YouTube has become a content phenomenon. According to Statistics Brain a staggering 1,325,000,000 people use YouTube, watching 4,950,000,000 videos every day. 3.25 billion hours of video are watched on YouTube each month. Is it any surprise, therefore, that YouTube stars are often more influential than traditional celebrities?
Of course, successful YouTube stars do not provide their entertainment for free. They do not put themselves on the medium for philanthropic reasons. They have found that it is perfectly feasible to make money on YouTube, and if you manage to break into the ranks of the famous and influential it can be seriously good money.
Take PewDiePie as a case in point. His channel currently has 49.1 million subscribers. He is seriously popular! At the beginning of 2016, MoneyNation did the number crunching to see just how lucrative YouTube has been for PewDiePie. He has an average salary of $12 million per year and has earned an estimated $124 million since he began his YouTube career in 2010. MoneyNation calculated that his net worth is a very healthy $78 million. This may only be a third the size of Miley Cyrus’ net worth, but it is 625 times the net worth of the average American household.
So how do PewDiePie and other successful YouTubers make their money? It certainly isn’t by “hope”-marketing, where you simply plonk a video on YouTube and hope for it to make some money somehow. In fact, the true answer is very boring - it is the same as for every other website in existence. To make money on YouTube, you need to create quality content attracting traffic which, in some way (for instance, by viewers clicking on an ad or a link to purchase a product), converts.
Let’s assume you have the ability to create quality video content (nowadays virtually anybody with a phone and an imagination can). What are the main ways you can earn money from YouTube?
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Google owns YouTube, so it is not surprising that they have made it extremely easy for you to sign up to Google Adsense and attach ads to your videos. The ads displayed will be different for everybody who views your video, as it is dependent on the viewer’s web-surfing history (have you wondered why it is that you keep seeing ads for a product you have previously taken a look at on the internet?)
While this may sound like free money, the reality is that the vast bulk of people who sign up for Adsense receive little or no money from it. For a start, you share the advertiser’s money with Google. Although it is not clearly disclosed, it appears that Google keeps about 45% of what advertisers pay. In reality, you will earn somewhere between $1 and $2 per 1000 views (CPM). This rate changes regularly. People do have to fully watch the ad, rather than bypassing it, to count as a “view.” Another option is to have cost per click (CPC) ads on your YouTube page, where you are, of course, reliant on people actually clicking on your ads.
Most important for the average YouTube user, however, is that there is a minimum payout threshold of $100. If you do not earn enough money, then Google never pays out at all. It all comes back to traffic. Like virtually every other type of website, if you can build up traffic, you will get to the point where you have enough visitors to exceed Google’s threshold and start to receive payments from them.
You need to ensure that you create quality videos, and promote them. This is how all YouTube influencers begin. They build up an audience for their channel, reach the Google $100 payment threshold, continue promoting their videos, and as subscriber numbers continue to rise gain for themselves healthy incomes, which they supplement with other income-generating methods.
Being a YouTube partner does not earn you money per se, but it provides you with tools that make it easier to do so.
Technically you become a YouTube Partner the moment you monetize your content and begin to share advertising revenue with YouTube. This gives you access to in-depth analytics about your viewers and their ad-clicking. You also gain a few other partner benefits, such as custom thumbnails and the ability to broadcast a Google Hangout.
YouTube provides extra promotion to their YouTube Partners, and includes them in various advertising programs worldwide, both online and offline.
You receive special framed Play Buttons on your site, once you gain certain levels of subscribers: a framed Silver Play Button for 100,000 subscribers and a framed Gold Play Button at 1,000,000 subscribers. You gain further tools and community support the more subscribers you receive.
One important, though rarely emphasized, advantage of being a YouTube Partner is that you keep your copyright on your uploaded videos (assuming you correctly hold it in the first place). It is not all that well known, but if you are not a YouTube Partner you give YouTube the right to do what they see fit with your videos.
The YouTube Partner Program gives you a non-exclusive agreement. This means YouTube does not restrict where you can load and upload content, so there is no problem if you also choose to upload content and monetize it on other video platforms.
If you operate a successful YouTube channel, you could consider the option of joining a Multi-Channel Network. Three of the better-known ones are Fullscreen, AwesomenessTV, and Freedom. The official Google definition of Multi-Channel Networks (MCNs) is that they are “entities that affiliate with multiple YouTube channels, often to offer content creators assistance in areas including product, programming, funding, cross-promotion, partner management, digital rights management, monetization/sales, and/or audience development.”
They are very much like talent agents. In return for a percentage of your AdSense revenue (or any other form of income the MCN arranges for you), they will broker deals for you and connect you with other YouTube talent. If you live in the right place, your MCN may even provide you with studio space to produce your content.
Of course, like any agent, the MCN will take its share of your advertising revenue (in the case of Freedom, smaller members pay 40% of their net advertising income from AdSense). The percentage of revenue you keep increases as your channel grows. If you have a decent audience, the MCNs have the strength to leverage your site up to higher ad rate levels.
If you are a stand-out talent, these networks will greatly help your growth. If you are lucky, they will invite you to participate in their original productions. They are the best way to get mass exposure for the truly talented. They also provide an opportunity for you to cross over into other media, such as t.v., films and books.
Once you have made a name for yourself you will have followers - your personal fanbase. These followers will often be happy to spend money on any merchandise you sell. You could, for instance, create a range of shirts or hats that promote your site. Many followers are happy to buy your merchandise - it helps make them feel part of your group.
These are niche products aimed purely at your most loyal fans. The bigger your channel grows, and the more popular you become, the more your followers will happily pay for merchandise. Indeed quite a few YouTube influencers find merchandise sales more lucrative than the advertising income they share with YouTube.
You can market your merchandise on your YouTube channel. Of course, YouTube audiences, particularly those in Generation Z, can be enormously fickle, if they believe their heroes have sold out to commerce, so you do have to be careful that your merchandising does not alienate your audience. You still need to appear as genuine to them.
For quite a few businesses it works the opposite way. Their primary focus is merchandising their product. They give away video content in return for the opportunity to pitch their merchandise, or even simply get their name visible. Red Bull is a case in point. They have 5.5 million subscribers who love watching the Red Bull action-focused videos. Red Bull may not actively market their drinks in their videos, but there is no doubt what the product behind the channel is.
Most YouTube content creators are involved in other activities - YouTube is not their entire life. If they can build up a huge base of subscribers to their videos, however, they have a ready-made audience to whom they can promote their other activities.
Perhaps they have written a book, created a video game, invented a new product, or created a course. They will be selling these ancillary products in other markets, for example, they may sell their book on Amazon, or they may deliver their course on their website. In these cases, the content creator is using their YouTube channel as a marketing tool to help promote their ancillary product.
Some of the more influential YouTubers gain enough fame and traction that they can use this fame to help launch new products. PewDiePie, for instance, was able to collaborate with Canadian developer Outerminds Inc to create his own 2D side scrolling video game, PewDiePie: Legend of the Brofist. The game grossed over $100,000 on the day of its release in the United States. According to MoneyNation’s calculations, PewDiePie made $8.9 million of pretax income from merchandising and ancillary products in the 2016 financial year.
Quite a few YouTube influencers also gain secondary income due to their YouTube fame. For instance, they may be paid to speak at conferences or provide consultation services about YouTube Marketing.
Once you have made a name for yourself sponsorship opportunities often arise. Realistically you need to have a substantial audience first before companies are likely to consider sponsoring your channel. It is similar to any other type of corporate sponsorship If a business believes that it can benefit from having its name linked to your channel it will consider sponsoring you. As with everything else, the larger your audience size, the larger the sponsorship you will be able to negotiate.
Of course, for ethical reasons (as well as meeting the YouTube terms and conditions) you need to make it very clear on your page who any sponsor is. Your sponsors are, for all intents and purposes, advertising their products or services around your videos.
An extension of this is product placement, where a sponsor pays you to use their product in your video. This might be as simple as wearing a branded hat or t-shirt in a video, or even driving a particular make of car. If you not only use a product but also recommend it, too, you are providing an endorsement for it. This is another example of how trends in movies and television have moved into YouTube videos. If your videos are good enough, and tremendously popular with a large audience, companies recognize your influence on your audience as being nearly as important as that of mainstream media.
A combination of sponsorship, endorsements, and product placement can be a highly lucrative form of income for the more popular YouTube channels.
There is even a company that aims to set up sponsorship deals between YouTube creators and brands - Grapevine. They consider YouTube channels with 10,000 or more subscribers to be large enough to be thought of as influencers.
Quite a few YouTube channels regularly review products. These are in a wide variety of niches. Some are pure advertorials, but quite a few have educational content that teaches the viewers about a particular product’s features and how the viewer can best use the product. There will usually be a link in the video description directing the viewer to a site where they can buy the product. These links are set up as affiliate links (so that the shopping site knows exactly where potential visitors arrive from). If the visitor ends up buying the product, the owner of the YouTube video receives a percentage of the purchase price.
Affiliate links are something of a gray area in relation to YouTube’s rules. However, they are relatively common, and as long as you use them sensibly, YouTube appears to accept them. The key to successfully using affiliate links is that you must be honest and transparent (don’t hide what you are doing from your viewers), and you still need to provide value to your subscribers. Affiliate links are simply another way to monetise a YouTube site - you should not be creating YouTube videos with the sole purpose of making affiliate money.
There are many affiliate marketplaces available where you can find products to review. Some of the best known are Amazon and ClickBank.
As with virtually every other form of income you can earn on YouTube, the larger your subscriber base, the larger your income is likely to be. However if your videos are in a specific Review or Shopping channel you probably have a higher percentage of your viewers willing to buy products, so you do not need as many subscribers as you would for other types of income.
The amount you receive per click is substantially higher than with AdWords, as you are only paid for actual sales made. There can be an additional bonus for some types of affiliate sales when people sign up a recurring payment (for instance they sign up to a type of SAAS software with monthly payments). In that case, you are likely to gain affiliate income every time they make a payment.
You do need to keep your trust with your viewers, however, and not come across as scammy, in for a quick buck. You must provide genuine reviews that make it clear you are simply not in it for the money.
If you can build up a solid following of people who see true value to themselves in your videos, you may consider creating gated content in a premium paid Subscriber-only channel. This is clearly not an option for beginners. Most YouTube viewers are conditioned to watching material for free, and it is something of a mind shift to have to pay to watch videos on the site.
The range of paid channels varies by country, but there are currently 303 paid channels available to American viewers, with topics ranging from music to episodes of Sesame Street to learning woodworking.
One problem of putting your videos behind a paywall is that there is no way that they can go viral. You cannot even easily promote individual videos - just your channel as a whole; casual viewers cannot see your videos.
You may be able to use your free YouTube channel as a form of freemium lead to your paid services. Give away some quality videos on your free YouTube site, but hold back your best videos for behind a paywall on your own site. A good example of this in practice is The Young Turks.
Crowdfunding is rapidly becoming a common business model for the funding of many types of products and services. It should, therefore, be no surprise that YouTube creators have discovered this and are many are encouraging their supporters to help them out financially. Crowdfunding is where people go to a specific page on a website, such as Patreon, and donate money. Of course, for this to be a possibility you first need to build a loyal audience, and create regular quality content.
Patreon is designed specifically as a place where you can voluntarily pay creators you like. They suggest that creators can “harness the power of your fans by letting them fund your ongoing content creation with a monthly subscription amount of your choice.” YouTube videos are just one of many types of creative arts that can earn an income through crowdfunding at Patreon.
This is clearly another example of how modern-day creatives, including YouTube video creators, are rapidly becoming influencers. Their work inspires fans, who are in turn are willing to pay cash so that the creators produce even more product.
One example is The Nerdwriter who produces a weekly web series of videos aimed to cultivate worldview. He set a crowdfunding goal of $3,000 to expand his use of original animation and buy new camera equipment. This was after he had already targeted and exceeded milestones of $400, $700, $1,000, and $2,000 in his funding quest. He reached his $3,000 target thanks to donations from 1,909 patrons. As an incentive to his crowd funders, he has posted 30 videos, restricted to only being viewable by them. It is a common practice for video makers to produce exclusive content for their crowd funders.