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Where Does YouTube Get The Money To Pay YouTubers?

YouTube is currently the world’s largest video sharing website and also the second largest search engine. Over 400 hours of content are uploaded every minute and over a billion hours are spent daily on YouTube videos. 1.5B people visit YouTube each month {1). So many people rely on YouTube for their primary and secondary sources of income including influencers and celebrities. With so many YouTubers earning from YouTube, where does YouTube get the money to pay them?

How YouTube Makes Its Money?

It costs YouTube a lot to stay afloat. Think of the cost of hosting all those video files, paying staff and executives, and then paying YouTubers for their content. Does the money the platform make suffice in profit vs. revenue context? In 2016, YouTube’s CEO Susan Wojcicki, speaking at a Fortune magazine summit said YouTube was “Still in investment mode.” {2} However, in 2019, the platforms ad revenue grew by 36% which made up about 9% of Alphabet’s (YouTube’s parent company) overall annual revenue.{3} YouTube makes money – lots of it.

Here are some of the ways it does that.

Embedded Advertisements

Embedded advertisements make a major advertisement revenue stream for YouTube. There are different ways embedded advertisements work but they are generally played before the actual video starts. Some short ads are also placed in-between videos to generate income. For embedded videos, YouTube earns money from the advertisers on a views-per-ad basis. However, they pay YouTubers on the ads that viewers click through.

Video Search Advertising

YouTube gets money through sponsored advertisements. Sponsored videos show up in the search results when users search for some keywords. The advertiser pays YouTube according to the number of views the video gets after viewers click on the ad. This is called SERP advertising.

Landing Page Advertisements

A Landing page is YouTube’s homepage that opens first even without logging in. Advertising on YouTube’s landing page works like a banner style advertisement that can contain both videos and pictures which advertisers can use in various ways to tell their story.

Channel Subscription

The Channel membership feature allows YouTube Partners (YouTubers or Publishers) to engage on a deeper level with their fans. This way, they can earn more from YouTube beyond ad revenue. This feature works by allowing partners to add a “Join” button to their channel and video pages. This membership feature allows the creator to offer perks like discounts, merchandise, and special offers on official products, etc. to subscribers who pay a stipulated fee/month or year (varies for different countries). YouTube receives 30% of the membership fee paid by each subscriber.

YouTube Premium (YouTube Red)

Another way YouTube gets money is by monetizing people’s hatred for ads. This it achieves through YouTube Premium which is a subscription-based model. YouTube Premium provides a seamless, uninterrupted experience on YouTube, YouTube Music, and YouTube Gaming. The subscription cost for YouTube premium varies for different countries. {4}

Here are more perks YouTube Premium offers:

  • Ad-free videos
  • Access to exclusive YouTube Premium content
  • YouTube Music Premium access
  • Offline videos and songs
  • Background play when using other apps or when your screen’s off

Conclusion

While the majority of YouTube’s revenue appears to come from its advertising services, the platform also profits by reinventing itself and diversifying its revenue streams. Either the users are running a search for a business, subscribing to their favorite channel, or signing up for a no-ads experience; YouTube has found a way to monetize its proffered solutions.

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