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YouTube is the largest video sharing and video streaming platform in the world, with hundreds of videos being uploaded every minute. The popularity of YouTube has sky rocketed over the past years, as more and more content creators and viewers are joining the platform. The parent company Alphabet has disclosed that as of 2019, YouTube has generated USD15.15 billion in revenue, which is a prominent increase from USD 11.16 billion in year 2018. Being the market leader among all video sharing platforms, YouTube is often studied by business management students to learn about its operational strategies. In order to help you with writing papers in college, we have presented an in-depth discussion on how YouTube makes money. The business model of YouTube has been broken down to showcase how the company earns its revenue, while constantly attracting new users and customers.

YouTube Business Model: How YouTube Makes Money

Before we look into how YouTube makes money let us first look at the business operations of YouTube. As we have already mentioned YouTube is the biggest video sharing platform with videos millions of videos on every permissible topic and genre. Let us now break down YouTube’s operations to make it easier for your college essay.

The business operation of YouTube involves three key external stakeholders: the viewers, the content creators and the advertisers. The viewers, also known as service users are the audience of YouTube, who uses the platform to watch media content, such as music videos, tutorials, movie trailers, DIY guides, etc. The content creators are the ones the who create the media content and upload it on the YouTube for the viewers to watch. The content creators target particular group of audience and prepare video content which are likely to be preferred by that group. Finally, the advertisers are the ones who places their advertisements on the platform, targeted at the viewers.

For your paper writing help, let us now look at how these stakeholders are related to each other. The viewers are attracted to the platform for the new contents that are constantly being uploaded by the content creators. The content creators are encouraged to make new content for the incentives given by YouTube, and the advertisers are advertising on YouTube as they can reach out to a massive audience base. Thus, in this case it should be noted all the three stakeholders gain some form of value from YouTube. However, for YouTube its primary source of revenue comes from the advertisers.

The company has created a platform where the millions of people come to watch video content of their liking. During their visit, YouTube is able to show targeted ads from the advertisers, who has paid YouTube for the said advertisements. Let us now take a look at how much YouTube makes from selling ad spaces on its platform.

Cost of Advertising on YouTube

The pricing model of YouTube depends on the number of views on the advertisement by the audience. So, unlike traditional media, advertisers only pay based on the degree of exposure that their advertisement gets. On average, YouTube charges anywhere from USD 0.03 to USD 0.30 per view. The cost per view depends of various factors such as:

  • Content quality
  • Format of the ad
  • Timing of the ad
  • Biding
  • Targeted Audience
  • Ad messaging Options

YouTube is highly committed in showing the right ads, to the right audience at the right time, which can have a significant impact on the buying behaviour and brand awareness of the audience. The pay per view payment method also makes it easier for SMEs to take advantage of YouTube advertising as they can limit their expenditure based on their marketing budget. The company offers different advertising formats with varying degree of exposure to the viewers. These formats are display ads, overlay ads, skippable video ads, non-skippable video ads, sponsored cards and bumper ads. Each of the ad formats have different pricing. The revenue earned from the ads make up the majority of the earning of YouTube.

Since, the revenue of YouTube is largely dependent on the work of the content creators, therefore the company also encourages them to upload more content on the platform by incentivising them based on the view count or engagement with the audience.

You should also keep in mind, when you write papers on the topic of YouTube, that the company also earns revenue from its subscription. YouTube offers addition features and services for a subscription fee. For a monthly payment of USD 11.99, the viewers can enjoy content on YouTube without the distraction of any ads. Moreover, it also allows them to watch certain exclusive YouTube Originals content. Some additional features have also been provided to the subscribers such as the ability to minimize app while playing the audio in the background. YouTube has also entered into the music streaming sector, by introducing YouTube Music premium, which is subscription-based music streaming service. This service is bundled with the YouTube premium package, or can be purchased as a standalone service as well for USD 9.99 per month.

Summing it All Up

Before you start your professional essay writing, let us recap what we have learnt from this article. YouTube is currently the biggest video sharing platform, which follows a unique business model to run its venture and earn revenue. The company attracts advertisers by selling them targeted ads to the viewers. This becomes the primary source of revenue for the company. It also earns from its subscription services such as YouTube Premium and YouTube Music Premium. Thus, YouTube has two sources of revenue, which are the targeted advertisements and the subscription fees.

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