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It’s time for Alphabet to move away from YouTube

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cmatched with Attention has been focused on Bob Iger’s return to the helm of Disney and Netflix’s Reed Hastings decline, news on February 16th that Susan Wojcicki would be quitting YouTube after nine years CEO It barely rustles media pages. This is a sign of two things. First, how little attention Wall Street analysts and entertainment industry pundits pay to the YouTube business, even though it has become the center — as well as the epitome — of global video. Second, how overshadowed by the sagging walls of its parent company, Alphabet. Sundar Pichai, the embattled tech giant’s boss, is fighting wars on many fronts, from Microsoft’s chat postgptInspired by a Google search on Trustbusters and the Supreme Court, the infringement that what’s going on on YouTube should look like a sideshow.

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This hurts Mrs. Wojcicki. Her decision to hand it over to her lieutenant Neil Mohan may not have been the pinnacle of YouTube success. A combination of slowing advertising and competition from TikTok, an addictive short video app, helped lead to its second straight quarter of year-over-year declines in ad revenue. However, by watching them, YouTube has become an integral part of the entertainment scene for many Do it yourself Handbook, cookbook, babysitter, jukebox, yoga instructor, news channel and time waster all rolled into one. It has 2.6 billion monthly active users and a simple yet effective revenue sharing model that millions of creators rely on to keep pumping things out. Her TikTok response, YouTube Short, averages 50 billion views per day.

Data published this week by Benedict Evans, a tech commentator, underscores the extent to which the platform has moved beyond social media video to more popular content. In America, YouTube share of television Watching has recently been overwhelmed by Netflix. Last year, Mr. Evans estimates, it paid its creators roughly the same amount that Netflix paid for its big-budget productions. YouTube stars like MrBeast are bringing in audiences similar to the hit Netflix hit.

It’s a powerful advertising force to boot. Although its $29 billion in ad sales last year was roughly a tenth of Alphabet’s revenue, Richard Broughton of Ampere Analysis, a research firm, points out that it equates to “a significant chunk” of the $140 billion in global broadcast-television Advertising market. On top of that, YouTube is giving Spotify a run for its money in music and podcasts, selling cable-like bundles on YouTube. televisionAnd, like Amazon and Apple, it’s cutting subscriptions to other media companies’ streaming services. And it just shelled out a reported $14 billion for the rights to broadcast live American football on Sunday. In short, putting China’s Great Firewall to one side, he hopes to become the stage door for all the small-screen video in the world, from user-generated clips and live broadcasts to sports.

Mrs. Wojcicki is as close to the Mountain View aristocracy as you can get without bearing the title of Bryn or Paige. Sergey and Larry first created the search engine that would be Google in its garage. You undoubtedly helped bring Google’s professionalism to bear on YouTube. After the free-spirited mayhem of YouTube’s early days — it was founded just a year before it was bought by Google in 2006 — she’s grown up and the advertising director in the room. When you leave, it’s worth wondering if YouTube, now past its teens, is benefiting as much from its connection to the mothership as it was. Tim Mulligan midIa, Another research companyAnd He thinks Alphabet may be hindering YouTube more than helping. Is it time to sub?

For YouTube, there are many arguments in favor. One is focus. This is the turmoil in the entertainment industry, from TikTok and its streaming wars to pay-wage cord-cutters.television, that laser-like focus is essential. Alphabet has plenty of other things on its board to give YouTube full attention. Then there is the business model. Without a giant advertising hand on his shoulder, he’ll have more freedom to experiment with subscription revenue. The third argument concerns the regulators. A case heard February 21 in the Supreme Court over whether YouTube violated anti-terrorism laws by using algorithms that recommended extremist videos was met with skepticism by judges. Facebook has experienced a lot of political tension over content. But being part of a company larger than Meta, Facebook’s parent company, makes YouTube a more attractive target, especially for trustmakers. Its ability to expand services such as YouTube television Regulatory concerns about Alphabet’s global size may hamper it.

The alphabet can reap benefits, too. Mr. Pichai’s panicked response to the chatgptartificial intelligence (Amnesty International) a partnership between Microsoft and a startup called OpenAmnesty Internationalraised doubts about his leadership. One part of YouTube might be sending a strong signal that it’s doubling down on such “tuning” efforts. Amnesty International. It would also enable Alphabet to apply to the Department of Justice (Draj), which sued Google in January over its alleged monopoly on digital advertising technologies. Alphabet denies that it is a monopoly. But if the courts decided differently, a voluntary separation, even if loosely related to advertising technology, would be better than Draj-imposed half nelson.

YouTube’s valuation as an independent public company can be remarkable. Its ad sales are approaching Netflix’s $32 billion in revenue, not counting its 80 million music and premium subscribers or subscribers. television Revenues. Laura Martin of Needham Bank, an investment bank, thinks it could be worth at least $300 billion, more than half the value of Disney and double the market cap of Netflix.

Control freaks

If everything seems so simple, that’s because it probably is. Messrs. Page and Brin control more than half of Alphabet’s voting rights, and they don’t want to be the first of the tech giants to start selling the family’s silver. However, with TikTok, which is owned by China, not in an apparent rush to go public, investors will likely enjoy getting their hands on shares of the US equivalent – especially one that takes up global equity buying. television giants. The nouveau riche in the creative economy might as well.

Read more from Schumpeter, our columnist on global business:
Tech companies with AI are introducing a new form of modern warfare (February 16)
What would Josef Schumpeter have made of apples? (9 February)
China’s BYD overtakes Tesla as exceptional automaker (February 2)

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