Google: AT&T Returns to YouTube -- Pivotal Research

ATampampT cut its spending on YouTube following increased awareness of brand safety issues in early 2017amp160 With 63bn in pro forma spending during 2017 38bn on the ATampampT side and 25bn on the Time Warner side it was probably the largest advertiser not to return during 2018 but it is now doing soamp160 As reported in the New York Times on Friday ATampampT quothas raised the number of subscribers and the viewership that video makers must have in order to carry ads and is subjecting videos to more human and automated oversightquotWe have observed that large brand advertisers returned in part because they believe YouTube has generally taken brand safety seriously and have taken steps to improve its capacity to identify and eliminate problematic contentamp160 Services such as Open Slate have also scaled and helped advertisers achieve their brand safety objectives on the platformamp160 However it also seems to us that brand safety is never going to be 100 solved and marketers generally have to accept that if they choose not to buy manually curated content they will be taking risksamp160 Large advertisers with younger skewing audience targets are more likely to balance those risks in YouTube39s favor because of the relative advantages it is perceived to offer relative to or as a complement to traditional TVFirst YouTube is massive and still rapidly growingamp160 With US audiences over the age of 18 increasing consumption by approximately 25 during December 2018 and 29 for all of 2018 over the prior year YouTube now equates to 15 of total TV timeamp160 This is similar to the share of viewing the industry39s largest player NBCU hasamp160 Of course much most of the content is nowhere close to the quality of professionally produced platforms but YouTube39s advantage for many advertisers lies in its age skewamp160 During November 2018 traditional TV accounted for more than 2x YouTube39s consumption volumes but at YouTube 45 of time spent among adults 18 was accounted for by adults 1834amp160 Second its reach is also comparable to national TV among 1834samp160 While methodologies will differ between DCR and traditional TV measurement DCR data for the calendar month of November indicates that out of approximately 76mm 1834s in the US YouTube reached 70mm 1834samp160 By contrast television at a 1minute minimum tunein threshold reached 67mmamp160 Presumably the quotbrand safequot reach of YouTube would be significantly lower than traditional TVImportantly not all advertisers actually buy TV with guarantees against 1834samp160 Probably fewer than 10 of all national TV ad buys are made against this demographic target equivalent to a few billion dollars annually in the USamp160 However for those advertisers who need younger skews YouTube is helpful because it meaningfully adds to the available inventory an advertiser might consider buyingamp160 This likely helps reduce the cost per incremental point of audience reach an advertiser will realize if they know that the audience reached on YouTube includes some of the audiences not reached on TVamp160 Nielsen39s Total Ad Ratings is a product that is intended to help advertisers assess unduplicated reach across platformsWhile the aforementioned analysis does not cause us to assess Alphabet differently at this time we are refining our model slightly primarily updating it to correct inadvertently produced revenue estimates for 4Q18 and 4Q19amp160 Thematically we continue to expect solid topline growth and ongoing margin erosion while the company continues to reinforce its dominant industry positionamp160 Our valuation on the company is unchanged at 1240 on a YE2019 basis and maintain our Buy recommendationValuationamp160 We value Alphabet on a DCF basisamp160 Our valuation incorporates a longterm 55 growth rate a shortterm 85 discount rate and a 114 longterm discount rateRisksamp160 Core risks for web publishers relate to 1 high degree of rivalry in lieu of barriers preventing competition from emerging 2 high and increasing capital needs to remain and 3 government regulations and consumer pushback related to data management and privacyFull Report Including Risks and Disclosures Can Be Found Here GOOGL 12219pdfClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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Google: AT&T Returns to YouTube -- Pivotal Research

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