Google Will Pay YouTube Creators in Bid to Crash TikTok’s Party

Calling it “a big deal” for creators, Google parent Alphabet said Tuesday it will pay top creative talent to post videos on its new YouTube Shorts platform as it aims to grab a bigger slice of a shrinking ad-spend pie while slowing the advance of rival TikTok.

By introducing the new revenue sharing plan, which it says will kick in early next year, Google becomes the fourth major player this month to announce a big move to boost the creator economy at a time when the real economy is, by most accounts, headed into recession.

“This update makes YouTube the only platform where creators can monetize their content across short, long and live formats at scale,” Alphabet CEO Sundar Pichai told investors on the company’s third quarter earnings webcast Tuesday (Oct 25) evening.

The monetization move not only comes in the wake of related initiatives launched recently by Walmart, Meta and Instagram’s Reels, as well as a new payment program from Visa, but also reflects the changing media consumption habits that increasingly tight-fisted advertisers are looking to capture.

Ad Sales Slow to a Crawl

Given that 80% of Alphabet’s revenues come from advertising, and three-fourths of that come from Google Search alone, it’s fair to say that the company’s $54 billion exposure to online ad spend in Q3 — and in turn, the pulse of the global economy — is second to none.

As a result, news that the search giant saw its Q3 sales growth slow to 4% from a blistering 43% pace a year ago did not sit well with already-weary investors, who are growing tired of seeing sales and profits decline while costs and headcount continue to rise — all while the stock has lost more than 30% so far this year.

Officially, Alphabet said its employee base rose about 25%, ending the quarter at 187,000 from 150,000 in 2021.

“In the third quarter, we did see a pullback in spend by some advertisers in certain areas and search ads,” Alphabet Chief Business Officer Philipp Schindler told investors Tuesday (Oct 25) evening, pointing to weak spending in financial services generally — and a pullback in insurance, loan, mortgage and crypto subcategories specifically — as indicative of the broader trend.

“There’s no question we’re operating in an uncertain environment and that businesses big and small continue to get tested in new and different ways,” Schindler added, noting that alongside Shorts, the company’s YouTube TV unit was adding subscribers and viewing hours at an unmatched — and almost unfathomable — clip.

On average, Schindler said, global viewers are watching more than 700 million hours of YouTube content on TV daily, with another 30 billion daily views on Shorts via a base of 1.5 billion monthly active users.

“TV is a big area for us,” Pichai said. “Nielsen reported that YouTube was the leader in streaming TV viewership in the U.S. in September for the first time,” he added, speaking to what Schindler characterized as strong engagement driven by a “streaming boom.”

AI Stands for All In

As much as Alphabet’s business metrics — including Cloud, Workspace and Google Lens image search tool — were strong and continue to add share, its earnings were widely labeled a disappointment, and its stock price has fallen by a third.

Even so, the company’s 50-year CEO, who has held the top job since 2015, tried to reassure investors that Google had not only weathered similar periods of duress before, but had actually emerged stronger on the other side as a result of its long-term strategic investments.

“We are at a similar point now with AI, another transformational technology,” Pichai said of the company’s investments in AI and deep computer science.  “We are using AI advances to deliver a more natural and intuitive search experience, and these advancements will soon help to surface things before you’ve even finished typing,” he added, noting that Google Lens now answers more than 8 billion questions every month using only a photo or an image.

“We are supercharging our visual search capabilities to help people find what they are looking for at businesses nearby,” he said.