Chapter 8: BCG Analysis Of Youtube
8.1 BCG Analysis
8.1.3 YouTube
Figure 16: Monthly Active YouTube Users (Source: Oberlo)
According to Statista.com, the information about the most popular social networks worldwide as of April 2019 and the most number of active users they have on a monthly basis. YouTube has 2 billion users worldwide (Statista, 2019). The only social media platform that has more monthly active users than YouTube is Facebook.
Google acquired YouTube in 2006 for US$1.65 billion, and now YouTube operates as one of Google’s subsidiaries. Since the creation of YouTube, its mission has been to provide fast and easy video access to users, and the ability to share videos frequently. YouTube makes it so easy to get started and share your content with a large audience. The simplicity with which people can get started on YouTube has contributed immensely to attracting millions of content creators around the world.
YouTube ads were worth 9% of total Alphabet revenue in 2019, up from 8% in 2018 and 7% in 2017. YouTube ad revenue’s seeming resilience compared to overall revenue may mean we may well see this trend continue in 2020.
The estimation of YouTube revenue would rise to $24.7 billion by 2020, 13% of the estimated $189.9 billion, predicts Alphabet will bring in over 2020. Overall, ads contribute around 85% of Alphabet’s total revenue (Salmon, 2019).
YouTube ad revenue was worth $15 billion in 2019, $11 billion in 2018, and $8 billion in 2017 to Alphabet and according to the figure below, you can see that YouTube generates over 15% of Google ad revenue.
Figure 16: YouTube ad revenue by quarter vs Google properties revenue, Q4 2018 – Q2 2020, USD billions (Source: Alphabet)
9.1.4 Android - Star
Android is the most utilized smartphone system presently. The International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker forecasts worldwide smartphone shipments to decline 6.4% in 2020 to reach 1.285 billion units, down from 1.373 billion in 2019.
Figure 17: Worldwide Smartphone Shipment OS Market Share
However Android's smartphone share will reduce to 84.8% in 2020 from 86.1% in 2019, consequently to the time of the launch of iPhone SE (2020). Furthermore, This is partly driven by the newly launched new 5G iOS devices by Apple. Amounts are expected to grow at a five-year compound annual growth rate (CAGR) of 1.2%, with shipments of 1.3 billion in 2024.
8.1.5 Gmail - Star
Gmail or Google Mail is an email service, free for everyone to use. It offers an inbox and also provides 15GB of cloud storage for each account. For revenue, 80% of Gmail revenue comes from Adsense ads, and the advertisers will be charged for a per click and per 1000 ad impression basis. With over 1.5 billion active Gmail users, ad revenue forms a significant part of Gmail's annual net income.
● Gmail Displays Personalized Ads
When signing up with Gmail, the personal data will be shared. The personal data including the emails received the contacts frequently email, the contacts within
the list, and more. Gmail uses that data to benefit Google's AdSense. The platform will serve you personalized ads on every platform that you visit.
It is estimated that Gmail shows over 20 million adverts per day. For example, If advertisers pay only $0.05 for their ad's impression, Gmail is generating a revenue of $200,000 each day. That is $200,000 X 365 days = $73 million per annum.
Figure 18: Gmail Personalized Ads
8.1.6 Search Engine - Cash Cow
Google search is considering one of the most profitable businesses ever created by Google. It was helping the company gather a revenue of more than $100 billion. Google accounts for over 70% of the search market share and captures almost 85% of mobile traffic. In short, Google is unquestionably the most popular search engine. Google has enormous traffic through the website, making it an obvious option when brands and advertisers intend to capture organic or paid search.
Since people would go online looking for information, search grew swiftly as more people went online looking for information. Furthermore, the increasing smartphone usage also boosted, and revenue climbed after Google placed more ads into the top of mobile search results. From 2017 to 2019, the number of internet users in Europe grew 10%, while in North America, growth was only 2%.
8.1.7 Advertisement - Cash Cow
The Search-Ad business is Google’s is the primary source of income of Google’s business model. For this reason, the Search-Ad business is Google’s Cash Cow. In 2019, the total amount of 160.74 billion U.S. dollars generated from ads revenue, which made up 70.9 percent of revenue in the most recent fiscal period.
The number is no surprise as Google accounts for most of the online and mobile search market worldwide, at 90 percent of global desktop search traffic.
Google almost has no domestic competition in many of them. There are a few exceptions, such as China, Russia, and Japan, where local products are preferred.
8.2 Synergy among SBUs
YouTube is one of the subsidies companies under Alphabet, so in this analysis will discuss Alphabet’s SBUs synergy. Alphabet is a multinational technology that specializes in internet-related services and products, the most well-known subsidiaries under Alphabet are Google and YouTube. Alphabet is currently the leading company in the technology industry ranking as is the world's fourth-largest technology company by revenue and one of the world's most valuable companies.
Being the leading company technology industry, Alphabet disperses the benefit of owning the advanced technology and innovation through its subsidiary companies.
For this reason, it is important to highlight Alphabet's cost synergy which grants an extensive competitive advantage throughout the company’s businesses.
8.2.1 Cost Synergy: Reduction in Costs incurred in acquiring technology Alphabet intensively invests in developing machine learning(ML) and artificial intelligence (AI). The development of ML and AI is scalable and will create potential to enhance user experience and brand perception, customer loyalty, customer satisfaction, etc. In turn, increase the potential growth of the company. ML and AI apply in multiple alphabet’s businesses; for example, Google Search was considered as the leading tool for searching information. With the integration of artificial intelligence and machine learning they are targeting a more strategic role in one’s life,
becoming personal assistants known as ‘Google Assistance’. This will drastically improve the role Google Inc. plays in our lives and of course simplify our operationally
challenging everyday. Despite the fact that Amazon’s Alexa and Apple’s Siri came first and were until recently leading by active users, it appears that the winner of this battle is going to be Google Inc., also due to the cross-product synergies.
For YouTube, several mechanisms depend on artificial intelligence and machine learning. The outstanding appliances of ML and AI of YouTube are YouTube API and user interface, by understanding how the users actually use the services, YouTube API has one of the most efficient and user-friendly. It also helps develop interface and features, including automatic identification and removal of objectionable content, the automatic recommendation of content, and playback of the next related
video based on the users’ interests and watch history.
The development of Machine learning and artificial intelligence also deployed the API in other of their products. It relied on its infrastructure and its array of
algorithms that continuously analyze and find ways to improve its offerings. The latest advancements enable their users to get more work done with fewer clicks and taps.
For instance, AI in Gmail has spam protection and can smartly sort your emails into classifications such as Promotions, Social, Updates, Primary, and Priority. Gmail can also foretell the text while you're trying to compose an email to make the job faster.
Google Drive uses ML to analyze the most worked on files and expects which file you access most and sorted to 'Quick Access' to give you instant access to it in Drive, eliminating the need to navigate to the file manually. Google Translate's recent AI advancements, specifically Neural Machine Translation, boosted translations' quality and reliability, including over 109 languages to deliver relevant translations. Google has implemented several AI and ML-powered features into Google Maps, such as integrating with Google Assistant, analyzing the user's commuting routine, and suggesting routes with less traffic and delays based on live data. Another such feature is the recommendations for nearby points of interest, such as gas stations, places to
eat, ATMs, and more.
Figure 19: Alphabet’s key AI initiatives (source:cbinsights)
8.2.2 Management Synergy: Alphabet’s cloud focus
Goal of management Synergy is to improve quality of products and services, efficiency of operations, and well-utilization of resources as well as reduce task duplication. In December 2015, Alphabet reorganized its management and unified the cloud businesses under one leader, VMware. Cloud computing involves operating computer functions and capabilities in a service access via an Internet-based platform.
It’s commonly used for data computing, storage, and management that takes place off an enterprise’s local machines. The move is expected to help Alphabet innovate faster and deliver better products to its customers. Alphabet believes that the move is already delivering results. Organizations are able to see the benefit of integrating Google Cloud Platform with their suite of business applications, all of which are
already integrated with their machine learning services. Alphabet believes that its investments in machine learning and artificial intelligence will help it acquire a bigger share of the cloud market. During the quarter, Alphabet introduced Cloud Machine Learning, which provides modern machine learning services with pre-trained models such as Cloud Vision API and Cloud Speech API to its cloud offering. Alphabet is convinced that its machine-learning capabilities will help organizations really understand and act better on their data. In fact, it claims: “bringing our machine learning APIs over time through the cloud to our enterprise customers is going to be a huge source of differentiation for us”.
For YouTube, BBR networking algorithm helps solve the problem of traffic congestion in the complex networks and helps accelerate its consumer services, is a benefit from cloud investment.
Chapter 9
Conclusion
This study revealed that recently YouTube is the most famous video sharing platform and performs exceptionally successfully from most company strategies.
However, the recent time has many YouTube's new competitors, but YouTube is still in the top ranks worldwide. From our group's perspectives, we found that this company has the strongest advanced technology engineering team who are always up to date and develop the systems immediately. Besides, the marketing teams also initiate and perform well with the digital marketing strategies; primarily, YouTube Ads is the best company's revenue. We learned about this company and have a better vision about this business through their competitors. Although the company has some weaknesses and some strategies that still have a higher cost than others, its competitors are still stiff to overcome YouTube in this time and the near future.
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