YouTube's ad revenue is still shrinking, but YouTube Shorts, the engine that the video site hopes will bring it back to growth, is cranking up.
YouTube Shorts, the company's short-form video service, is catching on with users, advertisers, and creators, company executives said during YouTube and Google-parent company Alphabet's quarterly earnings conference call this week.
Shorts is the “number one” area of focus for “YouTube’s long-term growth," Google's chief business officer Philipp Schindler said during the call, pointing to the service's rising status in the “creator ecosystem” and YouTube's own “multi-format strategy.”
"People are engaging and converting on ads across Shorts at increasing rates," Schindler said, citing growth in "watchtime" as well as monetization of the short video clips.
And creators are increasingly cottoning to Shorts: According to YouTube, the number of channels uploading daily to Shorts grew by 80% in the first quarter of 2023 versus the final three months of 2022. And Google has expanded the number of ways for marketers to put their ads in Shorts, the company said.
The momentum for YouTube Shorts comes as new YouTube CEO Neal Mohan took the company reins in March after Susan Wojicki’s nine-year tenure in its top spot. In his short time at the top of the video giant, Mohan has made Shorts an enormous priority, positioning the product as the future for creator growth, communities and content diversification.
YouTube's primacy as the dominant hub for online videos has been challenged recently by TikTok, the popular video sharing app, and YouTube's ad revenue has declined for the last three consecutive quarters. With Shorts, YouTube is trying to blunt TikTok's momentum by giving consumers and creators its own short-video offering.
Shorter videos means less space for ads, though. But Schindler said Tuesday that YouTube to "closing the gap" between the ad revenue it has traditionally racked up from longer videos on and the revenue it earns from shorter clips. Indeed, YouTube's $6.7 billion in Q1 ad revenue was down 2.6% from the year-ago period, a less brutal decline than the 7.8% drop it suffered in Q4.
Company executives on Alphabet's earnings call repeatedly stressed Shorts’ growing audiences, payouts to creators and content (mobile-optimized and maximum 60 seconds long) as the roadmap to wide-ranging corporate success for the parent company. Daily Shorts views have increased from 30 billion last spring to 50 billion today.
Alphabet's reports of increased engagement and payouts also represent a bright spot in an unsteady financial landscape for creators. In recent weeks Meta terminated its somewhat baffling Reels Bonus payouts. Meanwhile, Snapchat has opened its lucrative advertising revenue share program to qualifying creators, while TikTok has launched a number of initiatives to pay creators, but none seem to have meaningfully padded creators’ bank accounts.
Many creators echo Alphabet’s optimism view about Shorts, noting that YouTube pays significantly better than the other platforms. “YouTube was the last big platform to the [short-form video] game, but it’s the one dominating right now because of the way it’s set up monetizations,” Peet Montzingo, who has 11.7 million YouTube subscribers and says he makes between $20,000 to $50,000 per month on AdSense payouts from the platform, tells Fortune. “It's a great incentive for people like me to keep posting.”
Still, Montzingo is at the higher end of the industry. Less prominent creators note that while the pay from YouTube Shorts is much better than that of Instagram or TikTok, it still doesn’t generate “enough revenue for a liveable wage.”
Those are the words of Sarah Funk, who has nearly 210,000 subscribers on YouTube and taps 12 other income streams to make ends meet as a full-time creator. Still, she notes that YouTube Shorts pays far better than any other platform. “Living in New York City, YouTube Shorts will not generate enough revenue for a livable wage, but it pays better than TikTok and Instagram,” she says. “It’s the best option right now for creators that want to make short-form content.”
The four Shorts creators whom Fortune interviewed for this story noted their pay rates on ad revenue (known as RPM or rate per million) have increased in recent weeks. This is occurring relatively soon after the platform launched Shorts monetization, which “excited” creators, and even prompted the Pink Shirt Couple--with their 11 million YouTube subscribers--to take a hiatus from sponsorships and focus exclusively on YouTube and YouTube Shorts.
