Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) shares are getting hit hard Thursday after reporting third-quarter financial results. While there were some areas of concern, the company's YouTube segment may have shown just how far ahead of peers the video platform is.
YouTube Outpaces Netflix
YouTube could be one of the most undervalued assets buried in the Alphabet umbrella, with analysts sometimes assigning a standalone value if the video unit were ever spun out.
Alphabet may be just fine holding onto YouTube with the latest figures.
Overall, YouTube advertising revenue was $11.21 billion for the third quarter, up 9% year over year.
Alphabet Chief Financial Officer Anat Ashkenazi said this unit saw "notable strength in living room," during the company's conference call.
For Alphabet, living room refers to YouTube watched on television screens like smart TVs and connected streaming devices, and does not count mobile phone usage.
Alphabet Chief Business Officer Philipp Schindler helped quantify just how strong the company's living-room YouTube advertising business is.
"In Q3, living room accounted for over one-third of total YouTube ads revenue," Schindler said.
One-third of the $11.21 billion quarterly total is $3.74 billion.
Putting that number into perspective, that figure is larger than the entire estimated annual advertising revenue for streaming competitor Netflix Inc (NASDAQ:NFLX).
Netflix recently guided for full-year advertising revenue to be $2.7 billion, down from a prior guide of $3 billion.
YouTube's living-room business alone topped Netflix's annual goal in a single quarter. In fact, the third-quarter living-room figure is 38% higher than what Netflix is now forecasting for its entire fiscal year for advertising revenue.
YouTube vs. Netflix
A recent report from Nielsen shows that YouTube led the way in streaming for the month of August.
YouTube had a market share of 15.8% for the month, more than double that of second-place streamer Netflix at 7.7%. Disney was a distant third at 4.8%.
Overall, streaming had 49.6% market share for the month, outpacing the 17.5% share for broadcast TV and 18.9% share for cable TV. Other options made up the remaining 14.0%.
"YouTube continues to lead in the living room as the number one streaming platform in the US in terms of watch time," Alphabet CEO Sundar Pichai said after third-quarter results. "It's also seeing good subscriber growth."
While other areas of Alphabet had weakness or areas of concern for investors, YouTube is showing its dominance and advertising strength.