YouTube’s Business Model


YouTube is an American video sharing website headquartered in San Bruno, California. According to feedough.com, YouTube was originally started as a dating website by Chad Hurley, Steve Chen, and Jawed Karim in February 2005. Google bought the site in November 2006 and since then the company has been functioning as Alphabet’s subsidiary. YouTube publishes content in more than 70 different languages and has become a promotional platform not only for individuals but also for various brands, celebrities etc. Most of us must be familiar with YouTube and must also have seen the rise and fall of various YouTube stars, but how many of us actually know how YouTube earns money? How is it that the company has grown to become the biggest video sharing platform worldwide despite the fact that the viewers can view all the videos completely free of cost?

Quite surprisingly, the users or the viewers are the products that YouTube is selling. It has an advertisement based strategy that relies on the 30 million visitors who view the videos every day. It receives payment from the multiple advertisers who wish to promote their products to YouTube users. These ads are of two types. The first category is that of sponsored ads wherein the advertisers pay the company according to the number of times their ad has been clicked upon and viewed by the users. The second category is of embedded advertisements wherein the video published by individuals have various ads embedded in them. In this case the advertiser pays YouTube for the number of people who view the ads instead of skipping them. The biggest source of revenue for YouTube is its subscription based version called YouTube Red which gives the subscribers a free access to YouTube gaming and YouTube music and also allows ad free YouTube videos among other benefits. Also, now there are various videos on YouTube which are paid content. This includes all those videos by big brands and entertainment channels which has to be purchased by the users. YouTube gets a certain percentage of the subscription fee on such content and the rest of the amount goes to the creator.

But despite of it being the largest video sharing platform, the content creators of YouTube are facing a hard time. According to monetizepros.com about 300 hours of video are being uploaded on YouTube every minute. This means that there is a huge possibility of similar content being uploaded and therefore the chances of a user viewing a video gets reduced drastically. The fact remains that YouTube cannot possibly be looked at a primary source of revenue. While videos like that of ‘singer’ “Dhinchak Pooja” may receive more than 2 million views, a lot of other educational and interesting content may not receive many user traffic at all. The utter unpredictability of YouTube creates a lot of hardships for the content creators. The competition coupled with the fact that YouTube shows trending videos section means that there is a lot of content that remains unexplored. Since most of the content available on YouTube is free, people have not been able to accustom themselves to the concept of paid channels on YouTube. There are very few paid channels on YouTube and most of these channels have videos that have received an insignificant viewership. Also, the fact remains that the content creator on whose video the ad has been embedded gets paid just 1 or 2 percent of the amount that is paid by the advertisers. This again implies lesser revenue for the individuals uploading their videos.

Despite all the problems that the content creators face, the fact remains that YouTube is a great on-line platform and has several success stories to its credit. Individuals have achieved celebrity status by showcasing their talents to the world in the fields of stand-up comedy, painting, cooking etc. it has also made it possible for users to access content produced anywhere around the world and that too free of cost. According to Adweek, in a matter of just 10 years, YouTube has grown from scratch to become the second best search engine, with over 800 million users. Its business model is surely a source of inspiration and astonishment for people all across the world.

-Contributed by Disha Mahajan

Picture Credits: fortune.com

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