YouTube’s battle with TikTok takes its toll as revenues dip

YouTube's long battle against TikTok has started to take its toll after its parent company, Alphabet, reported a decline in revenue at the video-streaming site.

The fall, from $7.2bn (£6.2bn) in 2021 to $7bn this year, is the first since Alphabet started reporting YouTube's performance separately two years ago, and marks a financial slowdown at the once dominant internet video hub.

The decline was attributed in part to the worsening economy around the world, with rising inflation and pressures on household budgets leading to a retrenchment in the advertising industry.

"When Google stumbles, it's a bad omen for digital advertising at large," said Evelyn Mitchell, the principal analyst at Insider Intelligence. But competition was intensifying between YouTube and TikTok for the eyeballs of the world, he said. "YouTube ad revenues shrank for the first time since Google started reporting YouTube earnings separately in Q4 2019, due in large part to persistent competition in streaming and short video."

According to research from the market analysts data.ai (formerly AppAnnie), TikTok is number one worldwide for consumer spend, with YouTube in second place as of September 2022. But the discrepancy is far larger when it comes to active users. TikTok is in fifth place but YouTube does not make the top 10. YouTube still has the lead on consumer spending in the US, its largest market, but even there TikTok is hot on its heels.

TikTok was downloaded 74.5m times around the world in September 2022, while YouTube trailed it with 19.7m downloads, data.ai's analysis shows. In the UK, the figures are equally stark: 1.96m downloads in the last three months for TikTok, and 838,000 for YouTube.

The conflict is about more than the bottom line. YouTube's format, with longer videos, more ad breaks and an older audience, is easier to monetise than TikTok's short-form infinite scroll. But TikTok is the star of the zeitgeist, forcing YouTube to play catchup.