How YouTube Earns Money: YouTube’s Business Model & latest feature
We know you can earn money from YouTube. But do you know how YouTube earns money and how they are able to pay so many creators?
According to the latest revenue figures from YouTube parent Alphabet, in just the first nine months of 2021, YouTube generated $20.21 billion from advertising.
But how much of it is going in the profit i.e. how much money is YouTube actually making? The exact figures are unclear but let’s see what YouTube’s business model is.
How YouTube makes money?
The bulk of YouTube’s revenue comes from it’s proprietary advertising service, Google AdWords.
Just like when you put a query on google, Google tries to show you the most relevant articles first. But even before these articles, you might have seen related suggested pages from an AdWords advertiser.
These are the companies that are paying Google to show their company’s Ads when a user searches for a query revolving around their business.
The same way on YouTube, the advertisers whose ads keep coming in between the videos, these are the ones paying YouTube to show the ads of their business.
Advertisers pay Google each time a visitor clicks on an advertisement. A click may be worth anywhere from a few cents to over $50 for highly competitive search terms, including finance, business etc.
AdWords advertisements is included in almost all of Google’s web properties.
Any recommended websites you see when logged into Gmail, YouTube, Google Maps, and other Google sites are generated through the AdWords platform.
To get the top spot in Google advertisements, advertisers have to outbid each other. Higher bids move up the list while lower are most often not even displayed.
How has the business model changed?
The model itself was kind of similar before Alphabet acquired YouTube in 2006.
At that time, YouTube was struggling to survive. It also had some copyright issues which were not very welcoming for the advertisers.
With user-generated content flooding in daily, advertisers began to see too many videos of the wrong type of content.
Ad rates dropped as advertisers went back to search ads that reached the consumer more efficiently and effectively.
Thanks to some innovation within the ads themselves, the market for the ads has improved.
YouTube overlays allowed ads to be shown within the videos at different points of the viewing rather than just having a pre-roll ad, and they followed the embedded video around the web.
2. Subscription service
‘YouTube premium’ aka the subscription business is also a way through which YouTube earns money.
Initially, there was a monthly subscription to view an ad-free version of YouTube with additional exclusive videos that non-paying users can’t access.
In 2015 the company rolled out YouTube Red—a subscription service that allowed watching ad-free videos and listening to music without interruptions for $9.99 a month.
As of 2021, YouTube Premium and YouTube Music Premium offer a free one-month trial and after that, are $11.99 a month.
YouTube intends to come up with in-video sponsorship, which gives YouTube no revenue. The site is hoping to force brands into existing ad channels rather than have their YouTube stars work outside deals with the brands directly.
This might be a risky move but we’ll see if it happens!
Recommended: Who is the most paid youtuber in the world?
YouTube’s latest feature 2022
This feature is an experiment that’s only available to a small number of creators. We’re working to let more creators participate in the future.
YouTube has introduced a new feature of sharing clips. This way you can select and share a small portion (clip) of a video or live stream with others by clipping it.
Clips can be shared on social channels or via direct communications (for example, email or text).
How to create and share a clip
Clips are between 5-60 seconds long and are played on a loop from the original video’s watch page.
- Sign in to YouTube. You need to be signed in to create a clip.
- Start watching a video.
- Under the video, click the Clip . If you don’t see this, the video isn’t eligible for clips.
- A create clip box will show up.
- Select the section of the video you’d like to clip. You can increase (maximum of 60 seconds) or decrease (minimum of 5 seconds) the length of your selection by dragging the slider.
- Give the clip a title (max 140 characters).
- Click SHARE CLIP.
- Choose an option for sharing the clip:
- Social networks: Click a social network icon (for example, Facebook or Twitter) to share the video there.
- Embed: Click the Embed button to generate a code you can use to embed the video in a website.
- Email: Choose the email icon to send an email using the default email software on your computer.
- Copy the link: Click the COPY button to copy a link to the video that you can paste somewhere else, like in an email message.
Here’s a video they have provided to understand better:
YouTube’s overall revenue is definitely growing even if the profits are not increasing at the same pace.
Hopefully the company will find a way that will benefit the users and the company both.