Youtube’s Unique Monetizations and its Effects

Ranking in as the second most visited website in the worldsecond most visited website in the world (right behind its parent company Google), Youtube is one of the most influential websites in the world.  Over 300 hours of videos are uploaded onto Youtube every minute and over 3.25 billion hours of video is watched on Youtube monthly.  Since its start on Valentines of 2005, Youtube has been pushing the envelope of delivering mainstream entertainment in a non-conventional method (at the time).  The website has been increasing its revenue since its formation and is paying its content creators, “Youtubers” a premium as high as seven figure salaries.  How does Youtube manage to pay all of its content creators while still driving up profits?  Here’s a timeline of Youtube monetization:

 

August 2006 – Participatory video ads and brand specific channels introduced

August 2007 – InVideo Ads introduced

December 2007 – Youtube Partner Program launched (salaried Youtubers)

March 2008 – Youtube analytics tool launched

October 2008 – Click-to-buy e-commerce platform launched

November 2008 – promoted videos launched

November 2008 – pre-roll ads launched

January 2009 – homepage ads go from 1 to 7 formats

August 2009 – Individual video partnerships launch

November 2009 – skippable pre-rolls launch

December 2009 – video targeting launched

March 2010 – Youtube mobile ads launched

(SOURCE: Youtube 5 Year)

Youtube has found a way to monetize on a free content service and has set the precedent on how many video streaming services make money.  However, the history of how Youtubers monetize their videos was intentionally left out of the timeline.  The timeline progression of Youtuber monetization and partnership has been pivotal in shaping the content that is being produced at the time.

The first type of Youtuber monetization was through AdSense and the number of views.  Today, AdSense is still used for revenue but Youtube has moved away from the total number of views as an adequate method to pay Youtubers.  The number of views for a video was very easy to abuse in multiple ways.  The first way was “clickbait”, where a ridiculous title or provocative thumbnail was posted on the video to pique the viewers interest.  One Youtuber had provocative picture on everyone one of her uploads while the actual video was nothing but blank (cannot link due to not safe for work nature) and made up to 8,000 dollars a month.  The next way was the use of viewbots and 5 star bots.  Viewbots were cheaper than the money made from the increased view count until Youtube began checking for viewbots (this is why old Youtube videos were stuck at 301+ views for a day).  Five star bots were bots who would rate the video in order to increase the popularity and visibility of the video.  Every video on the front page of Youtube would do substantially better just due to the exposure.

Following these reoccurring problems, Youtube switched to a viewing time based monetization, AdSense revenue, and subscriber monetization.  Youtubers would make money based on how long a video has been watched for instead of click counts.  On the surface, this seems like a good way to combat click baiters but it has had one of the biggest impacts on the content produced by Youtubers.  Many high production videos and animated videos are less than 10 minutes long but take exponentially longer to make than multiple other types of videos.  However, under the new monetization policies, the short, high quality videos would struggle to make a sustainable living.  Many Youtubers talked about the detriment of this policy and a Youtuber by the name of “RubberNinja” explains it clearly.  Today, Youtube videos consist of video game playthroughs, toy review videos, and vlogs.  These types of videos can easily generate footage and take a substantially less amount of time to edit.  For many gaming and review channels, uploading 3 to 4 videos is not unusual compared to an animator who would upload a video every two weeks with only 1/4 of the time length.  With the newer generation incoming with iPads and iPhones, the new demographic of viewers under 13 years exponentially increase the success and popularity of gaming and toy review channels.  Personally, my brother only watches these types of channels like “Evantube” and “Pewdiepie”.

youtube pic 1.png

Ironically, RubberNinja’s last video on his channel for over a year until he came back

Today, Youtube has finally moved into the realm of paid subscription with its new service, “Youtube Red”.  Youtube Red provides subscribers exclusive content from their favorite Youtubers with no advertisements.  Youtube is directly challenging streaming platforms like Netflix and Hulu by creating a replacement for cable with completely new content (Netflix has original shows House of Cards and Stranger Things).  However, many wonder today if Youtube Red is really a success or just a fad.  Currently, Youtube Red does not provide enough content for people to stay subscribed long term.  The only benefit of Youtube Red past its content is its ad free videos and the ability to lock your phone on the Youtube mobile app (there are ways to get around it anyways).

Personally, I think if Youtube wants to fight against titans like Netflix they will need to fix their monetization structure to reward high quality videos without making people subscribe.  Youtube’s freemium model and the ease of access for video creators is its strong suit, so alienating some of its content creators to benefit a niche community (vlogs, gameplay, etc) is not sustainable.  Youtube doesn’t need to create full seasons of shows, but it needs to be more about the high quality content and less about the memes.

6 comments

  1. francoismba · ·

    I enjoyed your thorough timeline on how YouTube has changed its monetization structure. I didn’t realize the company had moved away from number of views, however, the viewing time based monetization seems to also have many pitfalls. Also, I don’t see individuals purchasing a subscription for YouTube because people are already accustomed to free videos. I agree that the only benefit of YouTube Red would be that you can lock your screen while still using the application. It drives me crazy that you cannot lock your screen with the original YouTube app. Who would YouTube target with its new content?

  2. jagpalsingh03 · ·

    I thought this was a great post and I know that many current popular YouTubers are growing frustrated with way YouTube tackles monetization. The sheer amount of content, ranging from professional-high grade videos to your neighbor’s little brother’s 30 second video of gibberish make it difficult for the company to legislate terms that are effective for everyone. Like you said, the rise of Netflix, Hulu, HBO Now, etc doesn’t bode well for the company moving forward either but I don’t think having a premium service is the way to go. I could never see myself paying to access content of any YouTuber and like @francoismba says, only the benefit of locking your screen while still using YouTube app would make me think about a purchase. Regardless, I trust the employees over at Google and YouTube to figure this out because YouTube is simply too big to fail.

  3. Austin Ellis · ·

    Very interesting post. It seems like a seriously complicated problem to adequtely compensate Youtubers for their work. With all of the ways to fake views and votes as you mention, and those who put a great deal of production into short videos, it seems very difficult. I agree that a subscription program is not the best solution, as most of us do not care enough to pay for YouTube when adds are only a minor inconvenience. Interested to see what happens going forward.

  4. Awesome post! I think you captured the majority of ways YouTube is monetizing, or attempting to as they go forward. Most of YouTube’s profits come not from subscription, but advertising. Besides the evolution of the way they advertise as you depicted in the timeline, they have also evolved the structure of their advertising model, charging a premium to many companies for different advertising packages or promises; I think this combats what you said about “fix(ing) their monetization structure to reward high quality videos without making people subscribe.” They offer an upgrade to advertises from the AdWords or TrueView model, and within each of these models the more popular keywords and the largest influences (or high-quality, view-generating content) comes at a premium. Therefore high-quality content is rewarded in the sense that advertisers are paying to display or pre-roll to such videos. This definitely does not tackle the problem YouTube Red is facing, especially if there are no advertisements. There may be a trade off there, to ensure monetization of the service consumers will have to choose ads and not paying for the subscription or subscribing to no ads (Spotify model?) otherwise the YouTubers making the content and the videos being provided will have no way of receiving compensation.

  5. emmaharney21 · ·

    Interesting post! I think we all often wonder if these tech companies are worth their valuation. The follow-up question is “how do they even make their money?” You did a great job of outlining how YouTube has been able to do that over its lifetime. I am interested into what prompted them to introduce YouTube Red? Was it their desire to make more money, customers complaining about ads, an opportunity to compete with Netflix? I am not sure of the answer but I think understanding this will help to clarify how they will position themselves as a company going forward. You may be interested in this article Forbes posted comparing and contracting YouTube Red from Netflix or Hulu http://www.forbes.com/sites/abigailtracy/2015/10/21/how-youtube-red-compares-to-netflix-hulu-and-more/#5043fb1112a3 I personally think that they will need to do a lot more to combat these giants in terms of television and movie streaming. While that may be true I do not think we should underestimate people’s desire to watch the most recent viral trend or keep up with their favorite YouTube star. Not to mention YouTube offers something that has been central to our entire course, content creation and sharing. YouTube has social capacities that Netflix does not and maybe this should be making Netflix nervous. Great post!

  6. Thoughtful post. Google has always faced challenges monetizing YouTube content. I wonder if it will ever get figured out right.

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