Market Insight

YouTube launches feature allowing viewers to buy directly within its video ads

June 03, 2015  | Subscribers Only

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YouTube has announced a new capability enabling users to buy directly within its ads. The new feature allows advertisers to embed links, include prices and descriptions that will take users directly to their shopping sites.  It also provides advertisers the ability to show branded message and suggest items targeted to a certain consumer.  Google introduced a similar feature in early May this year, when it added a ‘buy button’ that allows users to order food stuffs from its search results on mobile devices.  Advertisers with a Google representative can start to use this new feature now, and it is expected to be run in AdWords in the next few months.  

Our Analysis

YouTube generated $4.1 billion (€3.1 billion) in advertising revenue globally in 2014. However, its profitability has frequently been questioned. YouTube has explored different ways to generate income through advertising innovations and subscription services announced in early 2015 that allows its users to watch YouTube videos without any ads.  The ‘buy button’ is the latest move from Google aiming to increase the value of its video advertising by putting the point of purchase closer to the point of advertisement.

The links inserted on YouTube video ads will take users directly to the advertiser’s online store, where they can pursue their purchase.  This will reduce an extra step they would have to take previously to come out of YouTube and search for the products on an e-commerce platform or the brand’s proprietary site. This will make the effectiveness of YouTube ads more measurable as it will allow advertisers to see the immediate result of their advertisement.

Other online media companies are also employing initiatives to move closer to consumer’s point of purchase.  Twitter allowed its US users to buy from tweet in 2014 and Facebook is also exploring similar ideas within the Newsfeed.

E-commerce is growing strongly.  According to the Commerce Department online retail sales in the US reached a record $80 billion in 2014. The shoppable video ads move enables Google to benefit from e-commerce trend and its comparative advantage to boost ad revenue.

YouTube had previously attempted to make its ads shoppable in 2012, but it failed to mature.  With e-commerce becoming increasingly popular and shoppable ads gaining momentum, this time YouTube’s ‘buy’ feature might go quite far.  

 

Research by Market
Media & Advertising
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