This is the real reason why YouTube wants you to use premium, and it's not what you think
It seems that whenever you open the YouTube app or webpage you are encouraged to pay for the premium version of YouTube. One of the main benefits for users is a lack of ads, and several unique features.
It would be an encouraging thought that YouTube simply wanted you to experience the best possible version of their platform, if this was the case, they why are certain features behind a pay wall. There have even been rumours of YouTube actively disrupting playback if they detect a user is using an ad blocker.
So why does YouTube push for users to pay for a premium version of the platform? After Alphabet, Google's parent company, unveiled its latest financial reports, the answer to that question became much clearer. It was revealed that the group generated $15 billion in revenue through the various subscriptions that are offered by Google, and one of the primary subscription services is YouTube Premium.
These figures are five times higher than those disclosed by Alphabet in 2019 for the same category. However, the group did not provide a detailed breakdown of the revenues generated service by service. Therefore, it's not precisely known which service, whether it's YouTube Premium, YouTube Music, YouTube TV, or Google One, brings in the most revenue. Alphabet has also not updated the number of subscribers its various services have at the beginning of 2024.
Despite this, Sundar Pichaim, the CEO of Alphabet, straightforwardly explains that YouTube represents a more than substantial part of these revenues. "YouTube is the main driver of our subscription revenue," said Google's CEO, adding that "YouTube Music and Premium are doing well. They attract passionate users and generate significant benefits for the music industry and creators." According to him, YouTube TV is also doing well, especially thanks to the broadcasting of certain NFL (American football league) matches in the United States.
In Europe, it is evident that Google's strategy will be to increase pressure on users to adopt YouTube Premium. To achieve this, two main levers are to broadcast more advertisements on the platform to better promote the "ad-free" model of the subscription and to offer an enhanced experience with more exclusive features to YouTube Premium.
For context, YouTube Premium and YouTube Music had together nearly 80 million subscribers in November 2022. YouTube TV had a little over 5 million subscribers in June 2022. As for YouTube's advertising revenue in the fourth quarter of 2023, it was $9.20 billion, representing a 15.5% increase over the previous year. While the revenue margin that Google earned through subscription services is growing, advertising remains its primary source of income.