Shulou(Shulou.com)11/24 Report--

Last month, Google veteran Susan Wojcicki announced that she would step down as YouTube CEO. Compared with the sensation when Bob Iger was back at the helm of Disney and when Reed Hastings left Netflix, there was also a change in the number one position of the head stream, which seemed to be much smaller this time.

This comparison reveals two messages:

1. Although YouTube has become a leading streaming media platform, and even one of the pronouns of the global streaming video industry, Wall Street and the entertainment industry do not seem to pay enough attention to its movements.

2. The various problems of the parent company Alphabet cover up a lot of light of YouTube. Sandal Sundar Pichai, Alphabet's boss, seems to be in trouble himself. On the one hand, Google has to face the surprise attack of Microsoft in the search market by taking advantage of ChatGPT; on the other hand, the US antitrust regulator and the Supreme Court have also attacked Google one after another.

Susan's resignation is by no means a successful one. By the time Susan's deputy, Neal Mohan, took over, YouTube was long gone: slowing advertising growth and the mainstream of short videos led by TikTok led to two consecutive quarters of year-on-year decline in advertising revenue. But under Susan's leadership, YouTube has become an indispensable member of the entertainment industry. It is a comprehensive video platform where many netizens learn about craftsmanship, cooking, parenting, yoga, watching the news and killing time.

Today, YouTube has 2.6 billion monthly active users worldwide and has developed a simple and effective revenue-sharing model, providing a cash channel for millions of video creators. Its YouTube Shorts short video platform, launched in response to TikTok, has an average of 50 billion views a day.

According to data released by technology commentator Benedict Evans recently, YouTube has long broken through the category of social media video and become a mainstream content platform. In the United States, YouTube watched more TV than Netflix. Evans estimates that the share of revenue paid to creators last year is almost the same as what Netflix spends on big productions. The audience appeal of YouTube celebrities such as MrBeast is comparable to that of Netflix blockbusters.

YouTube is also an advertising giant. Although last year's $29 billion in advertising sales accounted for only 1/10 of Alphabet's total revenue, Richard Broughton of Ampere, a market research firm, points out that this figure is already significant compared with the $140 billion global radio and television market. YouTube is not satisfied with this. It is also competing with Spotify for the music and podcast market, selling cable-like packages on YouTube TV and taking a share of other companies' streaming membership revenue. There are even reports that YouTube has just spent 14 billion dollars on the live broadcast rights of American football Sunday Ticket. In short, from user-generated content to streaming to sporting events, it is expected to become the gateway to the global small-screen video market.

Apart from the founders Sergey Brin and Larry Page and their families, Susan is one of Google's most senior veterans, bringing Google's professionalism to YouTube. The video site was only a year old when Google bought YouTube, and Susan was Google's advertising executive at the time. Under the strict management of her and Google, YouTube has gone from startups to maturity.

As Susan left, a thoughtful question emerged: can the parent company's "asylum" work as well as it did for YouTube, who has passed puberty? Tim Mulligan, an analyst at MIDiA, a market research firm, believes that today's Alphabet hinders YouTube more than helps.

So, is it time for YouTube to split from Alphabet?

There are many reasons to support a split. The first is focus. From the rise of TikTok and streaming wars to the decline of cable television, high concentration has always been the key to upending the entertainment industry. Alphabet's business is too complex to focus entirely on YouTube.

The second is the business model. Without the constraints of Alphabet, the advertising giant, YouTube, which has declining advertising revenue, will have fewer restrictions in exploring the membership subscription business.

The third is supervision. On February 21, the U.S. Supreme Court held a hearing to discuss whether YouTube's use of algorithms to recommend extremist videos violated counter-terrorism laws, and judges were skeptical of YouTube's position. Facebook is also under a lot of political pressure over content, but YouTube's parent company is Alphabet, which is larger than Facebook's parent company, Meta, and is more likely to be a target for antitrust regulators. In other words, while YouTube has the ability to promote the TV business globally, it is precisely because of the big tree of Alphabet that the plan faces a lot of regulatory resistance.

A break-up is also good for Alphabet. In the face of the menacing ChatGPT, Pichai's hasty response has called into question his leadership. Breaking up YouTube would send a clear signal to the outside world that he would double his bet on such generative artificial intelligence technology. It will also help Alphabet gain a head start in the battle with the US Department of Justice, which sued Google for monopolizing digital advertising technology in January. Alphabet denies monopoly, but if the court decides against it, a voluntary break-up of YouTube can be interpreted as a gesture of goodwill.

If listed separately, the valuation of YouTube should not be low. Its advertising sales are on a par with Netflix's revenue, which is about $32 billion in a fiscal year, not including 8000 million music and subscription members and TV revenue. Laura Martin, an analyst at Needham, an investment bank, believes that YouTube could be valued at at least $300 billion, more than half that of Disney and about twice as much as Netflix.

Of course, the split is not that simple. Page and Brin, who control more than half of the Alphabet voting rights, certainly don't want to be the first tech giants to sell their assets. However, in today's short video era, investors are bound to look around for targets. At this moment, a video platform that can compete with TikTok users and challenge global TV giants must not be underestimated, and online celebrities who have just made the first bucket of gold with the help of short videos will also flock to it.

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