The Economics of YouTube

Almost all of us are familiar with YouTube the Google owned video sharing platform, but not all of us are familiar with its beginnings and the impacts it had on the consumer-producer world.

YouTube which is now considered a monopoly in its field was founded by three PayPal employees, who ran the company from a small office, which was above a small restaurant, in a Californian city. From such humble beginnings, it has become so prevalent in today’s media landscape, such that around 500 hours of content are being uploaded every minute. YouTube did not stay small for long. By the end of the year, kingmakers Sequoia Capital had invested $3.5 million, followed by another $8 million alongside Artis Capital Management in early 2006. Venture capital was not the only source of interest in the company: in late 2006, Google, no less, came knocking. $1.65 billion in stock later, YouTube was a Google (now Alphabet) property. The main reason why YouTube has been able to beat other competitors is the unique and innovative features it serves to both the content creators and users both alike. While it was and still is a stock of user-created content, it is now widely used by brands as a platform for marketing, it is also used by the film industry to promote their interest and also by musicians and artist to release their art, it is also used in politics, for example, to host the debates in presidential elections for the US. Here are some quick statistics to show the dominance and wide influence of YouTube, There are more than 2 billion active users monthly, it was the most downloaded app in the year 2018, One billion hours of YouTube content is viewed per day, YouTube app is downloaded in more than 5 billion android mobiles. The statistics clearly show the marketing potential of YouTube.

Looking at the gender demographics of YouTube, we see that the YouTube world is fairly male-dominated, men spend 44% more time on the app according to data collected by open slate, they also found that in 51 categories of the content posted on YouTube, the males are the major viewers in ninety per cent of the categories. The below graphs show the female and male-dominated categories in YouTube, while the women are into fashion, cosmetics, and music, the men dominate in sports, gaming, fitness..etc.

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Looking at the age demographics, it’s not shocking that younger tourists tend to spend more time on the site. In summary, according to comScore information, YouTube has a huge audience, reaching 81.2 percent of Internet users in the U.S. YouTube drew 31.8 million users between the ages of 18 and 24 in March (98.3 percent of U.S. Internet users in that age bracket) who spent on the site an average of 10 hours, 15 minutes. For YouTube advertisers, buying beauty and fashion channels via Google Preferred — bundling the top 5 percent of YouTube channels for ad buys in any given vertical — is a good bet to target women efficiently, especially young teens and millennials. Beauty and fashion, according to OpenSlate, is a common category, with 582 million views per month across its top 100 channels.

How do people earn money on YouTube, this question intrigued me much as a child. Some of the ways are through google ads, product placement, and YouTube sponsorship.

• Google ads: Some people make money through the ads appearing before their videos on YouTube. YouTubers sign up through Google for an AdSense account that tracks how many impressions a video gets. An impression is counted as a viewer watches the video for more than 30 seconds at any time. AdSense revenue is based on the number of views shown during the video and the number of clicks on the advertisement. There is a 45-55 split policy in which 45% of ad revenue is kept by google and the rest 55% is to the content creator.
• Product placement: Payment of the service is another way for people to monetize content on YouTube. When a company pays the YouTube content maker directly to endorse an item and feature it in the video, payment for product placement occurs, generally speaking, the more people watching a video, the more it has value for an advertiser or sponsor. Therefore, it is likely to generate more revenue for the creator of the content. For people interested in benefiting from YouTube content, one of the most important priorities is to increase the size of their audience.
• YouTube Sponsorship: This is the thing all YouTubers yearn for, so what is sponsorship, it is when a brand invests in a YouTuber when the brand feels that the YouTuber is successful and reliable. The YouTuber may be paid by the brand to create a one-off video specifically about a product launch, a company event, a website opening, or something like that. Or, the brand sponsors the entire YouTube channel and then, in each video, YouTuber must recommend (or use) the product. The income a YouTuber receives from the sponsorship is variable depending on brand and content, but here is a rough idea. YouTubers earn from the brands for the pending video starting from $10 to $50 per 1,000 views anywhere, depending on the estimated number of total views. If the video hits or crosses 1 million views, YouTuber will make $10,000 to $50,000 anywhere.

But it’s not always a profit for YouTubers there are challenges additional to production costs, such as the average rate for pre-roll advertising is significantly lower than that for a traditional media channel like CNN, but at the end of the day if the YouTuber is able to gather a large base of viewers or subscribers, and get more views for their videos, the income they receive will be enough for a livelihood. In fact, the highest-paid YouTubers make more than 20 million dollars per year, which is no wonder why people are flocking to make money on YouTube.

In conclusion, we have seen the influence, and reach of YouTube in today’s modern world, how brands use the content to promote their interest, and how content creators make a livelihood from the ad revenue and also use it to improve and expand their content.