Why that rumored YouTube music subscription service makes sense (and why it doesn’t)

Rumors of a YouTube subscription music service are once again making their way around the web this morning, which would more or less acknowledge that the video site has a strong presence when it comes to music in general.

The latest news on the subscription service indicated that the service will be modeled after Spotify (meaning subscribers will have full access to a library of songs that can be played on-demand), reports Billboard. There should be both a free and premium versions of the music service, with the paid version offering an ad-free experience for $10 per month. If true, an unannounced YouTube music service would help explain the recent discovery of the YouTube background audio feature for Android that VentureBeat reported yesterday.

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I’ll be honest, I really don’t see Google throwing its muscle into any business strategy that doesn’t primarily focus on advertising as the way to generate revenue. This is especially true now that the company has launched Google Play All Access, its on-demand paid music service. All Access doesn’t really need to sell advertising since it can serve as a vehicle for Google to sell more digital media through its Play store and offer some incentive for people to chose an Android device over iOS.

The only logical reason I see for Google to launch yet another paid music service would be to get more people on board with signing up for a paid service on YouTube. The video site rolled out a paid subscription pilot program to some of its premium YouTube channel partners earlier this year, but it’s failed to provide those channel partners with much revenue — and that could be because people don’t associate YouTube as a service where you pay for something. A paid YouTube music service, if marketed correctly, could help change that.

But looking back at a free, ad-supported tier of a hypothetical YouTube music service, there’s another big reason it would make sense for Google: audio ads.

Pandora is (arguably) the biggest player in this space right now when it comes to audio ads, more so because it’s having to go back and set up sales teams to sell advertising specific to a particular region. Both Clear Channel and Cumulus are also utilizing the ad sales teams they’ve used for decades in terrestrial radio, too. But thus far, no one has created a localized audio advertising platform that sways more programmatic — and that’s where Google has an opportunity to grow.

Audio ads are also easier to produce on a local level than video ads, and it wouldn’t take much to translate those audio ads to YouTube either. (For instance, rotating a few static images within the video player during a 15-second audio ad.) And once Google builds this platform, it can eventually start letting other up-and-coming streaming music services integrate these audio ads the same way it does with display ads.

Billboard’s sources indicated that the YouTube music service is expected to launch this year. We’re reaching out to YouTube for further comment, but don’t expect to hear much more than it told us yesterday. (And of course we’ll be sure to updated the post if we learn anything new.)