The Real Money Behind YouTube

Austin Sprague

In my past two blogs I talked about the great social media platform YouTube. I spoke about various professions in the company and in another blog I specifically talked about how YouTubers make their money on the platform. While the YouTubers have the platform to thank for their careers, many people do not think about how the actual company makes money off of their platform. In this blog want to outline the business and economics of YouTube.

For starters YouTube was created in 2005 by three college grads that wanted to be able to upload, view, and share videos on the web. Like most people they were following the market place model and wanted to turn a profit on their creation. They had a good amount of success because after 1 year of being in the market they had nearly 100 million views a day. As they began to grow the popular company, Google was looking to make a big purchase. In 2006 Google announced that it was going to buy YouTube for over 1 billion dollars. Google wanted to form a conglomerate with YouTube so they were able to offer more.

YouTube Founders

With Google and YouTube working together they were able to conquer more and pull in more people than ever before. Even though this was true YouTube alone only pulled in around 4 billion dollars in 2014. That is not nearly enough money to make a profit. In John Vivian’s book The Media of Mass Communication he speaks about revenue streams. He states that media companies can only make money two ways. The first is advertising and the second is sales to media consumers. That is exactly what YouTube is doing now a days. YouTube allows their viewers to monetize their videos in order to make profits. YouTube benefits off of this because they receive the same money from the advertisers. YouTube is making money on every monetized channel, not just one. The have been able to adapt and make more money on ads due to market pricing and technology improvements.

YouTube and Google advertisment revenue

In addition to advertisements YouTube has created another form of revenue. They are trying to master the form of micropayments and subscriptions. YouTube knows that we all hate ads which is why they have no given us the option to now get rid of them for a small price a month. This is just one feature of YouTube Red which can be yours for one small payment of ten dollars a month. YouTube Red is tapping into vertical integration with all of its new features. YouTube Red is offering new movies and TV shows that are only accessible to YouTube Red users. In addition to this they are offering new music and offline sharing capabilities. YouTube is really trying to tap into the market and bring as many users in to maximize their profits. They are getting very good at turning a profit and not just surviving.

YouTube has turned to Vertical Integration to boost profits

Sources:

CNET 

Wall Street Journal 

Investopedia

The Media of Mass Communication by John Vivian

 

Show Me The Money

Austin Sprague

In my last blog I talked about the wonderful life of YouTube professions. Vloggers and other stars push content out onto their channels in hopes that people like and view their content but how do they actually make any money? It is possible on YouTube to have over 100 billion views on all of your videos and not make a penny for doing it. This is because making money on YouTube is not that simple. Views in no way equals money in the bank. Are you shocked? I certainly was when I found out this information for the first time.

It’s all because of this fancy thing called advertising and monetization. According to John Vivian, “advertisers spend 2.4 to 2.9 percent of the gross domestic product to promote their wares.” That is a large sum of money for many companies. Advertising is the way that companies are able to brand their products and make a name for themselves. With one in two people in the United States going on YouTube, it is an amazing way for advertisers to reach large numbers of people and audiences. Even though this is true Advertisers can be tricky. Advertisers have turned to buzz marketing and sponsored content to also help supplement their strategies. Many people nowadays do not know if the videos on youtube are trying to tell them something or just sell them something. Youtubers will get paid to talk about products or drop hits in their videos to get people thinking about certain ideas or brands.

Before a so called YouTuber can make any money on YouTube, they have to make an agreement with YouTube to monetize their channel. Monetization simply means to allow advertisements to be run before a given video plays. Even with the Youtuber’s videos beginning with advertisements they still have the possibility to not make any money at all. See advertisers want results and they want their products or messages to me seen.

The advertisers got creative and decided to push two types of models. The first model is the Cost per Click. The advertiser will only pay the Youtuber if someone physically clicks the advertisement. The second model is cost per view, which simply states that the advertiser will only pay the Youtuber if the viewer watches the advertisement for 30 seconds or half the ad. Both models have their pros and cons but is all based on viewer engagement.

Everything is based on viewer engagement! 

I personally never watch half of an advertisement or click on the advertisements but someone certainly is. The top salaries on YouTube average around 8 million dollars a year on YouTube. Someone of my favorite Youtubers that I watch every day and have around 800,000-1,000,000 views on each videos daily make around $150,000-$500,000 a year.

Sources:

The Media of Mass Communication by John Vivian

Social Blade

Twitter

TV Guide

Video Power

Tobacco Control 

Youtube Professions

Austin Sprague

Imagine yourself in the year 2004. Britney Spears was very popular and the movie Napoleon Dynamite had just been released. If you wanted to watch a funny scene from the movie or watch Britney Spears’s latest music video where would you have gone? You can’t look on YouTube because it hasn’t even been created yet. I have no idea where I would have looked besides waiting for it to come up on the TV. YouTube wasn’t created until 2005 and has now become one of the primary ways to create and share user made content.

YouTube has become a social media empire in this day and age. With no limits to who can post and upload videos, it currently boasts around 1 billion active users a month according to Google Inc. While most active users do not produce content on YouTube, there are many people who seen this form of social media as their calling in life. Everyone who wants to make a living on YouTube does something different though. One of the most popular careers on YouTube is Vlogging. Vlogging is very similar to blogging but instead of text they produce video of their lives.

Can you imagine one billion?

Some of the most popular vloggers have millions of followers and subscribers that keep their job stable. There is a mutual symbiosis where the YouTube stars need the viewers to make a living and the viewers need the content they produce. I watch Casey Neistat’s Vlog each and every day because I love his content and I love how me motives me to do more with my life. I can see how vloggers can have different effect on people. While I personally love the vloggers opinions and ideas I feel like they are telling me more about what to think about rather than what to think. This falls in line with the agenda-setting theory which states just that. On the flipside I could see others people being stuck with the hypodermic needle that injects the opinions and viewpoint right into the viewers.  While vlogging is very popular, many other careers on YouTube include comedy, how to and lifestyle channels.

Casey Neistat Vlogging

YouTube really brings out the idea of demassification. Many YouTube stars have been able to produce content that relates to a specific topic. From this many people from topic will begin to look at these stars for answers and entertainment. The users are able to give feedback to the youtubers immediately in the comment sections which benefits the youtuber by finding out the content the users want. This is especially important because of the marketplace model. They are all trying to produce content people like so they can make the most amount of money possible. If they do not produce content the viewers like they will not have a job and cannot make any money on YouTube. Some youtubers have to go as far as producing up to 20 videos a week to make a decent living and satisfy the needs of all the viewers. Additionally, pre exciting companies and agencies use YouTube to promote their products and offer tutorials. The IRS has taken it upon themselves to create videos to help out taxpayers to file their taxes. While this is not a specifically a profession on YouTube, companies had had to hire people to produce all of these videos to put up on YouTube due to the convenience of video sharing Youtube offers!

Sources:

Huffington Post 

The entrepreneurial vlogger : participatory culture beyond the professional-amateur divide

New York Times 

YouTube: Online Video and Participatory Culture

IRS

The Media of Mass Communication by John Vivian