YouTube's Fastest-Growing Audience Is In the Living Room and Advertisers Want in

There's a great migration happening among the citizens of YouTube, and it's not in the direction one might assume.

Although most digital content producers, including YouTube, are fixated on mobile phones and producing short-form shows for audiences on the go, YouTube viewers are increasingly firing up the TV set.

"Our fastest-growing area is the big screen, the TV," said Sarah Ali, head of living room products.

In 2016, viewership on TV screens grew 90% compared to 2015, according to YouTube. And in 2017, viewership on TV screens is set to rise another 90%, the company said. It would not release the number of people viewing on TV screens.

With televisions now internet-connected, app-enabled and smart-speaker assisted, it's easier to stream over-the-top -- also referred to as OTT or streaming-video -- to the larger screen, which is likely why an increasing number of YouTube's 1.5 billion viewers are channel surfing like the "old" days of TV.

YouTube is undergoing a transition that touches on more than where people view. The brand safety revolt this year prompted the company to hold creators, some with big followings, to higher standards. The full impact of that is yet to even play out. The move to the living room, however, could ultimately prove helpful by giving more prominence to professional content and de-emphasizing reliance on the "creator class."

To be sure, YouTube is not the only beneficiary of this migration. Companies like Roku are attracting more consumers. Apple TV and non-traditional players like Facebook and Twitter are building TV apps to offer their brand of internet videos on demand.

Here's a broader view of the landscape.

50% more advertisers
The living room is recognized as a more lucrative territory to hook consumers. A YouTube viewer spends 30% more time watching NBC's content when it's on TV versus mobile or a laptop, said Mark Marshall, exec VP-entertainment advertising sales group at NBCUniversal. YouTube, in general, is a growing platform for NBC, with a 30% increase in minutes watched across all screens, Marshall said. But NBC's YouTube clips on TV are growing faster—minutes watched were up 65% year-over-year.

That's still fewer minutes than mobile and laptop, but changing viewer habits are clearly presenting new opportunities for digital advertisers to place commercials that resemble the ad breaks of TV's heyday. "In the upfront this year, we will have 50% more advertisers buying YouTube than last year," Marshall said.

Up with OTT
Advertisers have been chastened—even a bit shell-shocked—by the mobile revolution, and the digital domination of Facebook and Google. Mobile, for instance, still accounts for 60% of all YouTube viewing, according to Marshall.

Mobile has grown so unforgiving to brands that Facebook and Google developed six-second video spots, so advertisers get used to snappy messaging.

The OTT market is offering an alternative to that mobile mindset, and media players like Hulu are luring brands with 15-second and 30-second commercial interruptions. YouTube is phasing out the 30-second spot, but advertisers still get 15 seconds, which shows advertisers just how much time they can expect to get in front of consumers, which is not much.

Roku, with 23.1% of the U.S. connected-TV device market, is the leader in OTT boxes, which are hubs for apps like YouTube, Hulu, Amazon Prime and traditional broadcasters trying to reach an audience that no longer buys cable packages.

Google Chromecast and Amazon Fire TV sticks are No.2 and No. 3 among streaming devices, according to eMarketer, and 170 million people in the U.S. plug into connected TVs.

Over-the-top boxes and connected TVs account for 32% of ads that run alongside what's considered premium digital content—shows and movies with respectable production values, according to Freewheel, a video ad-tech platform. Four years ago, connected TV devices accounted for only 2% of such ads, it said,

"We've been very public about how much audience has shifted back to the large screen," said Scott Rosenberg, Roku's svp of advertising. "In this new world, there are thousands of apps and channels, and getting consumers to tune into your show, it becomes an interesting and a hard problem."

King of YouTube
NBC isn't having that problem with two of its biggest shows, "The Tonight Show" and "Saturday Night Live," ranked No. 1 and 3 respectively on YouTube when ranked against other broadcasters' channels, Marshall said.

YouTube viewership is a new selling point -- NBC's Jimmy Fallon has 15 million subscribers there -- especially because the company was criticized for hosting objectionable videos earlier this year. YouTube had to purge some channels that disturbed advertisers, and work to keep ads form showing up in unseemly locations.

"We have conversations around brand safety," Marshall said. "Now, if you like the audience YouTube delivers we can deliver that same audience in a guaranteed safe environment."

Indeed, streaming platforms need more compelling content. Facebook is spending billions of dollars this year to develop a TV-like offering, expected to be unveiled this month. YouTube has a pay TV bundle, which of course is meant for the living room viewer and mimics a streamlined cable TV package.

The living room experience is a favorite of advertisers, according to Diya Jolly, director of product management at YouTube. For the past year, advertisers have been asking to serve TV-ads exclusively, and YouTube lets brands target the living room through the Google Preferred ad market, which is a video ad program reserved for select brands to show ads alongside select content.

"Given the way OTT is growing, in general, brands are asking for this," Jolly said. "There's a lot of value in the living room."

"When we talk YouTube, naturally so many people think mobile phone or laptop," said Mark Marshall, evp entertainment advertising sales group at NBCUniversal. "But people watch on the biggest screen available to them wherever they are."