YouTube Creators Turn To Subscriptions As Advertising Revenue Implodes

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Written by Dana Sanchez
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YouTube creators are turning to subscriptions as advertising revenue implodes. The number of creators who no longer rely on ads for most of their YouTube earnings has grown by 40 percent. Image: Drawkit

YouTube creators are experimenting and earning money with alternative forms of income, no longer pinning their hopes and dreams solely on advertising as covid-19 hits the ad business, along with other parts of the economy.

YouTube parent Alphabet, the owner of Google, posted its first-ever decline in ad sales in the second quarter of 2020, but still exceeded expectations. Overall Alphabet revenue fell 2 percent at a time when other ad-driven businesses are hurting. YouTube ad revenue grew, but at a slower pace, in the second quarter, $3.81 billion compared to $3.60 million in 2019.

Not long ago, trying to charge viewers to watch your videos on YouTube would have been a career-ender, Bloomberg reported. YouTube is the largest ad-supported video portal on earth with 2-billion-plus users who love watching free music, late-night clips and how-to videos.

However, a growing number of YouTube creators are now making most of their income on the site by charging fans for subscriptions.

Advertising is still the main source of revenue for most creators. But in April, 80,000 channels earned money on YouTube from alternative sources, up 20 percent from March. Between January and May, the number of contributors who no longer rely on advertising for the majority of their earnings grew 40 percent, said YouTube chief product officer Neal Mohan.

“It’s important for our creators to have a diversified portfolio,” Mohan told Bloomberg.

Covid-19 isn’t the only thing affecting YouTube ad revenue. In recent years, brand safety scandals forced YouTube to stop ads on channels promoting hate speech and pedophilia. YouTube also inadvertently limited ads on thousands of less-offensive videos, depriving creators of their main source of earnings and pressuring them to look elsewhere.

YouTube creators can earn money several different ways — through advertising, subscriptions, donations, live-streaming features, e-commerce and YouTube Premium revenue. YouTube recently gathered all of those sources in one place that gives information to creators in the form of a new monetization metric called RPM, or revenue per mille, The Verge reported.

YouTube creators already use a standard metric called CPM — cost per mille or cost per thousand. RPM is more useful for creators who are trying to grow their channels and understand where their monthly income is coming from, according to The Verge.

CPM measures the cost of every 1,000 ad impressions before YouTube takes its share of revenue. RPM shows a creator’s total revenue (both from ads and other monetization areas) after YouTube takes its cut. This doesn’t represent a change to how much creators are making. Rather, it helps creators better understand where they’re making their money and how the revenue share breaks down.

The vast majority of YouTube creators are not famous enough to start a fashion line or land a Netflix show. A more realistic plan for economic stability is to get their most passionate fans — the top 5-to-10-percent of their audience, to subscribe.

British entrepreneur Jerry Dyer makes living filming videos of planes taking off and landing at his YouTube site, Big Jet TV. He has 85,000 followers and some of the hardcore airplane enthusiasts pay him $4.99 or $19.99 a month for access to special programming. Since December, his subscribers grew from 1,700 to 4,000, earning him about $14,000 a month after YouTube takes its 30-percent cut.

Dyer’s winning formula? He streams at airports for hours at a time. The first 20 minutes of his videos are free. After that, viewers pay.

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With more than 1.25 million subscribers, Nyma Tang is considered one of the 50 most successful Black YouTubers. She offers beauty tutorials, testing out the darkest available hues. Tang hails from South Sudan and has been on YouTube for four years.

Google has started promoting subscriptions and e-commerce as the next phase in YouTube’s growth story, according to Bloomberg. “What’s been nice to see is the role those products have been playing in light of all the uncertainty and challenges creators are facing,” Mohan said. 

Overall, ad buyers expect ad spending to decline 20 percent in the second half of 2020 compared to 2019 due to covid-19 economic impact, according to the Interactive Advertising Bureau (IAB). Despite the overall decline, digital ad spend is growing. Buyers expect it to be up 13 percent in the second half of 2020.