How Money Is Made On YouTube [MakeUseOf Explains]

Joshua Lockhart 06-06-2013

youtube-logoUntil a profitable, mutually beneficial alternative arrives, advertisements have to exist in order for us – the consumers – to receive content free of charge. YouTube isn’t evil because it places advertisements at the beginning of videos and throughout the site. If anything, it’s wonderful. Where else can you legally watch terabytes and terabytes of video content that you can’t even completely view in your lifetime for free?


However, this is only possible through advertising. Someone has to pay to keep the lights on at YouTube, right? Yes, the website is currently experimenting with paid subscription channels Would You Pay To Watch YouTube Videos? [MakeUseOf Poll] One of the biggest things that happened this week was the launch of paid channels on YouTube. While limited in number and availability to start, this is not something that's going to stay small for... Read More , but the truth is that most people don’t want to pay for the company’s product. (And that’s a little bit silly within itself as well.)

To those of you who use AdBlock 3 Tactics For Dealing With Ad-Block Users On Your Site Leaving ethical discussions aside (since I made my views on that quite clear last time), it is nonetheless true that ad-blocking is a real problem for bloggers and site owners the world over whose only... Read More , you are contributing to a problem. Bypassing the website’s primary source of income is an incredibly selfish move. Allow me to be clear: if everybody used AdBlock, then YouTube would cease to exist.

It’s simple logic, really. If there is no money coming in to pay the website’s staff, hosting, server space, etc., then how in the world could the website even stay up and running? It’s a minor inconvenience, and besides, some advertising is good. Take movie trailers, for instance. How else will you know what’s coming out? Furthermore, are the thirty extra seconds out of your day that big of a deal?

Your favorite YouTubers and companies also have to make a little extra cash to keep doing what they do, and this is collected through advertising money. If famous actors, writers, musicians, and comedians get paid for their careers, than why shouldn’t content creators on YouTube?

With that said, it’s a bit frustrating to see someone who is so addicted to viewing a certain YouTube entity, yet they block advertising. It’s a bit like going to a concert without paying for a ticket. These performers should be paid for their time, dedication, and talent. Even though it may seem like it, they aren’t doing it just for fun.

Maybe it would help if people knew just how money is made on YouTube. Heck, maybe you want to make money on YouTube and want to learn how. Below is a simple understanding of how these content creators (and potentially you) cash in.

How YouTubers Make Money From Ads


Quick question: what are the most annoying ads on YouTube? Simple answer: the ones that appear within videos. The first thing you should know is that YouTube partners (content creators like Rhett and Link, Freddie Wong, etc.) make money from only these ads. On the other hand, Google – which owns YouTube – makes most of their profit from ads shown elsewhere on the site, like banners and sidebars.

That’s fair enough. After all, it makes sense that the YouTuber’s income is derived from the reason that people are actually on the site, and that’s the video. Good on you, Google.

Moving on down the line, there’s the issue of how payment works. Generally speaking, an ad payout is based on whether or not it has been viewed. However, Google is very tightlipped on just how much its partners earn per view. The major consensus is that YouTubers make less than a penny per ad. So even if a video gets 500,000 hits, the YouTuber would make only $5,000 if it was a penny-per-view. On a surface level, this may seem like a lot of money for just making a YouTube video, and it kind of is. However, in order to be a successful YouTuber, you have to make more than just one video that’s viewed 500,000 times.

It’s possible to make a career from YouTube, but this very dependent on the amount of advertisements shown.

How YouTubers Make Money From Product Placement


There’s an alternative source of income that YouTubers can receive, and while it is inherently advertising, it’s a bit more subtle. As an ode to the olden days of 1950s daytime television, product placement is a highly profitable source of income for YouTubers. Again, I don’t exactly have the exact numbers, and this is mainly because product placement works on a case-by-case basis.

Consider an extreme sports YouTube channel that involves a bunch of wild and crazy guys doing stunts on motorcycles, jet-skis, you name it. GoPro may work out a deal with this channel where at least one portion of the video is shot on their cameras, and the audience is made aware of this fact. This would likely be done by a message at the beginning of the video: “This clip brought to you by GoPro!”

Is it advertising? Of course. However, it’s less intrusive, it complements the video, and furthermore, it can’t be blocked by AdBlock. Heh. Personally, and this is typically based on the payout, I feel as though this is the best form of income that a YouTuber can find. Furthermore, since the payment comes directly from the company advertising, the YouTube partner receives the full cut.

How YouTube Itself Makes Money

With the millions of content creators, millions of channels, and millions of videos, YouTube is an advertising cash cow for Google. Since content creators only receive a fraction of a penny per view, this means Google is cashing in on the rest. Furthermore, since sidebar and banner ads go directly to YouTube itself, this is another source of income for the video giant.

That’s a lot of money, kids.

Even still, you may have a chance at making some cash if you can develop quality content. If you’re invited (after making a few quality videos), then there’s your chance to jump in.

Do you make money from YouTube? Have you ever thought about making money from YouTube?

Related topics: Make Money Online, Online Video, YouTube.

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  1. Seth
    January 15, 2016 at 7:12 pm

    ->Late poster - sorry

    Adblock gives you the option to disable it for certain URL's. So if you want to give the content creator some cash, just turn it off on that page or domain. Then it stays on for all the other sites. That way bloggers get paid, huge companies not so much, and everyone wins.

  2. druv vb
    June 7, 2013 at 7:12 am

    Nice article. I always wondered how YouTube was still making money when most people just view videos and pay nothing. This explains that. Reading through your article would certainly make one put some videos on the net for some revenue.

    Well, maybe later....

    • null
      June 9, 2013 at 9:11 pm

      They earn from the companies who advertise on the site.

  3. null
    June 6, 2013 at 11:15 pm

    As per experience, 500,000 hits won't give you $5000... I was only given $300 for 400,000 views... Well, my geographic location might also be a factor...Nevertheles, Youtube is one of the best ways to earn online...

  4. Onaje Asheber
    June 6, 2013 at 6:15 pm


  5. Boris Belov
    June 6, 2013 at 3:33 pm

    Thank for this great article

  6. I hate ads
    June 6, 2013 at 2:46 pm

    I'm a proud addblock user! :D

  7. android underground
    June 6, 2013 at 2:05 pm

    If a 30-second ad only pays a penny then it's a terrible business model that deserves to die. Do the math: at $0.01 per 30 seconds the time of the viewer is only worth $1.20 per hour. At that rate even burger flipping pays better than YouTube ads.

    If video ads pay that bad they should be AdBlocked until Google negotiates a better rate from its advertisers. A video ad for a penny should last no longer than 5 seconds or so.

    • Terqz
      June 6, 2013 at 3:20 pm

      I think that's a penny per view. You're just saying if one person will view it within the 30 second time frame. But what if 10 Million viewers view it in that time frame? Am i right with what I think?


      • android underground
        June 6, 2013 at 6:04 pm

        Then it's ten million pennies for five million minutes, so the time:money ratio stays terrible.

        Of course the low payout highlights the general problem of (online) advertising: as the number of ads increase, the value of each ad goes down. Which leads to more, bigger, and more annoying ads, which reduces their value even more, which leads to more, bigger, and more annoying... This trend is clearly visible in Google's AdSense program: the payout per ad is lower than ever.

        Maybe an ad blocker that reduces the number of ads could slow down the ad value inflation? Or else it won't be long until the value of those YouTube ads drops to less than half a penny and the number of ads goes up again.

    • Joel Lee
      June 6, 2013 at 3:20 pm

      You would have a point if YouTube ads didn't have an X that you can click to exit out of them immediately.

      • Terqz
        June 6, 2013 at 3:39 pm

        I think so. Most of the time I clicked on it.. hehehe

      • android underground
        June 7, 2013 at 2:27 am

        According to Google's video ad site:
        "Pay only when they choose to watch your ad"

        So if you click away the ad you've spent time and effort and the publisher doesn't get paid anyway. The money:time ratio gets even worse then.

  8. michel
    June 6, 2013 at 12:54 pm

    okay, now how about an article about how pirating is selfish and wrong?

  9. Pooky Joralyn
    June 6, 2013 at 11:45 am

    I don't know what's like on YouTube, but on Facebook it gives lots of things I simply wanna punch the screen.

  10. MedicinABC
    June 6, 2013 at 8:32 am

    That's a very good article.

    I run a medicine blog in Spanish language and I see that most of the people don't know that without ads on web pages or videos they will not be able to enjoy free content.

    At the moment we are thinking about how to produce quality videos with YouTube, as a big chunk of our audience uses it. Do you have any suggestion for some useful tools for to make didactical videos? We need to do things like recording slideshows, make annotation and paintings with the mouse, etc...

  11. Adly Asraf
    June 6, 2013 at 7:04 am

    Thank for this great article. Now I know. I shouldn't be selfish.

  12. Keith S
    June 6, 2013 at 6:14 am

    Great article! Learned a lot from it! Thank you, Joshua & Very informative article!

  13. Zhong J
    June 6, 2013 at 3:32 am

    It would be obvious to many consumers who've watched videos to notice constant streams of advertisements since it's the sheer structure of luring people into services that'll generate revenue for a specific business group. The reason why Youtube is the most popular video sharing franchise in the world was because they have the amount of money to rent server space and able to upload all kinds of formats, in HD, unlimited and free.

    Other than that, they hold no customer support and simply doesn't listen to consumer's feedback.