On Monday, Google’s parent company Alphabet reported its 2019 annual financial results. As part of that report, the company disclosed the ad revenues of its subsidiary YouTube for the first time. According to the company’s SEC filing, YouTube generated $15.2B USD in ad revenues for 2019, up 36% from $11.2B the year prior. In 2017, the video-sharing platform’s ad revenues were $8.2B.

Putting the 2019 ad revenues in perspective is the fact that it is just over nine times the amount ($1.65B) that Google spent to acquire YouTube in October 2016. Although impressive, this number does not necessarily indicate that Google’s investment in YouTube is breakeven or profitable yet. In the Q4 2019 earnings call on Monday, Ruth Porat, the chief financial officer of Alphabet and Google, said, “We pay out a majority of revenues to our creators.”

YouTube is a platform catering to a broad audience, of which gaming and esports is just a minor share. A rough estimate is that about 7% of all YouTube hours watched are gaming and esports related, which is taking about 1B total hours watched daily and 50B gaming content hours watched in 2018 into account. When neglecting uneven distribution of ad revenues by video category, that would be approximately $1.1B in ad revenues generated by gaming content. For the sake of completeness, it should also be noted that YouTube has over 1B active monthly users and made $3B in non-advertising revenues, which included 20M YouTube Premium and YouTube Music paid subscribers as well as 2M YouTube TV paid subscribers.

I’ll take this occasion as an opportunity to look at the importance ad revenues might have in developing a profitable esports ecosystem. As many esports teams and leagues model their revenue streams after traditional sports teams and leagues, I will look at those for comparison. Most major sports leagues make more than 50% of their revenues from media rights, which are usually paid for by broadcasters covering them. Broadcasters, in turn, make a majority of their revenues in advertising revenues and subscription fees. Considering the overlap in business strategies, it is likely that media rights will be one of the most important revenue streams for the esports ecosystem going forward as well.

With that in mind, the advertisement revenues published by YouTube provide an indication that there is money to be made for video-sharing and streaming platforms through advertising and subscription revenues, which can be used to purchase media rights. YouTube did just that last week when it entered into a multi-year strategic relationship with Activision Blizzard, including exclusive worldwide streaming rights for the developer’s two franchised leagues, the Overwatch League and the newly established Call of Duty League.

Aside from the $15.2B landmark from YouTube, there are several more numbers that we can look at for orientation. The Information states that Amazon-owned Twitch brought in about $230M in ad revenues in 2018, and as of the middle of 2019, Twitch was on track to deliver about $300M in ad revenues for the full year 2019.

Three Chinese Tencent-backed live-streaming platforms add further context to the potential of ad revenues in gaming and esports. All three companies are in the early stages of monetizing their platforms. Huya reported advertising and other revenues increased by 91.4% to ¥221M RMB ($32.1M) for the fiscal year 2018. DouYu reported advertising and other revenues increased by 68.5% to ¥196M ($27.5M) in the third quarter of 2019. Bilibili reported advertising revenues of ¥247M ($34.6M) for Q3 2019, representing an increase of 80% from the same period of 2018.

Other platforms are still in the very beginnings of utilizing ad revenues; Microsoft-owned Twitch competitor Mixer started adding ads to its streams in September 2019.

Just like linear TV stations, the main income sources of all of those platforms are ad revenues and subscription fees. The executive summary of streaming platforms’ business plans is the constant acquisition of new viewers and paying subscribers as well as the retention of existing customers. One of the key resources being the content on a platform, it is in their interest to buy exclusive media rights to popular esports formats as they help drive fans to their sites. Looking at sports once more, one 2016 estimate had Disney’s ESPN paying out $7.3B annually for sports rights.

A massive advantage that online video and streaming platforms have over linear TV is their superior ability to custom tailor ads to viewers’ personal interest profiles, which allows them to create better value and return on ad spend for advertisers making it more attractive than TV advertisement deals. According to an Ipsos Connect research paper, a 62% majority of all YouTube mobile advertising receives viewers’ attention compared to only 45% of TV advertising. Furthermore, paid YouTube mobile advertising is 84% more likely to receive attention than TV advertising is.

Notwithstanding the fact that this is neither an exhaustive nor a complete consideration of all the aspects of media rights in esports, YouTube’s latest ad revenues number can help businesses understand that a solid content distribution infrastructure and value chain is already in place that has the potential to generate sufficient cash flow to build a sustainable esports ecosystem. Moreover, the numbers looked at in this article are a hint to the probability of esports stripping away brand value communication channels from traditional sports within the current decade.