YouTube is part of Alphabet, the mother company that owns Google, YouTube, Android, and much more. Google acquired YouTube in 2006 for $1.65 billion, and it turned among the most successful video platforms on Earth. Now YouTubers can make money in a few ways: YouTube Partner Program, Affiliations, Sponsorships, Crowdfunding, and selling their own Products.
Monetization Method
Description
Advantages
Drawbacks
Ad Revenue
YouTubers earn money through ads displayed before, during, or after their videos.
– Passive income source. – Can monetize a large audience.
– Earnings depend on ad engagement and viewer demographics. – Ad-blockers can reduce revenue.
Channel Memberships
Subscribers can pay a monthly fee to become channel members, receiving perks like badges and exclusive content.
– Recurring revenue stream. – Fosters community engagement.
– Requires delivering exclusive content to justify the membership fee. – Limited conversion rate.
Super Chat and Super Stickers
Viewers can pay to have their messages or stickers highlighted during live chats or premieres.
– Direct income during live streams. – Encourages interaction and support from the audience.
– Limited to live stream events. – May not be a consistent income source.
Merchandise Sales
YouTubers create and sell branded merchandise, such as clothing, accessories, or niche-related products.
– Direct revenue from product sales. – Brand promotion and loyalty.
– Inventory management and fulfillment challenges. – Initial investment.
Sponsored Content
Brands pay YouTubers to create content that promotes their products or services in videos.
– High-income potential from brand collaborations. – Opportunities for unique content.
– Must maintain authenticity to retain audience trust. – Balancing sponsored content can be challenging.
Affiliate Marketing
YouTubers promote products or services through affiliate links and earn a commission on sales.
– Earnings from commissions on product sales. – Diverse product choices.
– Dependence on external affiliate programs. – Income variability based on audience interest.
Crowdfunding (e.g., Patreon)
Viewers can support creators by contributing funds through crowdfunding platforms in exchange for rewards.
– Recurring income stream. – Engages dedicated fans and supporters.
– Must fulfill rewards and maintain engagement with backers. – Campaign success may vary.
Public Speaking
Successful YouTubers may secure speaking engagements or workshops at events, earning speaking fees.
– Prestigious opportunities. – Expert recognition. – Diverse income sources.
– Requires significant expertise and public speaking skills. – Competitive field.
Book Deals
YouTubers with a substantial following may write and publish books related to their niche, earning income from book sales and royalties.
– Prestige and recognition as an author. – Passive income from book sales. – Expands personal brand.
– Requires writing and publishing skills. – Marketing efforts to sell books.
Table of Contents
Understanding YouTube Business Model
Acquired by Google, in 2006, for $1.65 billion, YouTube is now worth many times over. In 2022, YouTube generated over $29 billion in revenue from advertising alone. YouTube is part of Google (now named Alphabet), and as such, it is owned by main Google’s Alphabet shareholders and is one of the fastest-growing segments for the company.Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, which comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).YouTube was acquired for almost $1.7 billion in 2006 by Google. It makes money through advertising and subscription revenues. YouTube advertising network is part of Google Ads, and it reported more than $29B in revenues by 2022. YouTube also makes money with its paid memberships and premium content. YouTube is the most popular online video platform, a hybrid between a video search engine and a social media platform with a continuous feed prompted by social interactions and engagement. In fact, the platform is so popular that YouTube.com is the second most visited website on the internet. After being acquired by Google in 2006 for $1.65 billion, the platform now boasts over 2 billion registered users. Collectively, these users upload 500 hours of video every minute. The platform competes with other video engines like Vimeo, Dailymotion and social platforms like IGTV, TikTok, and Twitch.Vimeo is a video platform established in 2004 by Jack Lodwick and Zach Klein as a side-project to the humor-based website CollegeHumor which helped them create Vimeo. Vimeo is a YouTube competitor, though it runs a different businessmodel, not based on ads but rather on memberships and OTT video services. TikTok makes money through advertising. It is estimated that ByteDance, its owner, made over $17 billion in revenues, for 2019. While we don’t know the exact figure for TikTok ads revenues, given it counted over 800 million users by 2020, it is a multi-billion company, worth anywhere between $50-100 billion and among the most valuable social media platforms of the latest years. Instagram makes money via visual advertising. As part of Facebook products, the company generates revenues for Facebook Inc. overall businessmodel. Acquired by Facebook for a billion-dollar in 2012, today Instagram is integrated into the overall Facebook business strategy. In 2018, Instagram founders, Kevin Systrom and Mike Krieger, left the company, as Facebook pushed toward tighter integration of the two platforms. Twitch started in 2007 as Justin.tv, broadcasting the life of Justin Kan, one of its co-founders, used to prove the concept of enabling anyone to broadcast their lives on the web. Once pivoted, Twitch quickly grew, and by 2014 it was acquired by Amazon for almost a billion dollars. Titch now makes money via subscriptions, bits, advertising, and merchandising.
Now to the question, how do YouTubers make money?
YouTube Partner Program
The YouTube Partner Program enables users to monetize their videos via CPM and CPC advertising.
In the CPM model, the viewer must watch the ad for at least thirty seconds or half the total runtime of a shorter ad. On the other hand, CPC advertising works by paying YouTubers for how many clicks the ads in their videos receive.
To be eligible for the YouTube Partner Program, the channel must have reached 4,000 watch hours in the previous 12 months with a minimum of 1,000 subscribers.
Affiliate marketing
Affiliate marketing describes the process whereby an affiliate earns a commission for selling the products of another person or company. Here, the affiliate is simply an individual who is motivated to promote a particular product through incentivization. The business whose product is being promoted will gain in terms of sales and marketing from affiliates.
Affiliate marketing is a popular form of making money on YouTube. Here, a merchant will pay the YouTuber a commission for traffic or sales they refer through their channel.
Affiliate marketing in videos usually takes three forms:
An unboxing video where the YouTuber films themselves taking a product out of its box for the first time.
YouTubers then make money by insert affiliate links into video descriptions.
Crowdfunding
YouTubers with smaller audiences can profit by encouraging their followers to crowdfund the creation of new content.
Many use the crowdfunding service Patreon because the platform makes it possible for YouTube channel subscribers to sign up for extras. For example, one YouTuber might charge $10 a month for exclusive content. Another might charge $30 a month for personalized, consultancy-based videos.
Sponsorship
Brands often approach YouTubers with large, devoted followings to bring a human element to their promotional strategies. Less well-known creators can also approach brands known to sponsor YouTube videos directly.
Video sponsorship is seen as the holy grail of revenue generation, and for good reason. While prices vary from industry to industry, many partnership negotiations are based on a price of $20-$30 per 1,000 views.
Marketing funnel integration
As one of the most trafficked websites in the world, some YouTubers make money by directing viewers to a landing page and collecting their email addresses.
Essentially, this allows them to harness the popularity of YouTube while having full control over developing a relationship with the target audience. They can then sell their products to viewers “in-house” and collect a much higher percentage of the resultant sale price.
Key takeaways:
YouTube has over 2 billion monthly active users and a diverse range of revenue generation methods. While the platform has high revenue potential, most methods require a reasonably substantial following.
YouTubers commonly make money via affiliate advertising. They can also integrate their content with platforms such as Patreon to effectively fund new content creation.
Brand sponsorship is one of the most profitable ways YouTubers can make money. Industry standards vary, but a good starting point for any sponsorship negotiation is around $20-$30 per 1,000 views.
Blogging is a prevalent and well-established practice, with popular blogging platform WordPress powering many websites on the internet. While a few successful bloggers really make money, those who do usually monetize through affiliate marketing, Google AdSense (or other advertising platforms), sponsorships, memberships, or selling their own digital and physical products.
TikTok, owned by the Chinese tech giant ByteDance turned as among the most successful native micro-video platforms, and it became the go-to platform for millions of young users. Thus, the “TikToker” has already become the evolution of the “influencer” from platforms like Instagram. Those TikTokers make money in a few ways, such as monetary gifts, sponsorships, advertising agreements, affiliations, and more.
Online influencer marketing is a relatively new creation, but it has fundamentally changed how brands communicate with consumers. People with targeted audiences are now the focus of advertising efforts. Influencers can tap from small to larger audiences thus, giving companies another way to promote their products. Indeed, influencers make money by selling digital products via sponsorships and affiliations, brand ambassadors programs, and physical products.
Podcasts make money in several ways. The primary sources of revenues from podcasting come from affiliate marketing, advertisements (in the form of pre-roll, mid-roll, post-roll), sponsorships, selling your own products, or by using podcasting to sell consulting services. Podcasting is an effective marketing and distribution channel, and it can be integrated within a businessmodel.
Influencer marketing involves the marketing of products or services that leverages the popularity, expertise, or reputation of an individual. Influencer marketing is often associated with those who have large social media followings, but popularity should not be confused with influence. Influence has the power to change consumer perceptions or get their audience to do something different.
Instagram makes money via visual advertising. As part of Facebook products, the company generates revenues for Facebook Inc. overall businessmodel. Acquired by Facebook for a billion dollar in 2012, today Instagram is integrated into the overall Facebook business strategy. In 2018, Instagram founders, Kevin Systrom and Mike Krieger, left the company, as Facebook pushed toward tighter integration of the two platforms.
TikTok makes money through advertising. It is estimated that ByteDance, its owner, made over $17 billion in revenues, for 2019. While we don’t know the exact figure for TikTok ads revenues, given it counted over 800 million users by 2020, it is a multi-billion company, worth anywhere between $50-100 billion and among the most valuable social media platforms of the latest years.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
