Brief:

• YouTube's tests of a new audio advertising format drove a lift in brand awareness among 75% of brands that participated, according to a company blog post. The Google-owned platform has moved from alpha testing into beta testing the format, which inserts 15-second audio ads into music playlists and marks YouTube's first endeavor into radio-like ads.
• Photography company Shutterfly experienced a 14% gain in ad recall above benchmarks and a 2% gain in favorability among its target audience as part of the tests. While the audio ads are aimed at listeners who play music in the background, they include a visual component that typically consists of a still image or simple animation.
• YouTube also launched dedicated groups of music-focused channels called "dynamic music lineups" that feature popular genres including Latin, K-pop, hip hop and top 100. The lineups include music tracks to moods or interests such as fitness. Advertisers can buy ad inserts in those playlists to reach listening audiences, per the blog post.

Insight:

YouTube's push into audio advertising aims to give marketers another way to connect with consumers who use the video-sharing platform to listen to music while doing other activities, such as working out. The move positions the platform to compete more directly against streaming music platform Spotify, which offers a free service with ads. Spotify is working with brands like Reebok for music-driven engagements as it looks to driven advertising revenue at a time when its premium subscriber growth is slowing.

YouTube is encouraging users to leverage its platform as an audio streaming service by offering "dynamic music lineups" that audiences can either view as music videos or listen to as background music. Tests of the new ad format, which ran from June 2019 to March 2020, showed positive results in brand recall, which is an encouraging sign for marketers that may consider running audio campaigns on the service. Media buyers that use the company's Google Ads and Display & Video 360 platforms will be able to buy audio ads in programmatic auctions on a cost-per-thousand basis, and have the same audience-targeting as in video campaigns, Variety reported.

YouTube's tests of audio ads come as the video-sharing platform experiences a significant increase in streaming of music videos to an all-time high, likely because homebound audiences are seeking digital entertainment during the pandemic. More than 2 billion of its logged-in viewers watch at least one music video a month, while more than half of those who consume music content in a day listen or watch more than 10 minutes a day, according to YouTube data cited by Variety.

YouTube forecasts that the audio formats will increase ad revenue from its library of streaming music that includes more 70 million official tracks, remixes, live performances, covers and other content, per Variety. YouTube's advertising growth has been a bright spot for Google's parent company Alphabet.

The tech giant in reported a 32% yearly gain to $5 billion in YouTube ad revenue in the third quarter, outpacing the 9.8% ad sales growth for the entire company. Audio ads can help YouTube to maintain that momentum. For music artists and record labels, the audio ads will give them a way to increase revenue from YouTube, which offers revenue-sharing for content providers, according to Variety.