’s channels.

Alphabet, which owns Google, doesn’t break out YouTube’s revenue and hasn’t said whether the service is profitable. Many in the ad industry have been forecasting that as more TV gets delivered via the internet, the more that TV advertising will become “dynamic” like the web. That would mean different households and viewers could receive different ads based on their shopping history or what’s going on in the world at a given moment.

But most broadcast and cable networks still sell the majority of their advertising on a national basis, and more targeted advertising could in theory put TV’s high ad prices in jeopardy.That tension played out almost a decade ago when Google launched a business that attempted to help networks sell TV ads by applying the same kind of technology and auction selling that has worked so well in search advertising—only to shut it down a few years later.

“Google tried to brute force their way into the market. That failed miserably,” said Habib Khoury, chief executive at Mass Exchange, a startup looking to bring more automation to TV advertising. “So this is a natural progression for them. The only place that makes sense to me for Google is in OTT. It aligns with how they do business.”

Mr. Ferber said that if advertising proved lucrative on YouTube TV, he could see Google lowering the product’s subscription rate to steal market share from competitors. “I’d be nervous if I’m an MVPD,” he said. Given Google’s deep pockets, “they have subsidization economics.”