Friday, March 2, 2018

YouTubing: Not What It Used To Be

A quick follow up on the post from earlier this week on earnings in the creative economy in these days of a new breed of celebrities who ply their craft online and build their following from the ground up. We tend to hear a lot about social media influencers making thousands per tweet, stars of Instagram with major brand deals, and of course professional YouTubers pulling in the big dollar, often without leaving their room.

As is the case in most marketplaces, especially those with low barriers to entry such as digital entertainment, a few make a lot and most don't earn much. Increasingly the way to make it on YouTube, which is the focus of this post, is for creators to use their online fame as a jumping off point, for activities such as books, personal appearances, merchandise, sponsorships, and product endorsement.

Because the revenue coming in solely from advertising running against the videos,  even for those with millions of views per month, is simply not enough. The CPMs (the amount that advertisers pay to reach 1000 viewers) for online ads have been declining on YouTube for most creators, a combination of a huge amount of inventory on the supply side (i.e. the 400+ hours of video being posted every minute to the site), as well as companies' concerns about brand-safe content moving many advertisers to premium YouTube inventory that tends to be produced by well-known creators and is generally considered family-friendly.

For the average YouTuber the squeeze is being felt on both sides, then: Competition from all the new creators wanting to get in on the action, and a flight to safety by the brands and companies with the biggest digital advertising budgets, such as P&G.

A study conducted recently by Professor Mathias Bartl of Germany's Offenburg University illustrates just how challenging it has become to make a living on YouTube alone. Bartl's analysis showed that even if you're in the top 3% of creators on the platform, and that means the bottom end of the tier averages about 1.4 million views per month, your net income from advertising (after YouTube takes its 45% cut) would be just under $17,000. (And at the highest end, where the likes of Smosh, Lilly Singh, and a bunch of game commentators whose names you don't know if you're over the age of 22, yearly incomes can run from $10 - $20 million, with ad revenue often being just one component.)

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Not only that, but as you can see in the chart above the percentage of videos getting the lion's share of the views on YouTube has gone from about 40% in the early days of the site to about 3% more recently. And finally, for some additional context, there are roughly 16,000 channels on YouTube that receive in the neighbourhood of 1.5 million views or more per month, and that's out of a pool of millions of channels. Being in the top 3% is seriously hard work. Where you really need to be in order to make a living on YouTube is in the realm of the 2000 or so channels with 1 million subscribers. That seems to be the new level of success required for 'big enough'.

Related Posts:

Online Creators and Cash: Some Numbers From The Creative Economy
The Industry of YouTube: A 2017 Snapshot