How Do YouTubers Actually Make Money?
Ever wondered how YouTubers make money? If you're anything like anyone, then chances are, you've asked yourself that exact question at some point in time. It's often the case that the vague answer you receive from the person that hears your question is: advertising. But what exactly do they mean?!
It All Started Back In O'Five... On Valentines Day To Be Precise!
Given the rise of YouTube since its birth back in February 2005 (how time flies!), and since Google bought it for around $1.65bn in November 2006, the video viewing platform has experienced consistent, rapid growth. Not only has the platform grown healthily, but it's created a wealth of online internet celebrities and YouTube stars ranging from the fashion to the fitness industry and from the music to the gaming industry, to name a few.
Some of these stars have amassed followings of thousands of subscribers with others easily passing the millions. Some YouTube content creators build a following by unboxing toys, or the latest mobile phones, whilst others share tips and advice on the best workouts to do, and diet to follow, if you want a six pack, for example.
The highest earning YouTuber in 2016 was PewDiePie, a Swedish gamer who records his reactions and commentary whilst playing games, earning a total of $15m.
The mix of strong presence in front of a camera together with humour/a memorable persona and good quality content, consistently produced, results in a mass following of these individuals, companies or groups. This is gold for advertisers, marketers, individuals or companies looking to market their services or products to such specific audiences. Here's why...
More Followers/Subscribers/Viewers = More Opportunities
Let's use a hypothetical example to illustrate this point: imagine I, Afzal Hussein, am putting out high quality content every week, or day, on YouTube on how to write great LinkedIn articles and grow your presence on the LinkedIn platform. Let's assume my YouTube channel has gained traction and I've amassed over 1 million subscribers (people who subscribe to view my content and get notified every time I post something new). Chances are, the 1 million subscribers consists of professionals, students (undergrads and postgrads), entrepreneurs and anyone else looking to grow their LinkedIn presence and content creation on the platform.
Every time I post a new video on YouTube, I'm marketing my content to a targeted audience of 1 million people. This can be valuable to any company or individual that has a target audience that aligns with my subscriber base and so they'll be willing to pay me to advertise their product to my subscribers.
The reason companies, businesses and individuals are willing to pay YouTubers is predominantly because it is often the case that it is cheaper to run a YouTube advertising campaign, and through an 'influencer' (someone with a large subscriber base for a particular, niche audience - this goes into influencer marketing which I'll write about in a future article) rather than creating a traditional advertising campaign.
The Breakdown
Though there are many ways YouTubers earn their income. Below is a list of a few:
Advertisements
A lot of this is done per view. For example, a YouTuber may have 1 million subscribers, but may charge an advertising campaign $10,000 per 100,000 views.
Those annoying ads that start playing before your YouTube video starts are part of an advertising campaign. They get paid around $0.20 per view, only if the viewer watches 30 seconds of the advert. Most people skip the vids (I do!), leaving an average success rate (paid view) of around 15%.
Therefore, if 100,000 people viewed a video and only 15% of viewers watched the advert for more than 30 seconds, this will result in 15,000 paid views. 15,000 x $0.20 = $3,000. Now, the YouTuber gets around 70% of the money, and the advertiser gets the rest. Thus, the result of 100,000 views on a typical advertising campaign where 15% of viewers watched more than 30 seconds of the advert is:
YouTuber: $2,100
Advertising Company: $900
Keep in mind, the advertising company is advertising a product which they'll hope to make their main return on from viewer purchases rather than the return for the views that are paid by YouTube. The YouTuber makes their return from the paid views rather than that from the advertised product being sold.
Simply put: Company X pays YouTube to run an advertising campaign via AdSense or AdWord (Google products - this is where YouTube gets its slice of the cake). Company X pays an established YouTuber X-thousand dollars per X-thousand views. Company X's advertisement plays before YouTubers video and usually allows the viewer to skip the advertisement after five seconds.
Selling Merchandise Or Goods
A YouTuber may use their videos to direct viewers to an online store i.e. selling t-shirts or anything related to their YouTube channel. It doesn't have to be related to their channel. If YouTube dies, what will the YouTube celebrity do? It's often good to direct subscribers to other portals in order to have more than one stream of income. This is often done with a merchandise online store or a personal website.
Fan Funding
Asking for loyal fans to donate towards improvements and rewards on a YouTube channel is not uncommon. A YouTuber may be raising funds to hire an additional person to help the channel run better and produce more content for the viewers more frequently.
A small donation of $1 per subscriber, when the subscriber base is anywhere between 20,000 to 1,000,000 individuals should help put the power of fan funding into perspective!
Licensing Content
If you're lucky enough to make a video that goes viral (think Gangnam Style), you can license the rights to the video to a media company in exchange for $$$.
Influencer Marketing
This is simply where individuals or groups work with brands and companies as affiliates and brand ambassadors to showcase their products for a fee. This could be a contract over a certain length of time, say, 1 year or it can be a fee per post/video. Examples include Cristiano Ronaldo marketing Nike football boots or Kim Kardashian promoting a weight loss tea.
And That's Pretty Much The Gist Of How YouTubers Make Their Millions!
If someone told you a few years ago you could make millions sitting at home recording yourself on camera opening boxed gifts and doing product reviews, you'd call them insane. The power, influence and impact that technology and social media in particular is having across the globe is something to keep an eye on.
This is only YouTube. Don't forget Facebook, Instagram and Snapchat!
Thoughts or questions on this article? Let me know in the comments!
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The views and comments expressed in this article are solely those of Afzal Hussein and are not representative of any organisation, charity or third party.