Key Points
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YouTube posted a 13% revenue increase in the second quarter, reflecting steady growth.
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YouTube leverages its user‑generated content model to attract advertisers.
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Netflix has embraced advertising, with its ad business expanding rapidly.
Alphabet’s (NASDAQ:GOOG) (NASDAQ:GOOGL) YouTube has long been the leading user‑created video platform, but the Google parent is so big that YouTube doesn’t get the same level of attention it would if it were a standalone company.
After all, YouTube makes up less than 10% of Alphabet’s revenue, and it pales in comparison to the massive Google Search business.
However, in the video‑entertainment arena, YouTube is a giant in its own right, and Netflix has long considered it its chief rival. YouTube just topped $10 billion in ad revenue in the second quarter for the first time ever, bringing in $11.1 billion in ad revenue, which doesn’t include subscriptions for YouTube Premium tiers.
At that level, YouTube is not far behind Netflix, which brought in $12.6 billion in total revenue in the second quarter.
Can YouTube close the gap with Netflix? A deeper look.
Image source: Getty Images.
YouTube vs. Netflix
YouTube’s second‑quarter revenue grew 12.8%, modestly below Netflix’s 13.4% growth. Netflix’s expansion has slowed recently, with its stock facing headwinds from investor concerns over weaker engagement, market maturity, and recent acquisition activity. The streamer expects even slower growth in Q3, projecting an 11.7% revenue rise.
YouTube’s growth has fluctuated between roughly 9% and 21% over the past ten quarters, showing a similar volatility.
Although they operate under different models—Netflix relies on a fee‑based service while YouTube monetizes ads alongside user‑generated content—both platforms are highly profitable. Netflix posted an operating margin of 33.4% in the latest quarter. Alphabet does not disclose YouTube’s margin, but analysts estimate it in the teens, partly because YouTube shares revenue with creators.
In recent years the two have adopted tactics from each other’s playbooks: YouTube, once a free service, now offers premium subscriptions for music, pay‑TV, and even NFL Sunday Ticket. Meanwhile, Netflix’s ad‑supported tier, introduced years ago, remains a key growth driver, with the company aiming to double ad revenue from $1.5 billion to $3 billion this year.
A win‑win
Netflix still holds a modest lead over YouTube, but both have room to thrive as they serve distinct audience segments. While Netflix treats all viewing time as competition, its use case often differs from YouTube’s.
Investors cannot buy YouTube directly, yet both platforms appear positioned for continued double‑digit growth as they continue to learn from each other’s strategies.
