How YouTube plans to stay ahead in the Middle East

The video-sharing platform, founded in 2005, reached record numbers this year, with 1.8 billion monthly login users watching a billion hours of footage every day.

That level of engagement holds incredible value. While parent company Google – which bought YouTube in 2006 for $1.65bn – doesn’t reveal YouTube’s figures, digital data and research firm eMarketer estimates that it accounted for about 11 percent of Google’s $95bn advertising revenue in 2017. 

The business model for both platforms is mainly centred on advertising, with brands from all over the world paying to reach those monthly users.

The Middle East is not immune to this popularity. YouTube statistics show that the number of channels in the MENA region has risen 160 percent in the last three years.

Currently, there are over 200 channels with over one million subscribers in the region, as well as more than 30,000 channels with more than 10,000 subscribers. One in four of those are women.

Robert Kyncl, YouTube’s global chief business officer, says its advertising revenue in the Middle East “continues to grow very rapidly” as a result of this popularity.

Speaking to Arabian Business at the company’s new YouTube Space in Dubai Studio City, he says: “What we do is we earn [from] ads and then we share the revenue with the creators.”

The YouTube Space in Dubai aims to bring together the most creative minds to learn, connect and create with one another

Kyncl adds that the creators get a 55 percent slice of revenue, which he says is growing.

“It was slower in the early years here but now the monetisation is improving tremendously. And there is also much greater collaboration between us and the media companies who are uploading their content to YouTube and growing their audiences as well.”

He adds that one of the “great advantages” of the MENA region in general is that it has a common language that reaches the entire region, which makes it much easier to grow than in lots of other places around the world.

“So we’ve got to look at MENA as just one place; it’s just like one community because it’s so many different countries but from a business point it’s actually great for growth.”

Creating regional content

In order to grow its numbers, YouTube knows that it has to develop its content creators – or YouTubers they’re known – and that includes the Middle East.

According to analytics agency Tubular Labs, Saudi Arabia has the highest watch time per capita globally. YouTubers from the kingdom are growing at the fastest pace, boosted by the popularity of female vloggers, which has increased by 75 percent in the past year alone according to Google.

Fostering this development is the principal reason why the company chose to open a YouTube Space in Dubai’s Studio City in March. The tenth such hub to be opened by YouTube around the globe, the site gives YouTube content creators free access to audio, visual and editing equipment, as well as training programmes, workshops and courses.

According to YouTube, more than 440,000 creators have used the nine other spaces around the world since the programme was first launched in 2012.

One of the great selling features is collaboration among creators. It unlocks creativity from anywhere by providing a level playing field”

With the familiar logo emblazoned on the outside of a relatively ordinary-looking building, the purpose-built studios are equipped with the latest recording equipment. These are available to creators who have more than 10,000 YouTube subscribers. Those with more than 1,000 subscribers will have access to workshops and events hosted at the space.

“There’s a strong presence from YouTube in Saudi Arabia, and also a really strong presence in Egypt, Lebanon and Jordan,” says Kyncl, when asked why Dubai was chosen for the new site.

“We’re incredibly strong across the region and we could probably open up a YouTube Space in pretty much every one of those countries, just based on that demand. So this Space is not meant just for Dubai, but for the whole region. But Dubai is really easy to get to.”

When asked how different the content produced in this region is compared to worldwide trends, Kyncl says there are a lot of “commonalities between vloggers” on YouTube, but there is one thing that separates the Middle East region.

“There’s lots of comedy in the region – people like to laugh a lot, which is great fun to see,” he says.

Kyncl is hopeful that the YouTube Space will have a similar impact here like other regions in the world where they have opened. He says that opening a content hub brings “lots of desire, both on the part of creators as well as advertisers to come and connect,” and it also fosters a spirit of collaboration.

“One of the great selling features is collaboration among creators. It unlocks creativity from anywhere by providing a level playing field. The creators can connect and collaborate physically and there’s something that you just can’t replace with that type of connection.”

That collaboration holds commercial benefit by showcasing talent and providing scale. “Advertisers want to be part of this collaboration because lots of them are creating content themselves. So for them to connect with, and learn from, the next generation of content creators becomes really attractive.”

Kyncl says having the Space open up provides a whole host of new opportunities. “Suddenly we’ve got these incubators – really big music film stars, directors, big brands – coming onboard. They become these cultural hubs that people use to collaborate and launch new products.”

Dubai-based influencer Mo Vlogs creates content for his 5.7 million YouTube subscribers

He cites a recent example of Madonna collaborating with Kim Kardashian at the YouTube Space in LA to promote her new MDNA skincare brand.

While such high-profile collaborations like that may not happen in the near future in Dubai, Kyncl says the Space will see plenty of use from creators around the region.

“We want as much traffic here as possible, which takes a lot of work because there’s lots of organisation. Depending on usage, we have rules on how you can apply and when you can come – whether you can come for seminars, or come to shoot for your own channel.”

But Kyncl says that the goal is to see “high utilisation” of the space for both creative content and, in time, creative marketing. “When it comes to advertisers – large companies that will launch campaigns – the plan is still being finalised. But we need to develop the advertising programme for this space in Dubai,” he says.

Paying the creators

For those thinking of earning a living from content creation, don’t bank on it just yet. The most recent research from Germany says that breaking into the top three percent of most-viewed channels could bring in advertising revenue of about $16,800 a year.

To break that down, research for Bloomberg by Mathias Bärtl, a professor at Offenburg University of Applied Sciences in Offenburg, showed that the top three percent of video creators of all time attracted more than 1.4 million views per month. The top one percent of creators garnered between 2.2 million and 42.1 million views per month in 2016, with their revenues often supplemented by side-endorsements or sponsorships.

Saudi national Bader Saleh’s Aish Ally comedy programme has garnered 3.2 million followers

Bärtl used an income of $1 per 1,000 views for an average YouTuber to calculate his earnings estimates. According to YouTube, the actual income is based on the level of advertising in a given country, and so will be much higher in the US, where the market is more mature, than in the Middle East.

Kyncl says of creator revenue: “It all depends where your views are coming from. Your revenue per 1,000 views is higher in the United States than it is in MENA, due to how quickly advertisers are moving their dollars online. We have a team here in Dubai that has been working hard for the past five years to move it online.”

Kyncl insists creators can create successful businesses by using YouTube to grow their profile.

“Their income doesn’t rely solely on a revenue stream from YouTube. They become brands themselves and can leverage that brand for other things such as selling merchandise or writing books and films.

“Our creators have become these entrepreneurs who have expanded horizontally, so today YouTube is not only a home to 1.8 billion monthly logged-in users, but also millions of creators who make their living from our platform.”

He stresses that YouTube “really cares” about the metrics of how many people are able to make a living in this way. “What we want is for creators to do this full-time, because then you start to see their output grow tremendously.”

YouTube is not only a home to 1.8 billion monthly logged-in users, but also millions of creators who make their living from our platform”

New revenue streams

In addition to its standard advertising model, YouTube has developed new revenue streams that it hopes to grow. YouTube Premium (formerly YouTube Red) is a particular focus. The subscription service, which costs $12 per month in US, is currently available in 17 countries. That doesn’t include the Middle East, though Kyncl says there are plans to bring it here before the year-end. “It’s not global yet but it will be at the end of this year.”

YouTube Premium includes ad-free videos, the YouTube Music streaming service launched in May that is intended to take on rivals including Apple, Spotify and Amazon, and will include original content from some of “YouTube’s biggest creators”. The channel has the added benefit of being able to use Google to narrow down a search for a song by using a description or some of the lyrics.

Just last month, YouTube Premium commissioned a dark comedy, On Becoming a God in Central Florida, to be co-produced by George Clooney and Kirsten Dunst, who will also star in the series. Set to air in 2019, the series will centre on the US cult of unbridled entrepreneurship and a woman’s intense pursuit of the American Dream.

“What this does is bring high value users to our creators so that they’re not only getting paid from advertising but also from subscription,” says Kyncl of the Premium service. “They have a dual revenue stream and that has worked quite well.”

Next-level engagement

While YouTube’s popularity is growing at a seemingly unstoppable pace, the focus on premium content creation is a clear signal that it recognises the fight ahead to retain audience engagement. Just last month Instagram launched IGTV, a new service for long-form videos from professional creators. The platform also announced that users will be able to upload videos of up to 10 minutes in length, with select creators able to upload hour-long videos.

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Instagram’s parent company, Facebook, is also taking video ever more seriously. Its video-on-demand service Facebook Watch launched last August, features original video content produced by partners, who – similar to YouTube – earn 55 percent of advertising revenue while Facebook keeps 45 percent. The company set aside a reported $1bn budget for content in 2018 in a bid to reverse the decline in the time users spend on the site.

Amazon Prime video-on-demand service, meanwhile is thought to have similar plans to YouTube in how it will work with creators on content opportunities, while Apple is understood to be working on a video streaming service to take on Netflix, which leads the market with 125 million subscribers.

YouTube earns money from selling impressions to advertisers all around the world

These companies all have the same goal in mind. As traditional TV viewing habits decline and users migrate to online video, the advertisers are following. According to eMarketer, digital video ad spending in the US will rise from $13.23bn in 2017 to $22.18bn in 2021. YouTube still leads the way, and is projected to account for 20.1 percent of total net video revenues in the United States this year.

When projected worldwide, the market scope is vast if YouTube can embed itself firmly in the content creation space of different worldwide markets. The launch of a YouTube Space in Dubai is a clear signal that it intends to hold on to its share and grow it even further – in this region and beyond.

YouTube’s difficult year

YouTube endured one of its more difficult years in 2017, dogged by a brand safety crisis that saw advertisers depart the platform. The problems started with revelations in March 2017 that adverts were appearing beside inappropriate content – endorsing white supremacy and other extremist content – which saw brands withdrawing their dollars on a worrying scale.

YouTube stripped advertising from many channels to placate companies whose ads ran in front of videos deemed inappropriate.

Procter & Gamble, which spent $2.75bn on ads last year, only returned to the platform earlier this year, appearing on videos that YouTube has reviewed and approved, amounting to fewer than 10,000 YouTube channels, according to P&G. The company used to advertise on roughly three million YouTube channels.

YouTube CEO Susan Wojcicki

At its recent annual event for advertisers – Brandcast – CEO Susan Wojcicki offered assurances that YouTube is working towards resolving the problem.

“It’s incredibly important to me and to everyone at YouTube that we grow responsibly,” she told an audience of 4,500 advertisers. “There isn’t a playbook for how open platforms operate at our scale.”

It won’t have appeased everyone, but the 1.8 billion monthly login users – which doesn’t count those watching without an account – is where its selling point lies.

It has also introduced more control over where marketers’ adverts appear and how they run on YouTube. There’s also a pledge to manually review every ad in Google Preferred, a pricier collection of more popular videos.