How YouTubers Make Money

August 8, 2020

Why they're all driving a Tesla.

It's often a slightly shadowy part of the internet - how much are YouTubers actually making? How do they even earn money? This is a quick overview on how YouTubers' pay their bills and how much I'm earning at the moment.

The standard business model has several verticals, some of which are more profitable than others, some of which scale incredibly well. We'll take a YouTuber called Kander as an example.

Matt Kander at the booth at TwitchCon
A YouTuber in his natural habitat, warming up his facial muscles for a prime Thumbnail capture.

Affiliate marketing

There are two types of affiliate programs, the "This video is sponsored by Squarespace" kind, and product links.

The first is when a company, like Squarespace gives a creator a referral link to their product. When one of their viewers sign up to the service with that link, Kander will receive a small commission. It's a win win for both parties, as oftentimes they'll bundle this with a discount or a free month. If you don't like the product, that's cool you can skip forward 30 seconds and continue on with the video.

The second kind comes in the form of product links- when Kander recommends a product, they'll include a link to Amazon, B&H or some kind of online store. These links have trackers on them that tell website X that they sent you there. When you buy a product, Kander will get a small % of the sale. It's not a lot, but when you have a channel with hundreds of videos all with affiliate links it slowly adds up. Some of these cookies will also stick around for 24 hours, meaning anything else you purchase will be attributed to them.

If you really want to support a creator, you can also funnel all of your amazon purchases through their affiliate account. It's a simple, free way to offer support.

Affiliate links are a great way for creators to monetize, typically it's 'set and forget' and scales very well. I generate around 10,000 views a month on my channel and that brings in between 20-50 USD a month through affiliate links.

Ad Sense

You know those ads that play before you watch a video, that's what we're talking about. When Kander decides to monetize a video, YouTube will match that content with an ad, and will serve that prior to a video playing. This is a very hands off approach for the creator, they choose to monetize and YouTube does all the rest. There are some restrictions to this - your content must be advertiser friendly. This means no swearsies, no controversial topics or anything that would be inappropriate for an advertiser to be associated with.

Philip Sheppard - composer of Detroit: Become human on stage at TwitchCon
Having fun and making money - one of the panels at TwitchCon

The amount of money generated through this method can also change depending on a few factors. The type of content your produce, the location of your audience, Put yourself into the shoes of a money management software called Freshbooks. You identify that the audience who would be most receptive to this  type of product (read get the most conversions) are those interested in personal finance and money management. Naturally you want your ads placed infront of content about finance (most likely viewers 18-35, working full time, disposable income, interested in earning more money or saving). You don't want your ads placed in front of Minecraft videos where the average age is 8-16, not working with a weekly allowance of $5. The more specific the content type, the higher the advertisers are willing to pay. These rates are different depending on the country that you're located in. Take into consideration as well, you can make a very nice video, but you only get paid if people actually watch it.

Digital Products

This is where things start to get very interesting. Digital products can add a significant amount of revenue to Kanders bank account. Due to the nature of Youtube, it's essentially a search engine optimized for Video. If you have a hobby such as Photography you might look up "How to color grade a photo for an Autumn look". You find a video that you really enjoy and upon further investigation find out that this person's entire channel is dedicated to photography. You subscribe, and over the course of a few months start to trust their opinons on photography. One day they announce they're selling a LUT pack (a pre made filter that you can apply within photography software) that will allow you to achieve a similar look to their images. It costs 20 dollars, you're sold.

This is the power of digital products. You can engage with a YouTuber, they provide value to you (for free) and when they come out with a product you like, you're more than happy to purchase. Why? Because over time they've built up your trust by providing you consistent, highly valuable content for free. They've earnt your trust and you also might just want to support them for all the value they've provided so far.

Sponsored posts

With an online presence or personal brand, the amount of eyeballs on your social media accounts can be extremely valuable. Even more so if you actually have an engaged following that 'likes' your content, comments on it, is genuinely excited about the stuff you make. Companies who have products that may resonate with your target audience are willing to pay you money to promote or make your audience aware of it's existence. Social media personalities that utilize this method of income are typically branded as 'Influencers', that term has a certain stigma associated but like it or not, this method of advertising works.

These sponsored posts can also be bundled with an affiliate link to further incentivize the poster to make a quality post. This is very common across instagram, less so on YouTube due to the time intensive nature of video production.

Sales funnel to their full / part time profession

This ties in with digital products. When you establish yourself as a brand, or an expert in a particular field this presents an excellent marketing opportunity for people to be exposed to your services. Take photographers - they produce content around photography, gear reviews, tutorials on specific types of looks or types of photography - weddings, food, portrait, real estate. Having that kind of exposure gives potential clients an excellent portfolio of work, as well as the confidence that this particular photographer knows what they're talking about.

Patreon / Crowd funding

YouTube is a tough gig, especially for those just starting out. A lot of the above streams of revenue take years to build up to a level that's actually self sustainable, let alone profitable. Many creators opt for crowd funding to allow them to create content, especially in the early stages. Viewers can subscribe to a creators patreon to support them directly, typically in tiers that offer a number of increasing benefits. This could be access to a discord channel, monthly QnA's, behind the scenes footage and tutorials. It really comes down to how much the viewer is willing to support and what the creator can offer as an incentive.

That's it. There's really not too much magic behind it, but here's a deep dive into how this all works.

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