Video continues to become an important part of a well-rounded online strategy. As advertiser demand skyrockets and the means of consuming online content continues to evolve, more and more sites are starting to regularly produce video. While video monetization is still a relatively novel concept, the amount being spent is growing rapidly and there are a number of success stories already.
To put the video advertising industry in perspective, here are a few stats:
- Estimated gross ad revenue for YouTube in 2013 was $5.6 billion, with about $2 billion in net profit.
- 86% of brands plan to increase video ad spends in 2014.
- YouTube had almost 158 million unique viewers in January 2014.
- Americans viewed almost 27 billion video ads in January 2014, with time spent watching video ads equal to about 10 billion minutes.
Monetizing YouTube videos is actually very straightforward, primarily because the options for doing so are very limited (for now at least). YouTube content creators really have no choice but to monetize through theYouTube Partner Program, which is essentially Google AdSense for video content.
For now, YouTube content creators channels don’t have the option to sell their own video ads on their videos. As we’ll discuss more below, there is really only one decision to make: whether or not you want to allow specific types of ads to appear in your videos. From there, the strategy for increasing revenue becomes pretty simple: get more views of your videos.
Becoming a YouTube Partner
In order to have ads appear within your YouTube videos and start generating revenue, you’ll need to join the YouTube Partner Program. In addition to allowing for monetization via ads, this will unlock some useful tools as well (such as annotations within your videos). If you reach the point where your videos have logged 15,000 watch hours over a three-month period, you will get access to technical and strategic YouTube resources such as the YouTube Space program. (For a 60-second video, this translates into about 5,000 views a month.)
In order to most efficiently monetize your YouTube videos, you’ll want to have a YouTube Channel set up to keep everything you’re producing organized in one place. Once that channel is up and running, kicking off monetization is pretty easy. From the YouTube Partners page, click on the relevant link under the “Monetize your videos” section:
From there, you’ll have to agree to some terms of service and then will be given the option to select which type of ad formats will appear within your videos:
There are a couple points worth highlighting here:
- Publishers have the option to choose what types of ads will appear on their videos. If you’re interested in maximizing complete views and giving the best possible user experience, you may want to de-select the TrueView in-stream ads (these are the full screen video ads that let you skip through after a few seconds).
- Ads with product placements in them aren’t allowed under the terms of service. In other words, you can’t run YouTube videos that have ads already built into them.
Once you’ve gone through this process, you should see ads appearing on your videos almost immediately. The last step to get paid is to connect your YouTube account to an AdSense account (or set one up if you don’t already have one).
On a YouTube video page, ads can appear in two different forms (videos or standard banners) in three different places. Video ads (similar to TV commercials) will appear as “pre-roll” before the video starts playing:
Traditional banner ads also appear on many video pages. These generally come in the form of a 480×70 ad within the video player (#2 below) or a standard 300×250 rectangle in the top right of the page (#3 below):
The YouTube dashboard features an Analytics section that will summarize your earnings. Again, monetized YouTube accounts must be associated with an AdSense account in order to receive payment. All earnings are remitted through Google AdSense.
Maximizing Earnings
There are really only two factors that impact earnings from YouTube videos: the number of views your videos get and the cost per click associated with the ads shown.
Unfortunately, YouTube monetization is unique in that there are very few choices publishers can make and no real room for optimization. This differs quite a bit from AdSense (or other ad networks) where publishers can customize every aspect of the ad experience by choosing ad sizes, styles, and positioning within a page. (There are so many options for AdSense customization that we recently published 101 Ways to Make More Money with AdSense.)
With YouTube, there are no real opportunities to monetize more efficiently. Users can opt to allow TrueView in-stream ads (as shown in the screenshot above), but beyond that the monetization aspect is largely out of your hands.
In theory, you can figure out which niches offer the most attractive payouts using the AdWords tool’s CPC estimate as a proxy for earnings potential. For example, we see that the search term “New York hotels”:
Has a much higher suggested bid than does the term “Notre Dame football”:
In other words, a YouTube channel covering New York hotels would probably generate more revenue per click than a channel about Notre Dame football. Advertisers are willing to pay more for traffic interested in the former topic, since these visitors can translate into meaningful revenue.
There are some obvious problems with simply chasing CPCs. Many of the topics associated with the highest CPCs are extremely competitive, meaning that you’ll have a tough time getting your video seen. Moreover, it’s tough to create high quality, engaging videos on topics that you don’t know much about.
YouTube Economics
Making a few dollars of revenue on YouTube is easy; you can be up and running as a partner, pump out a few videos, and have your first ads appearing withing a day. The tough part is making enough money to support yourself full time. In a way, YouTube is a lot like professional baseball: a few stars make it big and get rich, but most toil in obscurity and retire without ever coming close to the big leagues.
Let’s put some more concrete figures around YouTube earnings potential:
- Most publishers earn between $0.30 and $2.50 CPMs from YouTube. (I.e., they make between $0.30 and $2.50 for every video 1,000 views; this tool can help you figure out revenue potential.)
- Some publishers are definitely getting rich from YouTube; the average of the top 1,000 channels is$23,000 of monthly revenue.
- According to Google, “thousands of channels are making six figures a year”.
- 30% of the YouTube videos account for 99% of total views.
It’s very difficult to track down updated information about the average YouTube video, but the reality is that most videos posted on the site get fewer than 1,000 views. Here are a few older studies showing the disproportionate allocation of YouTube views:
- The average YouTube video gets about 500 views, with 25% of total views coming in the first four days and most viewers watching less than 60 seconds. (2010).
- Only about 10% of videos get more than 1,000 views in their first month (2008).
- Half of all videos get fewer than 500 total views (2009).
In other words, it takes a lot of video views to make a meaningful amount of money on YouTube and the vast majority of videos published receive a significant number of views. Using the YouTube earnings calculator, a video with one million views might only make the creator $300 in total revenue:
That may be a harsh reality check for content creators who have big dreams of opening up a new revenue stream. But the fact of the matter is that only a very small portion of YouTube partners make more than a few hundred dollars in revenue from the program before giving up and focusing elsewhere.
Of course, there are other ancillary benefits to maintaining an active YouTube channel. Specifically, a YouTube channel can be a way to get your content in front of additional subscribers, boost your position in search results, and increase the time visitors spend on your site. In other words, the real money to be made with YouTube is indirect: it comes in the form of more visitors and a more engaged audience. We set up aMonetizePros YouTube channel not to get rich off of video ads, but to carve out a new platform to share our content.
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