YouTube Revenue Falls to $3.8 Billion as Pandemic Hits Ad Business

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Advertising revenue for Google-owned YouTube fell to $3.8 billion in the second quarter of this year, down from Q1, when it brought in just over $4 billion in ad revenue.

YouTube's ad revenue was still up from Q2 of 2019, when it brought in $3.6 billion, highlighting the rapid growth for the free video platform despite global circumstances impacting advertising sales and consumer demand for goods and services.

Despite the slowdown, executives at parent company Alphabet told investors in its quarterly earnings report that business was beginning to bounce back after the ad market hit the skids in mid-March, with Alphabet and Google CFO Ruth Porat saying that the quarter saw a "gradual improvement in our ads business," with "further improvement" in July.

Porat told analysts on the company's quarterly earnings call that YouTube's year-over-year improvement was driven by "ongoing substantial growth in direct response" ads, offset by a "continued decline in brand advertising," though brand ads began to pick up toward the end of the quarter.

Alphabet only revealed YouTube's ad revenue for the first time in February of this year, disclosing that the video platform collected $15.1 billion in ad revenue in 2019, up from $11.1 billion in 2018 and $8.1 billion in 2017. Despite the pandemic impact, YouTube appears poised to set yet another revenue record in 2020.

The company also disclosed in February that its subscription offerings, which include the live-TV replacement YouTube TV and YouTube Music, had a $3 billion annual run rate, with YouTube TV counting more than 2 million subscribers. It did not immediately offer updated figures in its latest earnings report, though CEO Sundar Pichai said that YouTube's paid services were "seeing strong demand."

"As YouTube TV gets more scale, we will see more opportunities there," Pichai said. "In the U.S. the TV market is a big part of the advertising market, so if we can invest here and scale up, the opportunities will become more meaningful over time."

Overall, Alphabet's revenue in Q2 was $38.3 billion, down from $41.1 billion last quarter and from $38.9 billion a year ago. Porat also struck a note of caution on the company's earnings call, saying that while the advertising trends were improving, "it's premature to say that we are out of the woods, given the nature of the macro environment."

This article was originally published by The Hollywood Reporter.