Tech

YouTube is aiming for the small screen, and it could pay dividends

Susan Wojcicki, CEO, YouTube
Harriet Taylor | CNBC

Earlier this year, YouTube, the video site that challenged users to "broadcast yourself" and became a cultural touchstone in the process, celebrated its 10th birthday.

As it enters its second decade, can the Google-owned company—and some of the stars that made their name on the platform—be as big a hit on mobile?

In a world where viewers are consuming more of their entertainment on small screens—and social media challengers like Facebook are aggressively pushing mobile—YouTube isn't wasting any time trying to hold the attention of its more than 1 billion active users.

"We believe YouTube is benefiting from (and driving) strong secular trends as video continues to shift to mobile and TV dollars increasingly move online," Doug Anmuth, Internet analyst at JPMorgan, wrote recently. The bank estimates that YouTube could earn $6.4 billion in revenue this year—a figure that Anmuth added could be "conservative" given YouTube's growing ability to monetize its video views.

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Last year, the company said nearly half of its users were logging on via tablet or cellphone. At the time, Susan Wojcicki, YouTube's CEO, cited mobile growth as "superimportant" to the company's prospects.

For YouTube and its competitors, the stakes are high and growing.

While the platform generates nearly 20 percent of overall U.S. digital video advertising dollars, which PricewaterhouseCoopers said hit a record of $13.3 billion in the first quarter of 2015, analysts say the increasing threat from streaming media could pose a challenge to YouTube's dominance. Facebook—which is poised to become YouTube's stiffest competitor in mobile video—offered a host of top video creators a cut of ad revenues generated from their content.

The move, something Wojcicki acknowledged recently was "a big opportunity" for most social networks, is expected to put new pressure on YouTube. At least for the moment, however, research analysts like Brian Wieser at Pivotal Research think the landscape remains tilted toward the video network.

"People often forget that YouTube is one of the greatest search engines," Wieser said. "Facebook is not doing the same thing from a consumer perspective."

'The global TV set'

How Michelle Phan grew her YouTube empire
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How Michelle Phan grew her YouTube empire

The video channel's strength is due in large measure to YouTube creators—a highly interactive community of individuals who create niche content for the site, thus making it more of a draw for mobile users. Some have managed to outgrow their "viral video" roots to become full-fledged stars.

Take beauty guru and YouTube sensation Michelle Phan, who has blossomed into a phenomenon based on her popularity and nearly 8 million viewers. She credits YouTube for her runaway success.

"I still truly believe that YouTube is the global television set," she said in a recent interview with CNBC's "Squawk Alley." "If I want to produce really good video content, I know it's going to live on YouTube."

She has since taken on the business world by storm, by starting her own cosmetics line Em and co-founding Ipsy—a personalized beauty subscription service that recently hit a landmark 1 million subscribers.

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Google's efforts to capture more ad revenue via YouTube views don't appear to have hurt engagement. Five years after the service was unveiled, the company's TrueView feature—which allows viewers to bypass advertising after a few seconds, without those brands being charged for it—has let Google reap ad dollars without costing YouTube in clicks.

Watch time on YouTube has gained momentum and is now up 60 percent year over year, according to Google data, which Chief Business Officer Omid Kordestani noted last month was the fastest-growth rate "in a couple of years."

The company announced two new projects that highlight mobile as a big priority. YouTube will now support 360-degree video ads, providing users with a more customized experience by allowing them to navigate their surroundings.

And due to high demand, YouTube's app will also receive an update that will feature multiple upgrades, including the ability to watch full-screen videos with a single tab. The app is available on all Android devices, and will soon be available on Apple's iOS.