Why YouTube’s CPM Has Only One Way To Go...Down

Why YouTube’s CPM Has Only One Way To Go...Down

Despite a staggering $5 billion dollars that advertisers are estimated to spend on YouTube this year, monetization is and will remain a problem for the world’s largest video platform. Since Adsense was made available to anyone with an account in good standing, there are a lot of new mouths to feed. The problem is how? It’s a well known fact that Adsense is broken, but has always been made to sound like it would improve...like advertisers are going to decide to pay more once they understand how great digital video is and how many people watch it. The reality is that there’s only one way for CPM rates - down.

The majority of YouTube's ad inventory is unsold, while some 100 hours of new content is being added to the platform every minute. Digital video is exploding and there are new video platforms and content driven sites popping up left and right. This means even more unsold ad inventory across all verticals and ad rates dropping further in the future. Most MCNs are facing the same dilemma, which is why their current business model does not make monetary sense for most creators. Of course, a MCN with tens of thousands of channels and billions of views per month is making money, but very little trickles down to individual creators after YouTube takes 45% and the MCN takes another 20% of every dollar.

YouTube is without a doubt the world’s most powerful discovery and audience building tool. No other distribution channel allows anyone upload a video for free and potentially reach an audience of 1 billion people. How much a creator can actually make on YouTube depends greatly on their content and audience, but at the moment 1 million views can earn creators as little as 2000 dollars. That’s a whopping $0.002 per view or $2.00 CPM after all fees are paid. Even if YouTube cut the platform fee in half, there wouldn't be enough money left for most creators to pay the bills, certainly not with CPM rates expected to drop even more. Part of the problem is that the current ad revenue model only values views, it doesn't value the relationship between a viewer and a creator.

Many creators with a loyal following monetize their audience in more creative ways than just Adsense. Off-YouTube monetization, like selling merchandise (think iJustine) or directing people to your own website or blog where you control the action, is becoming a more and more important. Crowdfunding is also becoming a viable option for many to offset production cost. Platforms like TubeStart are geared to help YouTubers and web series creators to raise funds through subscription based crowdfunding campaigns.

The point is that to become a successful YouTubepreneur means becoming less Adsense reliant and focusing on the bigger picture. You have to develop and deploy a long term Off-YouTube strategy, think “YouTube first” but not “YouTube only”, because with the proliferation of digital video the current advertising models won’t hold up.

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Posted in Youtube Marketing
About Our Contributing Author - Josef Holm
Josef Holm is the Co-Founder and CEO of TubeStart a crowdfunding platform for YouTubers, web series and digital video as well as the founder of crowdfunding industry platform crowdfunding.biz. As an active member of the crowdfunding community, contributor to Wired.com, speaker at SXSW V2V, Social Media Week LA and other major crowdfunding and social media events he is a passionate advocate of crowdfunding and the paradigm shift it brings along with it



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