YouTube Has Launched An Ad Blocker For Its Own Ads

YouTube is testing a paid tier for users to remove ads in Australia, Thailand, and Germany. It works across all of the ways YouTube can be accessed: main app on web, iOS, Android, smart TVs, and games consoles. YouTube Kids, too.

The service is called ‘Premium Lite’ and it’s being positioned as an entry level version of the ‘Premium’ content subscription product. That’s smart. But, make no mistake, this is a paid ad blocker that costs $8.99 (Australian) per month

How so?

Its entire value proposition is the removal of ads. Take a look at the above screenshot, which compares the features of Premium Lite to Premium.

Whereas ‘Premium’ includes content-related features such as YouTube Music, background play, and play offline, Premium Lite does not. It ONLY removes ads.

But, it doesn’t remove all ads. There will still be “Limited ads”.

In a footnote on the tier comparison page, it says:

In other words, the types of ads that most frustrate viewers and to which they would be the most incentivised to pay to remove, will go. For example: the ‘pre-roll’ and ‘mid-roll’ ads that appear before and during YouTube’s primary video content offering.

However: Premium Lite won’t remove the sponsor messages and paid content segments that YouTube creators include natively as part of the final editorial production — undermining its perceived value. A fact that seems unacknowledged by YouTube in how it’s presenting the benefits of the service.

The wording of the footnote is interesting in that YouTube is openly acknowledging its usual ad experience is interruptive (annoying).

This whole value proposition is somewhat analogous to the concept presented by eyeo and Acceptable Ads, which replaces the intended advertising delivered by a website and its adtech partners into a less-interruptive and user-tolerated version.

It’s probably no coincidence that one of the 3 test countries for Premium Lite is Germany. This is the unofficial ‘home’ of ad blocking, where the movement grew in earnest from. eyeo, which owns the popular ad blockers AdBlock and Adblock Plus, is based there.

Déjà vu?

Feeling a sense of familiarity? Don’t fret. You are not experiencing a glitch in The Matrix.

YouTube first launched Premium Lite in 2021, priced at €6.99 per month. Back then, it removed all advertising and was available in a handful of European countries — Belgium, Denmark, Finland, Luxembourg, the Netherlands, Norway, and Sweden — until it was discontinued in 2023.

No official reason was provided as to why it was discontinued. But, clearly circumstances have changed and YouTube feels incentivised to make it work.

What could that be, though? There’s a few factors at play.

Context

YouTube has a $30bn+ per year advertising business. But, it’s inherently flawed.

How so? People really don’t like the ads. As in, really dislike them. More so than many other formats of online advertising.

YouTube ads are a primary reason folks install ad blockers. So much so, there’s even dedicated browser extensions called “Adblock for YouTube” that collectively have over 10M downloads. To put this into context, guess how many downloads ‘Ad Blocker for Facebook’ on Chrome has? 30,000.

This is a fairly typical view from people in the ad block reddit community:

In other words: YouTube ads are a huge point of friction for users, but extremely lucrative. This is an awkward situation.

On the one hand, YouTube has spent years and billions of dollars building adtech infrastructure that is proven in its revenue-generating ability. On the other hand, this same adtech infrastructure is driving people to install ad blockers and spend more time on competing platforms, like TikTok.

This is something of a double-whammy for Google, since the more people YouTube drives to install ad blockers, the more people block ads across all of Google’s properties and the ‘open web’ (where Google has a healthy business monetising millions of websites with its adtech trinity of AdSense, AdX, and Google Ad Manager).

For YouTube, there’s so much business inertia and technical debt at this point, that only someone with the confidence, gravitas, and vision of a founder — like a Larry Page or Sergey Brin — could step in with the clout to rethink and rebuild it with a user-first approach.

Instead, YouTube has been exploring other options to tackle the issue. Namely, YouTube Premium (rebranded from YouTube Red in 2018) — which offers an ad-free experience. This provides users with an official remedy for their ad experience pain and currently has 100m+ subscribers.

However, this is a small figure when compared to the number of visitors that access YouTube with ad blockers active. The exact number is not published, but given 8 in 10 Internet users access YouTube in the United States and there are around 1bn ad blocking users globally, it’s plausible this figure is in the range of 400m - 600m unique visitors per month.

Not all of these visitors will be using ad blockers that successfully block YouTube video ads, but many will. Enough for it to constitute a multi-billion dollar problem. These users are getting the best of both worlds — ad-free YouTube, for free — and it really pisses YouTube off.

One might argue that Premium isn’t just about the benefit of going ad-free, but the fact that Premium Lite has been spun out as a standalone (nearly) ad-free offering undermines that logic. There’s no ‘Lite’ version that only includes the music content or background play, but with ads, for example.

In recent years, YouTubers have complained — widely — that the frequency and duration of video ads has gone up and to the right. This has created the perception that YouTube is doing this in order to incentivise its users to adopt YouTube Premium (where it makes more money).

There maybe some truth to this, but it also works on the assumption that YouTube as a company is a tight-knit and cohesive organisation moving in concert to narrowly defined and unified objectives. What is more likely the case is that the folks in the ‘ad department’ are incentivised to make more money with ads. A primary lever to doing that is to just show more of them. So, they do. Ads trend up over time.

The by-product of this is Premium becomes more attractive, but so to do ad blockers.

So, how does Premium Lite fit into this?

At the same time Premium Lite is being tested, other things are going on.

Firstly, the price of Premium is going up around the world. Secondly, Google is rolling out a massive update to Chrome — Manifest V3 — that will make ad blocking extensions in Chrome (and later other Chromium browsers that collectively have a 75%+ market share) less effective at blocking ads in YouTube. To such a degree, it’s expected it will no longer be viable for them to block video ads on YouTube at all.

Collectively, these are both contributing reasons why Premium Lite could be successful this time around:

• Anchoring Premium Lite against a more expensive tier makes it seem better value

• Manifest V3 neuters the incentive to use an ad blocker instead of Premium Lite

Further, keeping a little advertising in Premium Lite improves its unit economics and therefore potential commercial viability.

Having said that, it’s worth remembering that most ad blocking that occurs YouTube is happening on desktop browsers. Meanwhile, the vast majority of YouTube’s traffic happens through mobile, via the web and its app.

Therefore, diminishing the effectiveness of ad blockers on YouTube may have only a marginal impact on improving Premium Lite’s perceived value.

If the test is successful (however YouTube defines that) expect it to roll out worldwide.

Bottom line

Premium Lite may encourage more YouTubers to pay for a premium tier product, but it doesn’t solve the underlying problem: people hate YouTube ads. It’s a band aid.

The majority of consumers are never going to pay for a version of Premium, so the tension will go on. As a result, millions of people will continue to seek out increasingly more aggressive ad blockers in an attempt to block YouTube ads.

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