The runaway success of the viral short form video site TikTok poses a genuine threat to YouTube, said MoffettNathanson analyst Michael Nathanson after Alphabet (GOOG, GOOGL) reported earnings last week (video above).
“People are now more concerned about the TikTok threat to YouTube,” he told Yahoo Finance. “I think the threat is real. The response by YouTube and Meta (FB) is trying to replicate what TikTok does in short-form video, which is hard to monetize.”
TikTok’s popularity has been a matter of much conversation across Wall Street, as companies and their watchers try to determine how much of a threat the ByteDance-owned platform really is to YouTube, Facebook, and Snap (SNAP). When Google reported its earnings last week, YouTube revealed mixed results, missing its ad revenue projections but showing 40% growth year-over-over in channels that made at least $10,000 in revenue.
TikTok, which was launched in 2016, reached 1 billion monthly active users last year. In March 2021, YouTube released its beta version of YouTube Shorts in the U.S., as reported by The Verge. TikTok’s ascension aside, short-form video is still a viable, even necessary, avenue for YouTube to pursue — if for no other reason than because consumers expect it.
“I think you have to provide consumers with the type of content they’re expecting to see now, and it’s such a viral, engaging format that they have to do it,” said Nathanson. “They’ll be seen as old-school if they don’t innovate.”
The stock is ‘really, really cheap’
There are still reasons to be optimistic about both Google and, by extension, YouTube. To that end, YouTube’s place in Google’s wider system has majorly benefited the platform, according to Nathanson.
“YouTube benefits from being part of the broader Google ecosystem,” he said. “They know your preferences… That’s a huge advantage in terms of monetization. You don’t want to lose that.”
Google’s earnings, while not as sparkling as Wall Street may have hoped, had many bright spots. The company showed growth in both its search and cloud divisions, as well as 23% Q1 revenue growth year-over-year. There’s also reason for YouTube and Google to explore “premium content” like sports, said Nathanson.
“I’m not panicking,” he said. “I’d buy more. I think [Google] stock is really, really cheap.”
Allie Garfinkle is a senior tech reporter at Yahoo Finance. Find her on twitter @agarfinks.
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