THE ECONOMICS OF YOUTUBE Wilf LaValette

THE ECONOMICS OF YOUTUBE

As the world has become more technologically advanced, people have been able to make careers online and most notably: careers as YouTubers. The influence of YouTube is astronomical with around 2.5 billion monthly logged-in users, 500 hours’ worth of content uploaded every minute and around 1 billion hours of content watched per day. This goes to show just how big of a site YouTube is and the gigantic size of its market.

Many YouTubers start as normal young adults with a very normal life and begin their career by making videos in their bedroom; however, within a few years they can become millionaires with their careers branching out from YouTube into Music and even starring in Movies. So how is money made from YouTube and how did the content creators get so rich? A YouTuber’s main source of income is advertisements. When a YouTube channel is deemed popular enough (over 1,000 subscribers and 4,000 hours of watch time withing twelve months) it can join the YouTube Partner program in which it has the ability to monetise its videos, this means that before or during a video, ads will appear for viewers. Depending on the number of times the advert is viewed, how long it was viewed for and how many clicks the advert itself receives determines how much the advertisers will pay. YouTube then takes 45% of this revenue and gives the other 55% to the creator in question. Therefore, the more views a creator receives, the more revenue they get. However, in recent years advertising revenue for many YouTubers crashed following a series of ‘Adpocalypses’. These happened as YouTube shifted towards promoting more ‘Family Friendly’ content as they realized the huge potential of a far greater audience from younger children, therefore they penalised YouTube channels who swore or touched on topics which were not deemed ‘Family Friendly’ enough. Their videos were demonetised and revenue plummeted. Moreover, due to controversial actions by huge creators such as PewDiePie and Logan Paul, many advertisers such as Coca Cola and Pepsi left the site thus leaving many creators in ruins. YouTubers then had 3 options: 1) Leave the site altogether 2) Specialise in specifically family-friendly content or 3) Branch their influence to create Merchandise, spread to other platforms or seek Brand Deals. Nowadays, many YouTube channels are a whole franchise with Merchandise stores which thousands buy from, Music careers in which some reach the charts and even fast-food chains. Many YouTubers also feature in adverts both on YouTube and actual TV which goes to show just how broad the influence of YouTubers is becoming. YouTubers, and social media influencers in general, meet the same decisions to do with their content as firms do with goods and services. For example, they must choose between specialization and diversifying their content as well as quality or quantity of content. With these ideas considered; YouTube channels can be seen as firms, the individual creators as workers and videos as the goods they produce in the microeconomy of YouTube. As we move to the future, many more microeconomies from social media will be created, earning money from social media may cease to be something done by a select few and rather become a viable career path and social media will have greater macroeconomic impacts.