YouTube’s plans to convert a portion of its user base to a subscription-based, ad-free service known as YouTube Red appears to be gaining traction. The company’s iOS application is now ranked as one of the App Store’s Top 10 Grossing apps on iPhone, following the launch of YouTube Red in late October. This indicates that a number of users who initially signed up for the free, one-month trial have since converted to paying users, as that trial ended. However, the question now is how many of those users did so unintentionally – that is, did they forget to cancel their subscription before the monthly fee kicked in? Or did they mean to pay?
YouTube Red is YouTube’s ambitious effort to generate a new revenue stream for both the site itself and its creators. Instead of watching videos peppered with ads, YouTube Red users get ad-free videos, as well as other premium features, like the ability to save videos to watch offline and to play videos in the background. That latter item makes YouTube more competitive with rival streaming music services as users can listen to music via YouTube while using other apps.
The benefits of YouTube Red also extend anywhere you’ve signed in to YouTube, including in the company’s standalone applications, YouTube Gaming and the newly launched YouTube Music. In addition, YouTube Red subscribers gain access to Google Play Music, which is Google’s other streaming music service and digital music locker.
YouTube splits its Red subscription revenue with creators, paying out 55 percent to those making videos for its service – the same percentage as the ad revenue it shares. However, the company practically forced creators to agree to participate in YouTube Red by requiring them to agree to the updated terms or have their videos pulled from YouTube. That has impacted some larger channels, like ESPN, which had streaming agreements in place with others which prevented its participation on YouTube Red. In response, it pulled the majority of its videos off of YouTube.
As early adopters’ free YouTube Red trials wrapped up toward the end of November, the YouTube app has been climbing the charts on the iOS App Store.
It first appeared on the Top Grossing charts for both iPhone and iPad on Saturday, November 28th, where it ranked No. 214 and No. 389, respectively. By Sunday, it had jumped to No. 34 and No. 123, and today it moved to No. 8 and No. 36, for iPhone and iPad. (After I wrote this article, the app jumped again, and is now No. 6 on iPhone and No. 25 on iPad.)
During this time frame, U.S. download estimates are at 3.4 million, notes app marketing firm Sensor Tower, but there’s no way to see how many of those users opted into the free YouTube Red trial, or how many current users were shown the option to sign up to try to YouTube Red in the app.
Though the subscription option is a bit buried in the settings on both iOS and Android, YouTube has been showing a splash screen encouraging users to try out YouTube Red for free. Some users report they were even offered the option to extend their free trial, indicating that not all of those who agreed to try YouTube Red have had yet to decide whether or not they want to pay.
On iOS, YouTube charges a little more than its standard price of $9.99 per month for YouTube Red to account for percentage of sales that Apple takes. Instead, iOS users pay $12.99 per month – a price point high enough (it’s more than Netflix!) that YouTube will have to show there’s significant value in its new premium service in order to keep users from canceling.
Sensor Tower estimates that YouTube was seeing an estimated $12,000 per day from in-app purchases over the weekend – with the only in-app purchase being the option to subscribe to YouTube Red. That’s roughly 927 new subscribers daily, they say. However, others report that being in the Top Grossing section would mean the app is seeing much more revenue than that – well over $50,000 per day:
After all, top grossing iPhone games pull in 6 figures or more per day.
According to Readdle’s marketing head, Denys Zhadanov, who has a good handle on how the App Store and Mac App Store operate thanks to his work with Readdle, a better estimate would be $70,000 to $90,000 per day. And with a No. 6 position, that would indicate YouTube is making over $100,000 per day, he says.
After Sensor Tower ran the numbers for the app’s current rankings, they found that it would be making $300,000 per day on iPhone, and $50,000 per day on iPad. That’s $350,000 per day or roughly 27,000 subscribers paying $12.99 per month.
Sensor Tower clarifies that its estimates are on revenue reported so far, but will need a few more days of data to have the full picture. App Annie declined to provide data for this same reason, but agreed that the fact that the YouTube app ranks this high is impressive.
Meanwhile, YouTube’s app is not currently a Top Grossing app on Google Play, indicating that either fewer users are buying subscriptions to the service, or that most YouTube Red subscribers on Android came to join YouTube Red by already being paying subscribers to Google Play Music. (Google Play Music subscribers gained free access to Red, following its launch.) However, according to App Annie’s ranking data, the new YouTube Music app is ranked No. 78 on the Top Free charts on Google Play.
Another thing that’s interesting about this early data is that the iPhone version of the YouTube app is taking off more than the iPad version, in terms of its Top Grossing rank – especially since the iPad ranks are easier to climb. However, YouTube has been heavily advertising Red in the iPhone app, and it’s likely that more videos are consumed on iPhone versus iPad, which could explain this trend.
It’s also worth noting that, given the high download volume for YouTube, even a small number of conversions will get the app on the App Store’s charts. In fact, this aligns with the promise YouTube Red holds for creators – that, because of YouTube’s massive size, even if only a handful of users opt-in to pay for an ad-free YouTube, it could still see a sizable new revenue stream.
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