Tuesday, April 2, 2024

How revenue streams work for popular YouTubers

YouTuber revenue

Are we finally past the days of looking down on YouTubers? The phrase is now in the Oxford English dictionary. According to a survey, when asked “what do you want to be when you grow up,” a YouTuber was the most-used response by American kids. And even more, thousands of these so-called YouTubers are now making a living off the platform.

So rather than turning up our nose at YouTubers, perhaps our time is better suited discussing how they’ve leveraged the platform to make a full-time living. After all, YouTube is a more stable way to make money online than, say, trading cryptocurrency or gambling at the best betting sites.

Branded deals

Contrary to popular belief, ad revenue is usually not most YouTuber’s main revenue driver. In most instances, it’s actually brand partnerships and/or sponsorships.

You see, attention is one of the most monetizable assets in the world — right up there with most specialized skill sets. YouTubers with high subscriber counts and long audience retention time on videos have shown they can hold viewers’ attention just as well, if not better, than traditional media formats like a television program or radio show.

Big brands with equally-bid budgets are willing to pay a premium to collaborate with these YouTubers to highlight their product or service. Not only that, but most YouTubers have very defined audiences.

Let me give you an example. Say you’re a brand like Tide. It would make sense to partner with YouTubers that speak directly about home cleaning — so long as they’re not doing the Tide Pods challenge. Viewers watching that type of content are naturally interested in the cleaning sector already. Contrast that with a daytime television show, where you can only HOPE that watchers are stay-at-home parents that happen to clean.

YouTube, and the Internet at-large, has made hyper targeting ads much more feasible than analog media. Owned by Google, few platforms have as much user data at their disposal than YouTube. We can argue if that’s good or bad for users, but for advertisers, this is a pot of gold and part of the riches are transferred back to YouTubers that want to partner with them.

Ad revenue

Alright, let’s talk about ads. As you know, YouTube sells A LOT of ads. It splits that ad revenue with monetization-approved YouTubers — Google keeps 45 percent, creators make the other 55 percent.

However, the ad rates differ greatly from YouTuber to YouTuber. There’s a metric Google uses to measure payouts and it’s called cost per mille (CPM). This figure puts a dollar amount of money a YouTuber earns on every 1,000 views to their content.

This is where differences arise and it starts with subject matter inside the video content. For example, advertisers for investment brokers pay a higher premium on YouTube. That’s expected since their clientele is more high-income and there’s a lot of lifetime value to gain out of them.

Therefore, a YouTuber whose niche is personal finance would have a higher CPM than, say, a YouTuber who reviews movies. Simply put, the business market for finance is significantly higher than film, which is reflected in the ad rates and payouts.

Affiliate links

Ever notice how YouTubers drop a plethora of links in the description of their videos? It’s especially common on tech reviews.

Welp, the motivation behind dumping these links is, you guessed it, money. Most of these links are affiliate ones, which has a unique tracking code on it associated with the creator. That means if you follow the link and proceed to buy the product, the YouTuber will be credited with the sale. Thus, they’ll earn a percentage of the transaction back from the website you purchased on.

This commission comes at no cost to you — only the retailer. Almost every big-name store has an affiliate program where YouTubers can apply and generate custom links from. And similar to ad rates, the commission earned by YouTubers varies by the product. Pricey items like a camera pays a higher percentage than a cheap ‘ol reading book.

Between sponsorships, ads, and affiliate links, YouTubers have multiple streams of revenue they can bank on to keep them afloat. So how about we stop making fun of them now, huh?

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