Breaking Down the Business of YouTube

Breaking Down the Business of YouTube

04.19.19
YouTubers have ventured past the site and have found ways to harness their audience's buying power.
04.19.19

James Charles, YouTube’s star beauty vlogger, made headlines last month when a fan lashed out: slamming him for placing multiple ads — 6 in total — within a video. Instead of backing down and removing the ads, James used the moment to start a conversation about content creators and the ads they place on their videos.

In his tweets, James compares YouTube to TV and other traditional media. If even more ads are acceptable on TV, he seems to ask, is there anything wrong with them being on YouTube? YouTube is the world’s second largest platform, with 1.9 billion monthly users, according to the site, so it’s crystal clear why advertisers would cash in. James is also the most subscribed beauty vlogger, recently hitting 16 million subscribers. James’s big following means big bucks for any brand involved with him.  

Seeing this drama play out leaves people wondering, what does it take to have a channel as successful as James’s? How exactly does he make money — or any other YouTubers for that matter?

Costs

In the years since its inception in 2005, YouTube has changed dramatically. Long gone are the days of simply talking to your computer’s webcam in hope of a hit video. A scroll through the site today shows quite the opposite. The most-viewed videos look perfect and polished, filmed with the best HD cameras, perfect lighting, and bright backgrounds.

When these aesthetics go up across the board, so does the cost of this production. In a Snapchat story, James showed off some of what he uses for his videos. In the video, he breaks down most of his equipment, from a $5,000 camera to thousands of dollars worth of lights. It isn’t a one-man show either, as he can count on a full-time team of producers, a video editor, and a writer. These tools — out of reach for the average person — give us the high-quality content we’ve come to expect from YouTube’s biggest beauty vlogger.

Ads

Advertising on James’s videos is at the center of the Twitter argument with his fan. While viewers want to avoid ads as much as we can, they are one of the biggest ways YouTubers can make money from their videos. Through Google’s AdSense service, YouTubers are able to monetize their videos by placing ads on them. The amount a YouTuber can make is based on many factors, including how many subscribers they have and how long their viewers watch. The longer the viewer stays on the site, the more likely they are to interact with ads, bringing the vlogger, the advertiser and YouTube money.

James gains more than 3.5 million views on average on his channel daily, according to SocialBlade, a site that tracks YouTube statistics. These views, combined with the ads on his videos, turn into a hefty paycheck. While the exact amount YouTube and its algorithms pay per view is unknown, SocialBlade estimates James brings in an average of over $13,000 a day on ads alone. That’s on the high end. The website also figures it could be as little as $867 a day.

Sponsorships

A sponsorship is when a YouTuber works with a company creating content for them, much like an advertisement. When it comes to beauty vloggers, this is most often done through product reviews on their channel. Depending on how popular the vlogger is, makeup companies might send entire collections of free products in exchange for exposure to the vlogger’s audience. As influencers, the vloggers showcase the products on their channel through reviews or tutorials. If the vlogger makes a product look good, it can secure sales for the companies.

Another common sponsorship model is the use of affiliate links or discount codes. Oftentimes, a vlogger will list products they used in descriptions, complete with links to the products’ brand sites. These clicks bring money to vloggers in the same way a traditional ad would. They make even more if the viewer actually purchases the item on the site. Discount codes work in the same way, bringing vloggers money if a viewer purchases the item using the codes. Links like these can cause controversy — and even lawsuits — if it isn’t disclosed that the vlogger is being paid for them.  

The next step up from a simple sponsorship is a collaboration with a makeup brand. James’s flagship product, the James Charles Palette, is the result of a collaboration with makeup powerhouse Morphe. Collaborations like these have become commonplace in the world of YouTube, a sign of making it. Fellow YouTuber Jaclyn Hill has had multiple successful collaborations, such as Morphe’s Jaclyn Hill Palette and Becca’s Champagne Pop Highlighter. These kinds of sponsorships are huge and can bring in millions — 1 million Jaclyn Hill Palettes were sold in 2017 alone, according to Hill herself. 

When you break it down, you can see the effort that goes into the pearly and polished videos we know and love. YouTubers are harnessing huge audiences in ways that wasn’t possible before the internet age. These audiences of loyal subscribers highlight the change in the way people consume media, and how that media gets paid for. 

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