Watching videos a couple of decades ago was considered a luxury. You would need a DVD player to watch a video on your TV. But today, it is completely different from what it was back then. Watching videos has become very easy. All you have to do is open your mobile phone and search for the video you want on the internet. You will be able to find tons and tons of videos on the topic you searched for. Sharing videos has become easier than ever before. You don’t have to buy an extra DVD to copy the content. People can just do it using their mobile phones. The rise of the internet and technology has contributed a lot to make this possible. In the current world, videos play a vital role in every field. People pay more attention to visuals than speech so people are using videos to communicate.
But if you search for a video on a certain topic you would find a lot of videos from various websites. But there is one platform that will certainly see no matter what you search for. Can you guess what that platform is? It is YouTube ofcourse. There is probably no millennial in this world that doesn’t know about YouTube. YouTube is the most popular platform for sharing videos. Not less than a decade ago people could only access YouTube through a computer. But it is not the case anymore. The rise of the internet has contributed enormously not only to its popularity but also usage. Today you easily spot someone watching videos on YouTube using their mobile phone. But have you ever wondered how the platform actually works and makes it money? This article is completely about that.
But first, let’s look at how it all started.
What is YouTube and how it actually started?
YouTube was founded in 2005 by Chad Hurley, Jawed Karim, and Steve Chen. All of them were working for PayPal before they went onto create YouTube. The idea for the platform came to the mind of Jawed Karim when you could not find a couple of videos on the internet. He thought that it would be great there was a platform where you could find videos. But that was not the main intention behind the creation of YouTube. The other founders Steve Chen and Chad Hurley wanted YouTube to be an online dating platform. They wanted to provide online dating services to people through videos. This idea was inspired by the website Hot or Not which was created by Mark Zuckerberg when was studying at Harvard University. They were serious about this and even posted advertisements on Craigslist asking beautiful women to upload their videos on YouTube to earn $100.
However, this idea did not work as there were only a few videos on the website. This forced them to change plans. So instead of dating videos, they decided that they would let people post all types of videos. YouTube was started as a venture startup. Both Sequoia capital and Artis Capital Management provided them with the initial investment of $11.5 million and $8 million respectively. After that, they started developing the website and uploaded the first video called Me at the zoo featuring the co-founder Jawed Karim. Nike’s advertisement was the first video tk hit a million views on the website and by the end of the year, YouTube was getting 8 million views every day. In 2006 the site was acquired by Google during that time YouTube was getting 100 million views every day. Currently, YouTube is the second most visited website in the world after Google.
Business model of YouTube
As mentioned earlier YouTube is the most popular video-sharing platform. Not only that it is also the largest video streaming platform to ever exist. The great thing about YouTube is that anyone could upload videos on its platform. But there are also some guidelines you need to follow. As long as you follow the guidelines you can upload any type of video of any duration. Another great thing about YouTube is that it is absolutely free to use. That is the most important reason why it became so popular. It is this step that made them the second most visited website. People upload 400 hours of content on YouTube every minute and nearly 5 billion videos are being watched on the platform every single day. Its business model depends on viewers and content creators. They are the reason YouTube is able to make money.
So let’s look at what YouTube offers them that made it so successful.
Without viewers, it is absolutely there is no point in having the largest library of videos. YouTube knows this very well and took the best steps to keep them engaged. As mentioned earlier the main reason for YouTube’s popularity is because it is completely free. What more do you want from a video streaming platform? You have access to all of its content for free. Well, almost all the content. A viewer can open YouTube anywhere at any time and watch the videos they want. All they need is a mobile phone and an internet connection. YouTube is helping people in many ways. People are not only using it for entertainment but also for educational purposes.
You can find videos where people would teach you to do different things like pottery, coding, repairing, painting, and etc. You can find videos on almost all the topics you could think of. People get to see news, music videos, and the latest film trailers for free. This is a great deal if you are a consumer. Not only that but it also included some new features which allow you to save videos so that you can watch them later. It constantly provides updates resolving bugs on the mobile application so that you have a great user experience.
Without content creators, there would have been no YouTube. But it is also true the other way around. YouTube and its content creators are interdependent. Without YouTube, the content creators wouldn’t be able to make money and without content creators, YouTube wouldn’t have a source to make money. But no one can deny the fact that if it is not for YouTube there wouldn’t have been any way for these content creators to earn money. The best thing is that YouTube does not put any type of restrictions on most types of content. Buf if these content creators want to monetize their content they have to follow certain rules. They cannot upload videos with nudity and graphic content if they want to monetize their videos. These are certain types of videos that cannot be monetized.
YouTube is also great in providing money to the original content creators. If you use copyrighted material then your video will be demonetized and the money will be given to owners of original content. You can see this happening often when someone uses music created by other people. YouTube will put ads in between the videos to make money. After it makes money through those ads it will share some of it with the creators. The amount of money you earn money from the videos depends on various factors. Most people think that it only depends on views but it has more to it. The country you are located in also plays a major role in this. Two videos with the same number of views uploaded in different countries will earn different amounts of money.
How does YouTube make money?
If you think YouTube only makes money through ads then you are mistaken. Over the years YouTube has come with many ways to make money. Let’s go through them one by one.
Planting ads between videos
This probably the most obvious and common way in which YouTube earns money. You can understand this as soon as you see an ad pop up when you are watching a video. Like any website, advertisements form a major chunk of YouTube’s revenue. All types of companies want to promote their products on YouTube. This is because they know that YouTube is used by more than a billion people. With nearly 30 million people visiting the site every day they will have great chances of reaching a wider audience. So they use YouTube to promote different things like products, services, films, video games, events, and music.
Advertisements on landing pages
You will definitely find advertisements as soon as you open YouTube. These are paid advertisements by companies so that they can get maximum exposure to their products. These advertisements can be videos or just an image. Since they are on the landing page they have to pay a good amount of money to get the spot.
This another way in which YouTube makes money. Sometimes when you open YouTube you will see the first video will have a sponsored ad Written on it. It can be used by anyone. This video is sponsored by the advertiser to get maximum exposure to their channels. At the end of the day, the advertiser pays YouTube depending on the views they get.
Memberships in channels
Some of the YouTube channels these days have a join button. This is a button that is used by YouTubers who want to earn more than what YouTube offers them. Viewers can use this button to pay the content creators some money to support their channel. If you think all of the money goes to the YouTuber then you are wrong. YouTube keeps 30% of it gives the rest to the YouTuber.
This is the latest addition to YouTube. You can pay a monthly subscription fee to YouTube to get a premium membership. This will give you access to exclusive content. Not only that it also comes with some great features. If you get a subscription then you can watch ad-free videos and also get access to YouTube Music premium.
If you have not heard about it then don’t worry. YouTube TV is not available in every country it is exclusive to the US. This is also a subscription service that is growing at a fast pace.
This is the business model of YouTube. It is a combination of crowdsourcing, advertising, and subscription business models. YouTube is undoubtedly a revolutionary idea and deserves all the praise it gets. With more and more people using the service every day it’s popularity is only going to increase. If you want to know about other similar business models then check out our other articles like the business model of Twitter.