How YouTube’s Bet on Music Will ‘Narrow the Gap’ in Audio Advertising

The platform adds new ad options as streaming booms

YouTube is adding new ad options for audio. Kacy Burdette
Headshot of Scott Nover

Eight months after the coronavirus pandemic shut down the United States, Ticketmaster accounts are still well-stocked with credits, a nagging reminder of concerts that never happened. Instead, music fans have had to turn to virtual shows: Radiohead released old concert tapings on YouTube while others, including Miley Cyrus and Phoebe Bridgers, streamed live benefits shows to support independent venues.

With live concerts essentially impossible, music lovers have flocked to platforms such as Spotify, Instagram and YouTube. Artists have gone virtual too, and where there’s an audience, there are advertisers. Music fans are hungry for new content and experiences, so YouTube is doubling down on music features and expanding advertiser tools for its free services.

YouTube introduced two new ad products on Tuesday: dynamic music playlists, which let brands buy against specific genres or music charts, and audio ads, which feature minimal or no imagery. The new ad formats are available in beta for all global advertisers on YouTube, but the audio ads won’t arrive on YouTube Music until next year. The platform did not say how much the ads cost.

“When we look at the broader set of advertising opportunities, what we see is that big moments over time—outside of music—have generally gotten smaller, whether it’s broadcast television, cable television, award shows, sporting events,” said YouTube vp of sales Adam Stewart. “While those continue to contract, you see [K-pop group] BTS get to 101 million views in 24 hours.”

The U.S. streaming market is expected to add $1 billion in revenue this year as a result of the music industry going virtual, according to the Recording Industry Association of America. Music streaming subscriptions were up 24% between the first half of 2020 year over year, and ad-supported music streaming was up 3% in the same period, the RIAA said. YouTube’s own revenue has been up during the pandemic, and its Premium and Music options recently topped 30 million combined subscribers (35 million if you count those on free trials), according to YouTube.

In an interview with Adweek, Lyor Cohen, YouTube’s global head of music and a former record executive at Def Jam and Warner, called YouTube “music’s biggest stage” and boasted about the company’s “twin-engine” revenue strategy. Like on Spotify, YouTube users listen free with ads or pay for an ad-free experience.

With the new music playlists, brands can run ads against playlists such as the Latin Hot List or the Top 100 in 63 different markets, Stewart said. YouTube pays artists a cut based on ad revenue generated by their music and shares subscription revenue when paid users stream their music. Since February, YouTube said it has paid $12 billion to the music industry from ads and subscriptions, up from over $3 billion in 2019.

“Streaming adoption continues to grow, and with live concerts canceled or paused due to the pandemic, users crave opportunities to listen to content,” said Kathleen Neumann, director of media strategy at Nexstar Digital. She noted that the digital audio ad market is currently dominated by Spotify and Apple and said YouTube’s entrance will help “narrow the gap.” A recent IAB report estimated that digital audio ads will take a 5% hit this year.

But while Google has been basically synonymous with digital advertising for more than a decade, YouTube’s ad options around music have been sparse before now.

In fact, it’s “somewhat surprising how long it’s taken Google to bring out audio advertising given how many people interact with the platform in that manner,” said Charlie Saunders, global programmatic lead at the Publicis Media agency Zenith.

@ScottNover Scott Nover is a platforms reporter at Adweek, covering social media companies and their influence.