YouTube’s Numbers Problem

Over the past two weeks since leaving YouTube I’ve been doing a lot of math.  It’s not fancy calculus or trigonometry, but rather good old basic math.  Two plus Two equals… A SHOCKING AMOUNT..!

Whenever you end one project and move on to another there is a moment of elation.  You are excited for the new, and you can finally admit how tired you were of the old.  You have a glorious few days or weeks of time when it feels as if the entire world has been lifted off of your shoulders, and this lasts the exact amount of time until you receive your latest mortgage bill.  When looking down at that piece of paper with a few too many digits in the due now box you realize it’s time to get back to reality and figure out how the new project is going to pay enough to satisfy the bank.

So I’ve been doing a lot of math.  Not complicated math, rather important math, and to tell the truth the numbers tell a very hopeful story.

Back when I started the video project as in 2009 video hosting was extraordinarily expensive.  The cost was so high I wish I had a screen shot from the time just to prove how ridiculous it was.  I decided to build my own servers and host them in a colocation data center because it was the only way to even think about making the numbers work.  By the time I had enough metrics to be able to estimate scale out cost I realized it would be $20,000-$30,000 per month.  I was stuck because viewers did not want to pay for online content, and video delivery cost was way beyond non trivial. This is the point when YouTube randomly sent me an invitation to upload long form content, and through inertia I ended up with a very profitable channel.

The issue for YouTube now is that Ad Revenue has sunk to brutal levels, and sponsors have gotten very finicky and cheap. The numbers to make a YouTube channel work off of ad dollars is becoming harder and harder. Curiously at the same time video delivery costs have plummeted, and viewers are far more willing to pay for content they find valuable.

The numbers I’m looking at now are that Vimeo charges me $50 for up to a 5TB of storage and unlimited high quality streaming. They also allow me to restrict embeds to specific domains, and allow me to hide my videos on Vimeo’s main site so I can control how viewers are able to see my content.  At the same time I still have 100 subscribers to (previously paying $5 per month.

Looking at total infrastructure costs to be able to support a video site that can have 10,000+ members comes in at around $100 per month. (Vimeo + Hosting + Domain Name + SSL + etc…) which means I can have a paid membership site where $5 per month per member makes sense.

$5 isn’t much, but 1000 members at $5 per month comes to $5,000 per month or $60,000 per year. Even with payment fees and such that means for every 1000 paying members it comes to over $50,000 more or less of profit. At 2,000 members it would put me over $100,000 per year, and at the mind boggling thought of 10,000 members that would be $50,000 per MONTH.

Now if you look at my YouTube channels the primary one has 840,000 subscribers currently and the secondary one has 125,000. If I can scrape off somewhere between 1-10% of those subscribers to come to Failed Normal that makes a real business!  This is a business that will not be at the whim of an algorithm.  This is a business that cannot be felled overnight by and Adpocolypse or Microstopped. This is a business being paid for by the members so I don’t have to give one iota of a crap about pandering to vendors.  This is a business… …

For me this is a good day!  I have something to sell again.  I have freed myself of the shackles of 20 masters and can now focus on only 2.  What do I want, what do my viewers want? (Vs. on YouTube… What do I want… what do the advertisers want… what does the referral algorithm want… what do my loyal viewers want… what do the idiots who make up the mass of my CPM want… what do PR people want…)

This is also the reason I’m concerned for YouTube as a platform.  As video delivery cost plummets, and people are more likely to pay for valuable content why shouldn’t good creators jump off of YouTube?  Why deliver hundreds of thousands of views for a dew dollars, when you can focus on a few thousand loyal viewers who will bring in thousands?  Why deal with the troll armies that YouTube turns a blind eye to, when you can focus on communicating with the viewers who are looking for understanding and not a fight?  In the new commentary #RESIST culture a pay wall not only provides revenue, but also acts as a block to people who LITERALLY are only looking to create anger.

On YouTube another 10,000 or even 100,000 subscribers really doesn’t move the needle much one way or the other. On my own platform another 1000 members literally pays the mortgage for a very nice condo in South Beach.

I don’t know if Failed Normal will succeed at the end of the day, but at this point I’d argue content creators should be looking at deploying their own platforms vs. YouTube.  The numbers and the everyday reality of being a creator just make this now seem like the best way to go.

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