Earlier this week, Google confirmed that it is buying YouTube for US$1.65 billion in a stock transaction slated to close by the end of the year.
So what does a search engine company want with a popular Web site that shows original videos ranging from amateurish to professional? Answer: YouTube's young audience.
That's how Konrad Feldman, CEO of San Francisco-based startup Quantcast, sees it. He said Google will be acquiring an audience seen as highly valuable in the advertising marketplace. Quantcast is a free, open Internet ratings service designed to help Web publishers and advertisers more easily understand Web demographic trends.
"There's a lot of value in the audience," Feldman said. "And it's an interesting move because Google's phenomenal success to date has obviously been on the lower funnel of advertising (direct response advertising) -- the point where people are close to buying things. Traditionally video-based advertising has been much more about the upper funnel of advertising, or generating awareness in a brand."
According to comScore Media Metrix, more than 63 million people worldwide, ages 15 and up, visited YouTube.com in July -- with 16 million of them from the U.S. On a daily basis, the site attracted an average of 6.2 million visitors worldwide, with 1.6 million of that audience residing in the U.S. The site also ranked as the 17th most visited online property worldwide during the month, comScore said.
Feldman said YouTube has shown some very specific trends in terms of its audience -- and some of those trends are very attractive to advertisers.
"It's an ethnically diverse site and it's a very young audience for a large site," he said.
According to Quantcast's analysis, the majority of YouTube's audience is in the 18-to-24-year-old range. In addition, for a site of its size it also has a lot of young viewers -- those between six and 17 who are spending a lot of time on the site, Feldman said. From a broad audience perspective, this is an attractive group of users in terms of "Generation Y" -- those born between 1978 and 2002, he said.
"If you look at their interests as differentiated from other Internet destinations, you can get a feel for their audience by thinking about the magazines they're interested in -- Entertainment Weekly, Rolling Stone and Maxim," Feldman said. "And the retail stores they're interested in are Hot Topics, EB Games, GameSpot and Abercrombie. They're most highly differentiated affinity in telecommunications is Helio and Boost Mobile -- mobile virtual network operator brands launched specifically to target Gen Y."
Another interesting characteristic of YouTube users is that they tend to be people who visit the site only occasionally -- some 63 percent of YouTube users are passersby, which means they watch a video then they don't go back to site again over the course of a month. So everything Google and YouTube can do to keep those people coming back creates more advertising opportunities, Feldman said. However, YouTube also has an extended network of users because a lot of its videos are embedded into other sites, he said.
"For example, people who write blogs want to include a video link to a video from YouTube's site on their blog," Feldman said.
Google, on the other hand, is a widely used Web site with more regular users, he said. "People who use Google tend to use it quite a bit," Feldman said. "Google also has a bias toward a slightly younger audience, but it's really pretty balanced in terms of its overall audience. And income level trends upward for Google, and trends down for YouTube, which is in line with its younger audiences."