Skip to content

June 9, 2019

YouTube: Turn Off the Lights, the Party’s Over

by Adam Hardin

Was the YouTube Partner Program a viable way to make a career? When a machine is in the wheelhouse, probably not.

With the latest ad apocalypse (dubbed the “Voxpocalypse“), another large swath of YouTube content creators are finding themselves in the demonetization (and channel purge) list as YouTube cranks up their aggressive crackdown on content not deemed suitable for advertisers. Worse yet for some, the targeted deplatforming campaigns brought on by individuals caught in their crosshairs is a “taking a bull by the horns” approach to ensuring that major content sponsors are pulling out, decreasing their monthly income (we are ignoring whether or not this is warranted because I really don’t feel like going down that rabbit hole).

I’ve been on the Internet since 1996, starting with a 56K baud modem in the absolute remote wilderness of North Carolina and Internet Explorer on Windows 95. Back then, what content (whether it be videos, blog posts, images) people created were typically self-hosted on shared hosting services, such as GeoCities or Angelfire, or, if you were serious about your work, your paid hosting provider with a custom domain name. People made money off advertising networks that displayed banner ads on their sites. In some cases, they could do very well if the traffic was good (this was in the age before ad blockers became a thing); most of the time, webmasters made money by selling merchandise or asking for donations.

The YouTube Partner Program launched in December 2007. Since then, many have tried (and ultimately failed) to make a career out of YouTube. In the article 96.5% of YouTubers Don’t Earn Enough to Cross the Poverty Line, Study Finds by Daniel Sanchez:

[In the year 2017], the team at Information is Beautiful found that content creators only made $1,472 [USD] after 2.2 million video views. This year [2018], The Trichordist noted that the video streaming platform paid a paltry $0.00074 [USD] per stream, a slight uptick from last year’s $0.0006 [USD] rate. With the company’s recent update to its monetization eligibility policy, a new study has found these numbers will only continue to get worse.

It goes without saying that the lion’s share of revenue generated by advertisement revenue goes to the platform itself. Profitability, however, still remains a mystery. From the article Believe It or Not, YouTube May Spend More on Content than Netflix Does by Adam Levy:

If [Evercore ISI investment bank analyst Ken Sena’s] estimates are accurate, YouTube will account for approximately 5% of Alphabet’s total revenue in 2015. That percentage is expected to rise as YouTube grows faster than the more mature Google business. But compared to Google’s high-margin search engine and display advertising revenue, YouTube isn’t very profitable. The business has yet to generate bottom-line earnings, and it’s not clear that 2015 will be any different.

YouTube continues to invest in infrastructure, employees, and new products. Most recently, YouTube rolled out YouTube Red, which combines a full-fledged music streaming service with ad-free YouTube videos as well as original productions for $9.99 per month — the same price as Netflix and other music streaming services.

Eventually, YouTube will ease off the gas pedal and start turning a profit for Alphabet investors, just as Netflix will do for its investors. At that point, we might expect profit margins to climb to levels more in line with Google’s other major revenue sources. Last quarter, Alphabet reported an operating profit margin of 33%. At that rate, YouTube could add about $3 billion of operating profit to Alphabet in 2020. That’s about 20% of the company’s 2014 operating income.

That said, YouTube is going to put their own preservation interests first and foremost. What’s even more problematic for content creators is that YouTube’s biggest competitors–the traditional media–are keenly aware of the delicate relationship that YouTube has with its advertisers. Thus, when a hit piece comes out that could potentially paint the companies in a bad light, the algorithm is changed, videos and channels are tossed, behaviors are modified through demonetization, and YouTube tries to make nice with the old hat media by placing them front and center. Then you have people with an agenda who make waves, triggering another wave of demonitizations and channel/video removals. Then there are disputes between online personalities and journalists. Soon it will come to a point where so much as passing gas accidentally on camera will erupt in a mass exodus of advertisers.

To me, this just screams that people need to go back to what we started with: self-hosting, self-maintaining, and self-reliance. With the advent of cloud computing and scalability, it’s (theoretically) easier now to establish your own corner on the ‘net without the need to rely on a platform.

Of course, this doesn’t mean that large providers–Microsoft, Google, Amazon–aren’t immune to social pressure. But in this case, the content producer is also a paying customer, not a means to an end to generate advertising revenue.


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: