How the YouTube Creator Economy Works

I can't believe you didn't put a CuriosityStream/Nebula sponsorship on this video.

It wasn't mentioned, but one of the other main sources of income is Patreon. It's crucial for creators that make long-form/less frequent videos. I don't think any of the (smaller) channels making 1+ hour documentaries every 2-6 months would be able to do it off of AdSense and sponsorship alone.

I had never thought about this in so much detail (eg full value per view). Thanks for breaking it down Sam!

No joke, at VidCon I had literally pondered “huh, what would it be like for Wendover to make a VidCon logistics video?“ As a smaller(ish) creator who had access to that elusive Hyatt, VidCon really felt like two separate parallel events, one for the larger creators and big brands, and one for everyone else. Kinda understandable given how past VidCons sort of turned into YouTuber petting zoos

It's also worth mentioning that when a creator signs a deal with an ad agency, they are typically paid a fixed amount based on the number of views they think their video will get before it's even published, and not the actual number of views the video ends up getting. The view estimate will be agreed upon by the agency and the creator beforehand, and it will usually be a lower-bound estimate because there are consequences if a video under-performs. For example, if a video doesn't hit the view target within 30 days of publishing, then the creator might have to do another ad for free in a future video (often called a "make-good"). On the other hand, if a video over-performs and greatly exceeds the view target, then the creator will still only be paid based on their initial estimate specified in the contract. This a win-win scenario for the advertiser because they effectively get extra free advertising regardless of how the video performs. It's especially easy for new creators to be taken advantage of, because it can be extremely difficult to predict how many views a video might get without a ton of experience, and so they are far more likely to settle for a lower number (and therefore less pay). So here's my personal anecdote on this. I signed my first ad deal with an agency 3 years ago when my channel was only 1 year old and I had only produced 10 videos. Since I did not have a lot of analytics history, I agreed on a view target of 75,000 views, which seemed reasonable based on the performance of my previous videos. However, this particular video quickly got picked up by the algorithm, gaining over 3 million views in the first month, and is currently sitting at just under 7 million views today. So in the end, I was only paid for 1% of the views I received on that video, and the advertiser got nearly 7 million free impressions for their product. All I got was a "good job" from the ad agency, and then they offered me the exact same rate going forward for my next video. Needless to say, I am no longer working with this company. Lately, I've seen some companies offering "bonuses" for videos that exceed expectations, so perhaps things are now shifting to be more equitable for creators. However, it's still important to recognize that these agencies are just businesses that are trying to make as much money as possible, and some of them will try to take advantage of you if given the opportunity. It's just something that I think people need to be cautious about, especially if you're a young or inexperienced creator on the platform. If you want to turn your YouTube career into a sustainable business, then you really need to develop your business skills just as much as your creative skills.

You're so right about those parasocial relationships with content creators, Sam ol buddy!

I went to every Vidcon from the second one to the tenth and also every Playlist Live from 2-10 as well. I watched the scene change from being people and YouTuber-based to companies and brands-based and then finally tik tok and brands with youtubers sprinkled in. There was something magical about those early years. I wish there were a creator-based event in London though. But perhaps those days are in the past.

Game Grumps is mostly funded by sticking two fingers into the coin return slot of arcade machines and hoping for the best.

You missed one major income source for some creators: amazon affiliate links. I've seen entire channels based around "rating" rooms/setups and then providing affiliate links for EVERYTHING in the description, pushing viewers to amazon where they can get a cut out of ANY sales made.

100% of my ad-sense, super chat, super thanks, etc. goes directly to charity.

While short form content is very very much up in the air, super long form (livestreams) is still undecided. As someone dead center in the middle of it, platform wars are definitely happening between YouTube Gaming and Twitch right now for the space. If YouTube can replicate Twitch's monetization strategy & make their livestreaming experience better, we might see a bunch of platform switching--which is absolutely phenomenal for creators since Amazon & Google are in swift competition to make the best space possible to create content on.

Dang this stuff about inexperienced creators being ripped off hits close to home.

2:50 This is also because a person watching finance videos signals that they both want to enter economics but doesn't really know it yet. This means they're willing to spend more money in places more educated and experienced people won't, which makes the amount of money they can get from the person incredibly high. This pushes up demand and therefore the RPM. This is also why you see so many 3-minute ads with people and whiteboards in front of finance videos, because if they appeared in other genres, the viewers would either not be interested enough in finance to spend money or simply know better.

Man, the whole section on merch made me realize why Linus tech tips works so hard on their product lineup, they get to keep all the profits on that while making money off their own advertising in their own videos

Never in my life have I been so excited to watch the sponsorship portion of a YouTube video

Absolutely brilliant breakdown that will really resonate with a lot of smaller creators. Give them clarity they rarely find.

2:22 "Served to audiences with particular... interests." Puts up a video of a plane cockpit. I see what you're doing here, Wendover.

I enjoy watching Fact Fiend's "How Not To Do Business" series. It's interesting to see how strict the contracts are, and how small the payments to the creators can be.

This is great stuff. I don’t believe I’ve seen a video that really discusses the economics of YouTube creators as in depth as this.

Great video. Some of this stuff I didn't even know even though I've been in this biz for awhile now. One thing I always tell small creators who are first getting sponsorship offers is DON'T LET THEM SCREW YOU OVER, because ad agencies absolutely will screw you over if they can. They are able to take advantage of creators because most of us are just happy to be getting money for our work at all. It's sickening how we undersell ourselves and the sponsors/ad agencies don't pay us enough. Oh and Sam, I'm still waiting for that invitation to have my videos on Nebula. 😉