Day: February 6, 2020

YouTube Has Decided to Share Billions in Ad Money with Creators

In recent times, Google after the acquisition of YouTube revealed the ad revenue of YouTube ads for the first time. And believe it or not, but the numbers are quite bewildering. Just last year, YouTube accumulated a total revenue of $15 billion and you won’t imagine how much of the profit goes back to its creators. Well, it might not be enough at a glance, but it sure is a lot once you compare it with rivals such as Instagram. Eager to take a look at how YouTube’s financial results are broken down by Google? 

Google’s Financial Report for the Q4 2019.

As per the report published, apart from just the $15 billion which YouTube earned from the ad revenue, it made a staggering $3 billion from paid subscription through YouTube Premium and YouTube TV. 

Ruth Porat, the current CFO of the parent company Alphabet revealed at one of the occasions, 

“We pay out a majority of our revenue to our creators.” 

And just in case, if we take her word for it than at the lowest, the marginal profit shared by YouTube with the consumers account for a total of $8 billion on individuals who are capable of hosting its lucrative ads.

The Clash Between the Titans

Though YouTube’s ad revenue spent exceeds $15 billion, it was still unable to parallel the numbers churned up by Instagram’s ad spent. A recent report published by Bloomberg confirms that the total ad spent on the Facebook-owned platform, Instagram was approximately $20 billion. Normally, I don’t delve in approximating who is better than who? But here’s how the two of the biggest companies marginalize their profits on ad spends. YouTube keeps 45 percent of the revenue from all the creators’ ad spends and gives a majority of its earnings back to the creators. 

However, the case with Instagram is entirely different. Instagram doesn’t directly payback to its creators. So here’s the thing, while Instagram is making a great fortune out of the ad revenue, it is not really returning enough back to its creators as expected. The only way Instagrammers have a chance to make a good amount on ad spends is by directly approaching the partnered companies. In fact, not until recently, Instagram didn’t even provide any sort of mechanism by which sponsors could track or analyze performance on sponsored posts. Creators were left with putting their faith in unsure third-party software.  

Albeit now, Instagram has launched a tool called the brand collab manager. The tool still does not provide any direct method of paying anything to the content creators directly. Taking a single perspective is still not the right way, because our research indicates that when it comes to profit reaping margins, even YouTube isn’t as perfect as it discloses itself to be. No wonder, the high-end YouTube content creators keep the lion’s share of the profits and make a good earning, but the mid and lower tier YouTubers are the ones swimming in shallow waters. They experience what you can term as the “adpocalypses” and that too happens once every year. During the “adpocalypses” major YouTube advertisers pull themselves out of the platform and it greatly affects the overall YouTube revenue. Since YouTube fails to earn from ad revenue, it doesn’t have much to pay to the mid-tier or low tiered content creators publishing their content. 

Adpocalypse is the time when independent content creators are denied paid ads in their videos. 

Our Take on the Matter

Either way, if you’re an average person seeking to start a business clearly dependent on reaping profits through ad spends on YouTube or Instagram, then it’s not a profitable strategy. One way or the other, both the companies still make a great profit on your published content irrespective of you knowing about it. 

My advice to YouTubers and Instagrammers is to work on a particular skill or innovate a product. By depending on ad spent, they might not be able to earn enough but marketing their own product/skill sandwiched in between binge-worthy published content will surely upscale their profit margin immensely. 

Do you have a product or service idea in mind that you always wished to work on? Share with us.