Filling the Value Gap: Where are the YouTube Millionaires?

As online creators struggle with declining ad rates and fractions of pennies payments for streams, platforms and artist-entrepreneurs respond with new options.

During the closing keynote of the 6th annual Buffer Festival held on September 27 in Toronto, online creator turned entrepreneur Jack Conte threw up a slide that told the story that is the reality for many online creators. This particular slide was the earnings and engagement page from his Google AdSense account, which breaks down how many views his videos receive and how much revenue he receives. The news was not good. In exchange for 1,062,559 views and 1,919,583 minutes watched, his total earnings were estimated at $166.10.

These numbers probably seem out of synch with the tales you’ve heard about the self-made YouTube wealthy: the teens and twenty-somethings who have turned cameras set up in their bedrooms into global celebrity and uncommonly high paycheques. Those people do exist, of course, but they essentially make up the ‘one percent’ of the platform, with earnings many, many times those of the average YouTuber. In order to be part of the elite class of YouTubers making millions per year, millions of subscribers are required, often more than 10 million in fact, along with an output of 3 to 5 new videos each week, and a staff to assist with a volume of production which is not unlike that of a TV show.

Such a production approach can be a viable business for a small percentage of online creators, but, for the majority of people posting their work online, the setup is far more of a cottage industry. And because most creators don’t have millions of subscribers or the resources to hire production staff, Jack Conte founded Patreon, an online platform that facilitates membership-based financial support between fans and artists. The premise was simple. Like someone’s work? Make a monthly pledge.

In the five years since Patreon was launched, it has gone from zero patrons and artists on the platform to approximately 1 million patrons and 50,000 creators. This year, it’s on track to pay out $300 million to creators, thereby doubling the payouts made in 2017. A few dozen of these creators are reported to be generating six-figure revenues thanks to the platform. While not in that highest tier of Patreon-supported creators, Canadian podcaster Jesse Brown has built his Canadaland brand from a single podcast on media criticism in Canada into a network of shows, and he did so via Patreon, where close to 4,000 patrons pledge just over $20,000 per month to Canadaland, which supplements its Patreon revenues with advertising sponsors.

How creators and platforms are addressing the value gap

The term ‘value gap’ is usually used to describe the fractions of pennies that musicians have been recently receiving for streams on Spotify or YouTube, but it’s also relevant to online creators in general, who more and more are confronted with the challenges of an online marketplace that is oversupplied with creators—whether they’re writers, filmmakers, podcasters, comedians, beauty, fitness, and lifestyle bloggers, or musicians—and an advertising pie that can only get sliced so many ways.

As evidenced in Jack Conte’s slide showing a payment of just over $100 for more than 1 million views, the time and resources creators put into their work and the payments they often receive from the online platform are mismatched. To make things even worse, payments have been declining for some time, most profoundly during last year’s ‘Adpocalypse’—a boycott by advertisers who were unhappy about their ads appearing alongside videos they deemed inappropriate or otherwise not ‘brand safe’. The result was the removal of hundreds of millions of dollars from the advertising pipeline that provides payment to creators.

After the Adpocalypse

Though the worst of the Adpocalypse appears to be behind us, the days of creators making a living on YouTube supported solely by advertising dollars are largely a thing of the past. Multiple revenue streams are therefore a must, and YouTube has developed a suite of non-advertising-based monetization tools to help move creators beyond click-based revenue alone. In case you’re wondering how committed YouTube is to enabling business models outside of ad revenue sharing, the company now has an executive whose title is ‘Head of Alternative Monetization’. That executive is Rohit Dhawan, who gave the opening keynote at Buffer Festival’s Insight Series, a day devoted to the business aspects of the constantly evolving online content industry.

Dhawan plainly stated the following during the kick-off at the industry event: “My job is to maximize creators’ earnings.” And so far, so good. It has been reported that the number of YouTubers earning at least $10,000 per year is up by 35% year over year and that the number of creators in the six-figure range has increased by 40%, although the actual number of creators in each tier has not been made public.

Increased revenue possibilities / Increased feature integration

The path to more dollars in creators’ pockets is, thanks to the integration of merchandizing and ticketing directly into the platform, the introduction of subscription-based channel memberships along with exclusive offerings, and features such as Super Chat, a live and interactive chat that lets fans interact directly with their favourite YouTubers by purchasing chat tools such as emojis, placements, and colours to highlight their messages in the live chat stream.

Dhawan reported that 64% of creators who use the Super Chat feature double the revenue they generate through YouTube revenue. He also pointed to success stories such as Lucas the Spider, whose creator sold $1 million in merchandise in 18 days using the new integrated eCommerce feature.

Also integrated into YouTube’s offerings to brands and creators are functions usually carried out by third-party agencies. To streamline relationships between YouTubers and brands, YouTube acquired Toronto-based influencer marketing platform Famebit in 2016, bringing together tens of thousands of creators with over 10,000 brands. What separates Famebit from other influencer marketing agencies is its methodology for matching advertisers with content creators. Rather than auditioning creators based upon online work they’ve already posted on YouTube or other online platforms, the agency issues a request for ideas to a few hundred creators, out of which about 10 to 20 are selected by the brand for a campaign that often lives across various social media channels.

While YouTube’s ‘one stop shopping’ approach to these new features has turned into a valuable new resource for many, there have also been criticisms of a centralized system that has video distribution, influencer marketing and monetization via advertising, merchandise and ticketing all taking place under one roof. One skeptic of the new programs issued a mini-tweet storm on the hashtag for Buffer Festival’s Insight Series, criticizing YouTube for introducing new features that ‘create a deeper dependency’ between the platform and creators, while also shifting commissions from an array of third-party agencies back to the Google-owned site.

Whether you’re for or against the centralized services offered by YouTube they are now but one of several options available to creators looking to branch out beyond ad-based revenues. In addition to the crowdfunding of the likes of Kickstarter and Indiego or the subscription/membership model of Patreon, other platforms ranging from Facebook to Instagram, Twitter, and Snapchat are in the midst of adding longer form video to their offerings and will no doubt be experimenting with a variety of business models as their platforms are only as engaging as the content that lives on them.

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