Understanding YouTube Revenue: Part 1

Written by - 24/10/2016

YouTube content creators are increasing in number by the day, and with an average of 4 billion YouTube video views per day and 6 million hours of video watched per month, you can bet it’s a lucrative business, if you know to use it.

Never before has the concept of the ‘personal brand’ been more relevant. YouTubers, Vloggers and Vine stars are the face of the internet in 2016 and rank highly alongside some of the highest paid in any profession. Swedish Vlogger Pewdiepie raked in $12 million pre-tax last year, and British creator Zoella is earning £50,000 a month from her 10+ million subscribers.

Just how does video content equate to such a high return? The simple answer is actually three things:

  • Ad Revenue
  • Brand Sponsorship
  • Merchandise

Let’s break these things down to their component parts so that we can understand exactly how each of them works.

Ad Revenue

There are currently 5 different types of advertisements that can be shown on and around YouTube videos:

Embedded Ads

These feature directly on the video play page and don’t interfere with the video in any way. They are primarily positioned to the right of the video and above the video suggestions list.

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Overlay Ads

These appear below a YouTube video around 10 seconds in as a wide display advertisement. These transparent adverts appear in the lower 20% of a video and are generally closable at any time.

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TrueView (Skippable) Ads

This advert type plays before featured content and allows the user to skip after 5 seconds if they wish, (you probably will).

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Non-Skippable TrueView Ads

These are the same as Skippable Ads, except they’re not skippable (See what they did there?) These are limited to max 30 seconds long.


Sponsored Cards

Similar to overlay ads, these can appear at some point during a sponsored video with an advertisement related in some way to the content of the video.

How it works:

First, an advertising company will approach YouTube aiming for a specific number of impressions (views) on one of their ads. A creator will then approach YouTube looking for a slice of the proverbial pie, by allowing them to place the advert in any of the above formats on their video to garner views from their audience. This is operated through Google Adsense so that creators can choose and monitor the types of ads that get attached to their videos.

YouTube will always go out of their way to ensure that any videos that have been monetised with ads do not own any copyrighted materials that are not owned by the content producer, or do not have express permission in the case of sponsored videos.

Through Adsense the creator has the ability to choose the types of ads that appear on their video but not the content of those ads. Ad content is selected algorithmically based on the channel’s audience and what YouTube sees as relevant to the individual video content. The more those ads are seen, clicked on or watched, the more the creator makes as a small percentage of the money originally given to YouTube by the advertisers. Just how much money is based on a number of things.

Income varies massively from channel to channel, and even then it will still fluctuate daily. A lot of that comes down to your CPM or ‘Cost per Mille’ (what is your cost per everytime 1000 adverts have been delivered to your audience). For example, if your CPM were £1, you would make £1 every time you gained 1000 views;

CPM = £1

1000 views = £1

10,000 views = £10

100,000 views = £100

1,000,000 views = £1000

10,000,000 views = £10,000

and so on…

However it’s still never particularly that straightforward as different types of ads generate different revenue. For example a 30 second advert that your viewers have to sit through is more valuable to an advertiser than a smaller box at the side of the screen that is far easier to ignore. This difference is fairly mysterious as far as actual income is concerned, and this is all assuming that viewers do not have any kind of adblocker installed. If this is the case then neither the YouTuber, YouTube, nor the advertiser have the ability to make any money, which for smaller content creators can make a significant amount of difference.

The reason CPM fluctuates is primarily due to the audiences you reach. If YouTube recognises that you are reaching a broad audience with your content, your CPM may be significantly lower than if you have cornered a large sector of a niche audience.

Advertisers also spend more money at particular times of the year. At Christmas there may be a large amount of ad money up for grabs, but by the time January rolls around it could all dry up, leaving a lot of full-time content creators high & dry.

There are ways of working with agencies to help you get more out of your ad revenue. These agencies are called Multi-Channel networks, and represent digital-first talent to make the most of their income and subscribership, as well as managing brand sponsorships, which I will be expanding in Part 2.

View Part 2 Now >