YouTube Monetization: Ultimate Guide

YouTube Monetization

YouTube has always provided artists with expansive opportunities for monetization. In its early days, creators could integrate direct ads from their partners, having YouTube manage the delivery of impressions and track views. It also offered the ability to sell video on demand. While complaining about low royalty payments from YouTube, the industry never took advantage of any of these tools. Getting paid for views was simply the easier way. Though those tools are no longer in play, YouTube has replaced them with much better ones.

YouTube monetization is broken into three platforms, each with unique models. You have:

1. YouTube.com - Ad Revenue, Memberships, Merch, Micro-payments

2. YouTube Music - Ad and Subscription Revenue

3. YouTube Premium - Subscription Revenue

Let’s break it down.

1. YouTube.com: Ad Revenue, Memberships, Micro-payments, Oh My…

Ad Revenue

YouTube.com pays you a cut of ad revenue for each view. If someone watches your video and an ad plays, if the ad costs an advertiser $1, you get $0.55, and YouTube pockets the remaining $0.45.

If the viewer skips the ad after 5 seconds (and let’s be honest - everyone skips ads, especially when they're trying to vibe through a playlist), nobody gets paid. Not you or YouTube.

While you can earn more per view than per Spotify stream (Spotify's payouts are like 0.003 cents per stream), most music fans skip ads. Unless you’ve got a strong relationship with your fans, like a loyal YouTube audience who wants to support you, ad revenue for music isn’t a gold mine.

Memberships

Creatives can offer different perks in exchange for monthly fees from viewers, like exclusive live streams, early access to videos, exclusive chats, custom stickers, and more. The group Blackpink did a ticketed live performance on YouTube using its membership feature. Buyers got access to the live-streamed concert and replays, plus other membership perks for a month. I’m almost certain many of the people who bought tickets forgot to cancel and continued to pay the monthly fee for months before noticing.

Super Chat

Super Chat is a feature reminiscent of Twitch and its micro-payment system, but more direct. On Twitch, users buy bundles of graphic images that represent fractions of pennies that can be given to streamers live as a show of support. Super Chat allows users to pay straight cash. They click the button to give, select a dollar amount, and pay. It was stated during Vidcon in 2019, after the initial launch of the feature, that some YouTubers were earning as much as $400 per minute through Super Chat donations. And, it had become the primary source of income for over 20,000 channels.

Super Thanks

While Super Chat is exclusive to live streams, Super Thanks has the same functionality but runs across on-demand videos. Under each video, there’s a button viewers can click to give as a thank you for its creation.

Merch Shelf 

YouTube allows creators to integrate their online stores and sell products directly on YouTube. They can link to specific products within videos, and there’s a visual display underneath each video calling attention to the products.

Affiliate/Shopping

Artists can link to products spanning across a multitude of retailers, from Apple to Walmart, and earn affiliate revenue from any product in each store. A song about cherry lipstick can link to cherry lipstick and get a kickback from each purchase.

Additional opportunities

Artists have tools such as the description box, pinned comments, the Community Tab, Cards (slide-out in-video displays), and End Screens (Calls-to-Action that display at the end of each video) that they can use to sell and direct traffic anywhere.

Drawbacks

Monetization on YouTube.com requires artists to reach a threshold of 500 Subscribers and 3,000 hours watched. Not only are artists restricted from monetizing through ads, memberships, etc., but they’re also restricted from linking externally in-video using Cards and End Screens. There’s no ability to immediately monetize outside of directing traffic off-platform through the description box and pinned comments.

YouTube’s monetization threshold is difficult for artists to reach because views are scattered across separate properties of the platform. An artist may have videos through VEVO, but the watch hours of those views don’t count toward monetization. They may upload albums on YouTube Music through their distribution company, but the watch hours of those songs don’t count toward monetization. Watch hours from views driven by Google Ads don’t count toward monetization.

Driving traffic off YouTube can lead to the suppression of your videos because it will drop the amount of time your viewers spend consuming media on YouTube.

The revenue split on memberships and donations is 70/30, with YouTube taking 30%.

YouTube Music: Stream Like It’s Spotify

YouTube Music works like Spotify. All the revenue from ads and subscriptions gets dumped into a big pot. Your payout depends on your share of total streams.

If you made up 1% of all streams on YouTube Music that month, you get 1% of the pie. And unlike YouTube.com, you actually get paid for every stream, whether someone skipped an ad or not.

Drawbacks

YouTube Music isn’t as widespread as YouTube.com. So if your fans are international, some of them might run into roadblocks trying to stream your tracks. Less reach = less revenue. Additionally, most people who use YouTube for music use YouTube.com and not YouTube’s music app. There’s no way to reach the YouTube music audience, even by advertising directly on YouTube.

The Artist-centric model being forced on DSPs by Universal Music Group will likely find its way to YouTube Music at some point. This will bring a monetization threshold to the platform, complicating revenue generation.

YouTube Premium: Time Is Literally Money 

YouTube Premium doesn’t pay you per stream. It pays you based on how long people watch your videos.

So if you’re running a podcast, talk show, or anything that gets people watching for hours, you’re gonna love YouTube Premium. If people spend more time watching your content, you get a bigger slice of the subscriber revenue.

Music videos don’t last that long. Three minutes, maybe five. You're not about to rack up premium hours like Joe Rogan. So while the money's good for long-form content, music isn’t really built to cash in here.

Drawbacks

It’s not beneficial to the way music is consumed. Songs are short, making it difficult to rack up watch time hours.

Music is competing with podcasts and live streams that go on for hours.

Content ID

Fingerprints of your songs are created, and YouTube is scanned for matches. Once a match is established on unauthorized third-party content, the video is claimed, ads may be placed on it, and the revenue from those ads will be paid out to you. Distributors and independent service providers like Audiam manage Content ID, and it comes with a price tag.

Drawbacks

Rights holders must sacrifice a percentage of their revenue, often between 20% and 30%, to join Content ID programs. Only channels that are in the Partner Program and whose videos qualify for advertising are sure to be monetized. A channel, including your own, that uses your music but isn’t in the Partner Program, may, but is unlikely to have ads run across its videos. Artists, even if utilizing Content ID, may still have to work to qualify for monetization.

MCNs - Multi-Channel-Netowrks

MCNs are like YouTube labels. Your channel would be signed to a deal with a larger entity. This would allow your entire channel to be monetized. The benefit of joining an MCN is that it can get direct advertising at higher rates and distribute the revenue across its partners however it chooses. VEVO functions like an MCN.

Drawbacks

Channels in MCNs are now subject to YouTube’s monetization threshold, so it’s not a workaround, as it was previously.

You’re giving total control over your channel to a third party that can hide certain metrics like your revenue totals, demonetize and monetize videos at its discretion, and more.

Most MCNs are using it as a backdoor to gain a percentage of revenue from a multitude of channels. It’s a quantity over quality thing where they hope some of the channels generate enough revenue for their cut to amount to something significant. They don’t get direct ads, they don’t aid in marketing and promotion, they don’t do anything but take a cut.

Takeaway

It’s clear that the best pathway to monetization is through YouTube.com, but it’s not without challenges. Artists must refrain from distributing their releases through a distribution company to YouTube. Those releases must be manually uploaded directly to their channel, where the watch time will count toward monetization. The revenue generated by YouTube isn’t subject to split pays you may have arranged with your distributor, so that will have to be handled manually. Mechanical royalties will also have to be handled manually, as YouTube pays 100% of royalties for all rights to the uploader.

You’ll notice there’s no input for ISRC codes or UPCs when uploading videos to YouTube. This means videos of your song uploaded to your channel won’t technically count as music. Views won’t count toward charting positions or be recorded as sales for certification by the RIAA, which gives out plaques for Gold and Platinum selling releases. The alternative is to use Content ID, preferably with a distributor that allows whitelisting.