how-do-youtubers-make-money

How Do YouTubers Make Money?

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.

Understanding YouTube Business Model

who-owns-youtube
Acquired by Google, in 2006, for $1.65 billion, YouTube is now worth many times over. In 2019, YouTube generated over $15 billion in revenues from advertising alone. YouTube is part of Google (now named Alphabet) and as such, it is owned by the main Google’s Alphabet shareholders and it is the fastest-growing segment for the company.
how-does-google-make-money
Google has a diversified business model, primarily making money via its advertising networks that, in 2019, generated over 83% of its revenues, which also comprise YouTube Ads. Other revenue streams include Google Cloud, Hardware, Google Playstore, and YouTube Premium content. In 2019 Google made over $161 billion in total revenues.
youtube-advertising-machine
As part of Google (Alphabet), YouTube contributes to Google advertising revenues. Advertising is the primary driver of Alphabet’s Google’s revenue, and it added over $15B.
youtube-competitors
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.
how-does-vimeo-make-money
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 business model, not based on ads but rather on memberships and OTT video services.
how-does-tiktok-make-money
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-business-model
Instagram makes money via visual advertising. As part of Facebook products, the company generates revenues for Facebook Inc. overall business model. 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.
how-does-twitch-make-money
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
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:

  1. A simple video reviewing the product.
  2. A video recommending a product or service.
  3. 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.

Read Also: Google History, Google SWOT, Google Organizational Structure, How Does YouTube Make Money, How To Use Google Sheets.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"