YouTube is “on pace to eclipse TV” thanks to savvy algorithm use

1 billion hours. That’s the number of hours of video YouTube users are now watching on a daily basis around the globe, a 10-fold jump since 2012.

According to the Wall Street Journal, YouTube is now “on pace to eclipse TV,” a significant milestone.

While the rise of YouTube and digital video generally has a lot to do with the rise of the internet and the abundance of digital video content, YouTube’s ascendency is also the result of Google’s savvy use of algorithms. The Wall Street Journal’s Jack Nicas explains:

YouTube long configured video recommendations to boost total views, but that approach rewarded videos with misleading titles or preview images. To increase user engagement and retention, the company in early 2012 changed its algorithms to boost watch time instead. Immediately, clicks dropped nearly 20% partly because users stuck with videos longer. Some executives and video creators objected.

Months later, YouTube executives unveiled a goal of 1 billion hours of watch time daily by the end of 2016. At the time, optimistic forecasts projected it would reach 400 million hours by then.

YouTube retooled its algorithms using a field of artificial intelligence called machine learning to parse massive databases of user history to improve video recommendations.

The bet on machine learning has largely paid off, and YouTube’s algorithms continue to be refined. For instance, the algorithms have been tweaked to better identify “single-use videos” that are not indicative of true user interest. These often include how-to videos and videos about medical conditions.

Challenges remain

But despite YouTube’s dramatic rise, the digital video ecosystem still faces numerous challenges.

For one, the hunt for the perfect digital video ad format is still on. YouTube just announced that it will be getting rid of unskippable 30-second pre-roll ads. In their place, it will be pushing an unskippable six-second bumper ad format that was launched last year.

Despite the fact that most users don’t like unskippable ads,  a recent study found that skipping ads, when possible, is now an “ingrained behavior,” suggesting that advertisers might be forced to use unskippable ads but in ever-decreasing lengths.

Advertising is a big part of digital video monetization, but realistically, advertising won’t be sufficient for many content owners that have historically generated significant revenue from fees paid by television and cable networks. In an effort to address that, YouTube this week announced YouTube TV, a $35 per month service that will give subscribers access to 40 channels, including television networks ABC, CBS, NBC and Fox and cable networks like Disney and ESPN.

The service also includes a DVR feature and unlimited cloud storage.

But even though YouTube is asking young cord cutters to pay up, some analysts believe that at $35 per month, YouTube TV doesn’t have a sustainable business model that can cover the cost of content, meaning that Google will have to effectively subsidize the service.

Google, which generated nearly $90 billion in revenue last year, clearly has the means to do that, but as YouTube overtakes the small screen, expect to see more attention lavished on addressing these advertising and monetization challenges.

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