In this article, I’ll give you an overview of how YouTubers make money, starting with the typically smaller revenue streams and working up to the larger ones (though how much creators earn from each of these income sources can vary wildly)
Ads
The first thing people think of when they think of monetizing YouTube is earning ad revenue through the YouTube Partner Program. After you’ve reached 1,000 subs and 4,000 watch hours, you’re eligible to get 55% of the revenue that YouTube earns from the ads shown on your video.
The cool thing about this is that you don’t have to lift af finger. YouTube does it all for you, so you can just sit back and watch the money roll in.
The bad news is that it’s typically not a lot of money (though it can be). I’ve personally never earned more than $1,000 in a month from ads, but then again, a friend of mine is earning around $9,000 a month from a channel that he hasn’t uploaded to in 3-4 years now. To get there, he made about 600 rewatchable videos, and he’s still getting millions of views every month. A single one of those videos accounts for about half the views, so there’s also a lot of luck involved.
So what determines how much money you earn from ads? Unfortunately, it’s a bit of a black box. You earn an amount from every 1,000 views, but that amount depends on how much advertisers are willing to spend to show their ads to the audience you attract. You, unfortunately, don’t get to choose which ads are shown on your content, so you can’t directly impact how much you earn per view. Last time I checked, the average RPM was about $2 per 1,000 views, which is about what I earn from my videos. In some niches, you make more money than others. If you make content about tech or finance, you can perhaps earn $10-$15 instead, while video games content might earn you less than $2.
That’s a pretty big difference. Generally speaking, if you make content aimed towards people (or businesses) who have money, you’ll earn more than if you make content for people who don’t have money, because advertisers are interested in reaching people who can pay for their products and don’t want to waste money on reaching people who can’t.
Sponsorships
Sponsorships are where most YouTubers earn the bulk of their income. You make a deal with a company and record a small segment (typically 60-90 seconds, but it can also be a full video – a review, fx.) about their product. You embed that segment in your video, and they pay you money or give you product samples in return. You’ve probably seen (and probably skipped) tons of these.
It’s one of the easiest ways to earn money. It has a pretty decent earnings potential, and you don’t have to do much to get started, which is probably why so many creators rely on it.
When I was first starting out on YouTube, I heard that once you reach 10,000 subscribers, sponsors will start reaching out to you. And lo and behold, a mere four hours after I reached 10,000 subscribers, a company contacted me to make my first sponsorship (it might’ve just been a funny coincidence). In any case, you don’t actually need to have 10,000 subscribers to get sponsorships, but you’ll likely have to work more to find them.
That’s not to say that subscriber count is the most important factor here. If you can reach the right audience for the right company, they’ll usually be willing to pay to access that audience.
Most of the sponsors who contact me will offer me their product in exchange for a sponsored segment. I almost always say no, because it’s simply not worth the time I’d have to put into creating the segment, and here in Denmark, we’re also required to pay tax on the value of a sponsored product.
On the other hand, I’ve written a sponsored segment for a YouTuber I worked for, which, combined with a newsletter entry, paid $4,000. I think he had around 50,000 subscribers at the time, but the audience was a highly relevant group of professionals, so it was worth it for the company.
Though your subscriber count isn’t the determining factor for how much you’ll be paid, it can have an impact on the sponsors. Some are simply not interested in paying creators who have fewer than 100,000 subscribers, even though subscriber count isn’t as big a factor for how many views a video will get as it used to be
In my experience as a small creator, bigger sponsors will have a formula that calculates how much they’re willing to pay for your video, based on the average number of views of your previous five videos or something along those lines. But it’s always worth negotiating even so.
Occasionally, companies will offer you payment combined with an affiliate commission, which we’ll look at next.
Affiliate links
Affiliate links are links in your video description or your comment section where you refer your viewers to products or services offered by third parties. When a viewer clicks one of the links and signs up or buys something from that link, you get paid a percentage of the price or a fixed amount.
Amazon is a big player in the affiliate space, simply because they have a lot of products and a pretty easy system to get started with.
You simply sign up, find some products, get an automatically generated affiliate link, and add it to your video description or comment section. When a viewer clicks your affiliate link and buys something (not just the product you linked to) from amazon with a certain time frame, you get a small commission (around 2% in my case, but certain categories pay more). I don’t earn a lot from Amazon. Just enough to buy a couple of books on Kindle every year, but that’s also because I really haven’t put any effort into it – the products I refer to are generally cheap with a low commission. So if I was a clever man, I’d find expensive products with a high commision and make product reviews on YouTube.
Amazon isn’t the only player, however, and if you can find something more relevant for your audience, you can earn a lot more money. You can find subscription-based software companies that will pay a fairly high commission (20-30% percent is not uncommon) for a signup AND pay you for every month the person keeps their subscription. That can add up to quite a lot. A friend of mine earns $1,500 monthly recurring revenue from one affiliate service, even though he doesn’t go out of his way to promote it. It just really synergizes well with his content, and it’s a good service.
It can be a bit of a double-edged sword to use affiliate links, because you can lose your credibility if you end up promoting mediocre or even bad products/services because they pay a high commission.
So Far, So Good
It might have dawned on you that all of the activities you’re doing are, in fact, marketing: You’re using your content to sell products. So far, we’ve seen how you can earn money from promoting other people’s products. The second part of the article will shift towards promoting your own products and services. Stay tuned.