YouTube Predicted to Octuple Its Ad Revenues in 10 Years

YouTube keeps leading the way in online video, and a couple of Wall Street pros think that this is just the beginning.

Stifel Nicolaus analyst Scott Devitt sees YouTube's revenue surging from $4 billion last year to $31 billion come 2024. It's a lofty goal, that Devitt justifies with a disconnect in marketer spending. TV advertising over the past five years has had at a 5 percent compound annual growth rate, even though the consumption of traditional TV viewing has fallen 10 percent in that time. The migration away from television is even more pronounced among younger viewers: 18- to 24-year-olds are watching nearly 30 percent less TV than they were five years ago.

We're still consuming plenty of video -- through set-top devices, PCs and mobile gadgetry. Google (GOOG) (GOOGL) paid $1.65 billion for YouTube eight years ago. It seemed then like Google was paying too much for a site that served up chunky video files for free and lacked monetization, but it has turned out to be one of the savviest website acquisitions.

Ad it Up

Devitt sees video advertisers flocking online, and it's why he rates Google and Facebook (FB) -- the two dot-com giants drawing more than a billion unique users every month to their streaming video content -- as buys. Google and Facebook may command a little more than half of the global digital ad spending, but he thinks that the combined market share will grow as marketers lean primarily on those two sites.

He points to third-party industry forecasters seeing digital video advertising growing at a 21 percent annualized clip through these next few years -- with the global forecast clocking in at a 29 percent annualized rate.

A couple of weeks earlier, Nomura Equity Research analyst Anthony DiClemente issued a bullish Google note with kind words to say about YouTube.

DiClemente also sees a big shift in advertising dollars going online. He estimates that YouTube will clock in with $4.64 billion in revenue this year, 23 percent ahead of last year. He sees that revenue growth accelerating in the next couple of years -- faster than Google itself.

YouTube Is Betting on Its Talent

Agencies and brand marketers tell DiClemente that they're spending more money online, but quality inventory is a problem. Since anyone can post a clip on YouTube and the bar for monetization is pretty low, some marquee brands are hesitant to pay for space ahead of or embedded in YouTube clips.

DiClemente favors the push for multichannel marketing, whereby sponsors can advertise on the top channels in a certain category. This also finds YouTube making the proactive move of investing money in some of the site's biggest stars so that they can create shows that will fit advertising needs.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook and Google (A and C shares). Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.