News alert: A lot of people spend a lot of time watching YouTube videos.
Ok, so that's not really news. Anyone who's used the internet since Gangnam Style became a thing knows YouTube's viewership is massive. But management gave us an update on some of the viewership statistics of the Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) web property at VidCon last week.
According to YouTube CEO Susan Wojcicki, 1.5 billion people visit YouTube while logged into their Google accounts every month. There are surely others who don't sign into Google to watch YouTube videos. What's more, users watch an average of one hour per day on mobile alone. Viewership on TVs through streaming devices is also increasing rapidly, up 90% year over year.
YouTube thinks it has a long way to go, but it will have to fight other internet giants like Facebook (NASDAQ:FB) as it tries to grow its audience engagement even more.
YouTube's hour-per-day statistic is particularly impressive when compared to the amount of time spent on Facebook. The average daily users on Facebook, Instagram, and Messenger spend a combined 50 minutes per day across all three apps. That includes usage on desktop as well.
In the second half of 2016, YouTube accounted for nearly 21% of all downstream mobile data usage in North America, according to Sandvine's semi-annual report. Facebook and Instagram combined for almost just as much. And considering video generally requires more data usage per second than photos and text, it seemed like Facebook was the preferred app-maker of mobile users (at least in North America).
However, that doesn't account for time spent on mobile while connected to WiFi. Data-conscious consumers may save their YouTube binges for when they have a good WiFi connection, so they don't eat up their monthly data allotments from their mobile carriers. Indeed, YouTube's share of bandwidth usage is about nine times more on fixed-access lines than mobile. That gap may close in the future as more people sign up for unlimited data plans.
An example of this phenomenon in action is friends at a party who all want to share videos and music with one another. ("Hey, have you seen this?") People just take out their smartphones and load the YouTube app.
Taking on television
One hour per day is great, but Wojcicki thinks there's a lot more potential in YouTube. She notes the average American watches four hours of television per day, so bringing more television-like content to the platform could increase engagement even more.
YouTube has already produced 37 originals shows and films for its premium YouTube Red service, which have generated over 250 million views. At VidCon, YouTube announced 12 more originals to add to the slate. The company is also producing some original content for its ad-supported platform as well.
YouTube will be battling Facebook for users attention. Facebook has signed several deals with sports leagues to stream select games, although it hasn't done much to promote those live events. Meanwhile, it's reportedly been looking to produce several new originals including big-budget dramas of the same caliber as House of Cards, for example. It will also produce shorter 5-to-10-minute shows for easy consumption on mobile devices.
Both companies are willing to spend heavily on originals and have the cash available to do so. YouTube's corporate overlord, Alphabet, produced a whopping $9.5 billion in operating cash flow in the first quarter alone. Facebook wasn't too shabby either, producing $5 billion. Spending a few million to produce original content is a small drop in the bucket for them.
But if it gets people to put down the TV remote and pick up their phones to watch videos, it could be a big revenue generator for both YouTube and Facebook. The TV industry brought in over $70 billion in ad revenue in the United States alone last year. So, while 1.5 billion people spending one hour watching videos is astounding, there could be much more for YouTube. But don't be surprised if Facebook makes an effort to take some time away from the video-streaming app.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Facebook. The Motley Fool has a disclosure policy.
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