Making money through YouTube has never been easy, especially for content creators with smaller audiences. It’s been a push/pull struggle between content Creators and YouTube for years but now it may finally be taking a turn for the better.
YouTube’s Revenue Model
YouTube makes its money by drawing large audiences to its video streaming platform and then showing those audiences ads placed on landing pages, sponsored placements in search results, and embedded videos on channel content. Creators get paid a 55% revenue share per 1,000 views of the embedded ads on their channel. Sounds good right? Unfortunately, this business model has created a chain reaction of problems for both Creators and YouTube.
The Problem for YouTube: if the audience doesn’t watch the ads, no one gets paid. Even though their Creators are attracting millions of views on their videos, no one can figure out how to get those viewers to watch those ads. The problem is, ads are annoying. More and more viewers are using ad blockers to stop videos from being interrupted constantly by ads. The less viewers watch the ads, the less money everyone makes and the more ads are embedded by content creators, desperate to make up lost revenue.
The Problem for Creators: you only get paid when viewers watch the ads on your channel, from beginning to end. That means, even if you get one million views of your video, if you only get 1,000 views of the of the ad in its entirety, you only make about a single crisp dollar for your trouble. As a result, Creators are getting more and more creative in their videos in an attempt to draw bigger and bigger audiences.
The Problem for YouTube: with the sheer amount of content that’s being uploaded to YouTube every day, it’s impossible for YouTube to effectively monitor its quality. As a result, some brands have been pulling away from spending their marketing dollars on YouTube for fear of their brand being associated with something inappropriate. To help them reduce the number of videos to curate for advertisers, YouTube recently changed its partner program to say if you want to monetize your channel, you need to have at least 1000 subscribers and 4,000 hours of view time in the last year. This is devastating news for smaller channels just starting out.
The Problem for Creators: since the revenue sharing isn’t enough to sustain most content Creators (if they qualify for any at all), they are forced to diversify revenue streams through solutions such as third party sponsorships like unboxings and product reviews. These product endorsements are often “off mission” in terms of what viewers are looking for on the channel and can conflict with the paid advertising for the video. For example, imagine Nikon pays YouTube for their ad to be embedded in your photography video where you are reviewing a new product from Cannon. Neither brand is pleased with that outcome.
The Problem for YouTube: they do not get a cent of the Creator’s product sponsorship deal so they responded by cracking down on graphic overlays for product sponsors and tried to encourage brands to make sponsorship deals directly with them. The Creator’s cut of this deal is the standard 55%. I’m no mathematician, but that’s a lot less than 100%.
The Problem for Creators: need to look to even more creative ways to monetize without relying on the unreliable revenue from YouTube. With no minimums and no reliance on showing ads, fan funding platforms like Patreon.com explode as Creators begin monetizing their channels with funds directly from their fans. Giving the Patreon service a mere 10% of earnings versus the 45% YouTube charges, Patreon is a no brainer.
Adapt or die
Like all things online, when you hit a wall, the solution is always to adapt.
If businesses and individuals don’t rid themselves of old thinking and adapt to new environments, they get left behind. Consider SONY spending millions in response to Napster and other online music piracy trying to make it impossible to copy songs from their CDs. What’s a CD you ask? Exactly.
Digital evolution occurs at lightning speed. YouTube content Creators are adapting by launching fan funding programs on Patreon. YouTube is adapting by putting marketing muscle behind their improved YouTube Premium ad-free monthly subscription service. This is great news in the push/pull game. Does this mean that YouTube and Creators have finally carved out a truly symbiotic relationship? We believe it does!
Why YouTube should love Creators using Patreon
Unlike its response to independent third party sponsorships, YouTube should love Creators using Patreon to fund their channels because:
- It means the Creator can dedicate more time to producing content for YouTube
- It means the Creator is less likely to be seeking third party sponsorships independently of YouTube.
- Content Creators can show ads on their videos in addition to running their Patreon program. It takes nothing away from YouTube’s revenue model.
- Patreon supporters are exactly the type of consumer they need for YouTube Premium, their ad-free premium monthly subscription service. Working with these content content Creators to promote their premium service is a win-win.
If you are a YouTube content Creator and you aren’t using Patreon, you are simply not getting paid what you are worth! Not sure how to use Patreon to make money on YouTube? Register for the free webinar, MONETIZE YOUR PASSION, to learn more.