How to Make Money on YouTube

When I told people my job was making content for YouTube there was really only one question anyone really cared about, “How do you make money?”  The answer is rather simple.

Generally there are 3 primary ways to make money as a YouTube Content Creator and then a few ancillary ways.

The first way creators make money is through YouTube Ad Revenue and YouTube Red.  Whenever someone watches a video and they see an ad the advertiser pays a fraction of a cent for that “impression”.  YouTube then splits that fraction of a cent with the creator.  Fractions of cents add up and you get your CPM rate, which is how much you are paid per 1000 impressions.  These CPM rates are determined by what advertisers are willing to spend during certain periods for certain types of content.  Content is ranked by quality within YouTube’s algorithm, and it is categorized based on what genre the content focuses on. (Tech, Comedy, News, etc).  Advertisers set their budgets and time periods and then whenever a video is about to play an auction is held within microseconds and whomever is willing to pay most has their ad shown for that slot.  This means that CPM’s vary wildly based not just on categories of content, but perceived value of content, and when the content is being played.  The end of the year, and during the election season generally sees significantly higher CPM’s than during January when many ad buyers have run out of ad spend. This is also why some creators with seemingly low numbers of views make more money than creators with exponentially more views.  The category of content is simply more valuable to ad buyers.

Additionally with YouTube Red membership fees are split with content creators based on if Red members watch the creators content.  How the math works here is a complete mystery, we just see how much YouTube will be paying us based on how many videos Red members have watched.

Beyond the Ad Revenue creators can find their own sponsors for content.  Creators create deals directly with vendors and so they get the full rate with YouTube receiving no cut.  Sponsored content can entail everything from making a video that is no more than an infomercial, to using a vendors products within a video the creator was already going to create, to simple things like shout outs during the video.  I used to charge vendors for a tweet length shout out during my 2 hour live shows.  How much you can earn through sponsorship has as much to do with your bargaining skills as it does the success of your content.  I knew creators with fractions of my reach charging multiples of what I did.  The difference was that they hustled to close deals and would bend over backwards for sponsors.  Personally I only ever accepted incoming leads, and would not budge an inch on what I offered.

The final standard way to earn revenue from YouTube is through Patreon and crowdfunding.  Patreon at this point has become a word as much as a name.  Just like Google, whether or not you use Google as your search engine you may say that you Google’d something.  Patreon is a platform that allows you to accept money from viewers either on a monthly basis or every time you produce a work.  To be clear Patreon is the go to platform for this, but you can just as easily accept money directly though PayPal.

Patronage can offer a surprisingly large amount of revenue. Last time I looked a channel called Secular Talk was earning $20K per month just from Patreon.  With patronage the only downside is that you do need to make sure your patrons understand what you will or will not provide.

These are the standard ways to make money as a YouTube creator and the ones I’d recommend.  Beyond these some creators have found success in offering merchandise, hosting events, and finding other ways to earn money from the brand that they have created with their channel.  To be clear these can be great ways to earn money, BUT they entail creators delving into entirely new businesses with their own logistical headaches.  Creating content is not the same business as selling T Shirts.  Talking to an audience of thousands through a web cam is not the same as gathering a few hundred people together and hosting an event.  These things can be done well, but unlike the first 3 ways to earn money require their own resources and mindset.

When looking to start making money from YouTube the most significant thing a creator needs to do is treat their channel like a business.  You don’t get paid for subscribers, and not every view is worth the same.  You can end up being famous, and bankrupt at the same time.  Although some creators find success within months I’d argue you should give yourself a 2 year time frame. Beyond that it would be wise to create a business around being a “creator” and not a “YouTuber”.  Build your brand across a few platforms, and try to own at least one platform outright.  Some of the most successful creators on YouTube right now came over from Vine.  Regardless of what you think of their content they are doing it right.  The platform should be secondary to your brand.  You may be tied to YouTube when you start out, but you should be finding ways to communicate off of YouTube as much as possible.

You too can be a YouTube Star… maybe… depending on your skills… a bit of luck… the mood of YouTubes viewers at the time… and how much of your soul you’re willing to sell. (And… so long as the whole platform doesn’t blow up as I expect it too…)

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