How Do YouTube Channels Make Money?

Most people are aware that popular YouTube channels make money, but it’s not immediately obvious how. And there’s a reason for that: the answer isn’t straightforward.

There are several different ways for a YouTube channel to make money. There’s advertising, sure, but most channels have at least one other revenue source, and which ones used can vary. Hank Green outlined this all a few years back.

Here’s a look at these revenue sources, along with how much money they can potentially bring in.

Advertising: The Primary Source of Revenue

YouTube is unique among social networks in that it shares advertising revenue with its users. If your tweets or Facebook posts regularly go viral, you get nothing from those sites, but if you build a consistent audience on YouTube, you can expect a cut of the ad revenue your videos generate.

It’s the first way most YouTuber channels make money, but how much does it add up to? Well, YouTube offers creators 55 percent of all advertising revenue. The actual dollar amount can vary wildly depending on the subject of the video, the demographics of the viewers, and the current demand for advertising. YouTube CGP Grey outlined things nicely in this video:

To summarize, every time you watch a YouTube video, Google holds an auction for the ad, matching things like your watch history and demographic information up with the content of the video, then finding out which advertiser is willing to pay the most to reach you at that precise moment.

Ad rates vary wildly depending on these factors, but 1,000 views generates, on average, about $2.50. About $1.38 of that goes to the YouTuber, at least according to Grey: YouTube doesn’t release official numbers on any of this.

This advertising revenue is probably the most reliable revenue stream for consistent YouTubers, but is really only enough to earn a living if you consistently get millions of views. Smaller YouTubers need to supplement this to make a livable wage.

Sponsorships and Brand Deals

If a channel has a big enough audience, companies will sometimes work with them directly, asking the creator to promote products and brands in the video itself. Sometimes this takes the form of affiliate links for services like Audible, but sometimes a brand will pay a one-time sum for their product to be featured in the video itself.

Some YouTubers will simply mention the brand at the beginning or end of the video, making it kind of like an ad that’s part of the actual video (as opposed to a separate pre-roll managed by YouTube). Others will integrate the product into the content of the video itself, as seen above.

Deals like this are generally negotiated between the YouTube channel and the company directly, so it’s hard to say how much they pay. A Quora thread suggests the going rate is between $0.03 and $0.12 per view, which is considerably more than YouTube’s native ads pay (1,000 views is worth $120 at 12 cents per view.) No wonder so many prominent channels make these sorts of videos.

Selling Merch

Selling things is the most obvious way for humans to make money, so it stands to reason that YouTube channels would do this. Sometimes it’s a simple object, like a t-shirt or a poster, featuring logos or inside jokes. Sometimes it’s a CD or book by the creator. The idea is that loyal viewers want to buy something tangible that connects them to the content they love to watch. It’s probably the most straightforward way to make money, but again only really works if you have a dedicated audience of a decent size.

Patreon and Other Donations

All of the above kinds of revenue can be very inconsistent, which is why many YouTube Channels ask their viewers to contribute to them directly. Sites like Patreon make it simple for anyone to donate to a given creator every month. The value of having a set amount of money coming in every month can’t be overstated: ad rates change quickly, which can make it hard to budget. In return for this stability, creators often offer access to exclusive videos or merch.

Side Gigs

You need all kinds of skills to do well on YouTube: like performing, video editing, and writing, to name a few. It so happens that these skills are valuable, and many people on YouTube use them to supplement their income. It helps if you live in Los Angeles or another media-centric city, because you can audition for roles on TV shows or in commercials.

But no matter where you live, there are local companies looking for some help making videos or managing social media, and YouTubers can leverage their channel as proof of their expertise. With some hard work, it can be enough to build a freelance career in addition to your own YouTube content.

Licensing

It’s relatively rare, but every once and a while a TV network will approach a YouTuber and ask for permission to use one of their videos. Sometimes this can result in a licensing deal, in which the TV network pays for the right to use the clip. It’s not terribly common, but it’s another potential source of revenue.

It’s Not Easy Money

You might think the people behind your favorite YouTube channels have it easy, but as you can tell, none of this is easy money. Building an audience is hard work, and you can’t really access any of this money until after you’ve done that. And even having an audience doesn’t guarantee you’ll make enough to live off of any given month: you’ve got to constantly hustle.

Photo credit: evka119/Shutterstock.com

Justin Pot is the News Editor for How-To Geek. He lives in Hillsboro, Oregon. Follow him on Twitter and Facebook, if you want. You don't have to.