YouTube +27% Consumption Growth During March 2018 - Pivotal Research

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In this note we provide analysis of Nielsen's DCR (Digital Content Ratings) daily viewing data for Alphabet's YouTube from days between August 2016 and March 2018. Most notable among our observations is that YouTube growth has decelerated over the past few months, although it remains at high absolute and relative levels. During March, growth was +27% vs. levels closer to (or slightly higher than) +30% during other recent months. Given YouTube's relative scale -- by itself accounting for more consumer time than Facebook, where use of time is declining -- ongoing growth at these levels is a notable trend for the industry. Concentration among sub-brands on the platform remains relatively stable and is generally dominated by music-related content.

One incremental data-point we highlight in the month's review of data relates to US consumption as a percentage of YouTube's global total. We estimate that the US accounts for approximately 15% of total YouTube activity, although the US probably accounts for around half of the service's global revenue, which in turn is probably around half of the world's digital video ad spending outside of China.

Additional detail and data follows in this note.

VALUATION. We value Alphabet on a DCF basis. Our valuation incorporates a long-term 5.5% growth rate, a short-term 8.7% discount rate and a 11.7% long-term discount rate. Our price target on Alphabet remains at $1040 and we continue to rate the stock Hold.

RISKS. 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 privacy.


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