Google Inc (GOOG)’s YouTube Sees Above-Average Growth

Google Inc (NASDAQ:GOOG) may be seeing a good chunk of its growth from YouTube, according to analysts at Citi. They estimate that YouTube’s growth is above average compared to the growth of Google as a whole. They see video ads as being “among the top sources of potential upside” for Google this year because of the growth of online videos in general.

Estimating growth of Google’s YouTube

Of course Google Inc (NASDAQ:GOOG) does not break down its metrics for YouTube or even its general video advertising business. As a result, Citi analysts Mark May, Kevin Allen and Nathaniel Brogadir admit that these estimates may not be correct. However, they think the year over year growth in total video views does suggest at least minimal growth in overall revenue for YouTube. They suggest that other variables, including ad load and cost per impression, could also have positive impacts on their data points.

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YouTube sees growth

The Citi team reports that total worldwide video ads were 15.7 billion last month and 37.4 billion for the full fourth quarter. That represents a 32% month over month growth in December and 23% in November. They believe seasonality could have affected this growth.

The total number of YouTube videos was 3.5 million at the end of last month, a 21% increase from September which implies an 84% annualized year over year growth. The total number of YouTube subscriptions was 1.3 billion at the end of December, which is a 16% increase from September and represents a 62% annualized year over year growth.

How YouTube impacts Google

The analysts estimate that YouTube is just 6% to 7% of Google Inc (NASDAQ:GOOG)’s total gross revenue. However, they believe it contributes between 10% and 15% in incremental revenue growth because of its more than 30% year over year growth, which is above average. They see this data as “encouraging” because it supports their YouTube growth forecasts, particularly for a 28% year over year growth in the fourth quarter, which would bring it to $1.3 billion.

They believe that over time, the usefulness of their newly introduced YouTube tracker will increase as more monthly data points are added. The Citi team continues to rate Google Inc (NASDAQ:GOOG) as a Buy with a $1,190 per share price target.