Why Being a YouTube Creator Isn’t a Good Business Model

Despite the fact that YouTube gets larger and more dominant every year, the pie is getting smaller as everyone fights for a piece.

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As YouTube matures as a platform, there has been a drive for more high-quality content from creators, viewers and YouTube itself. In fact, YouTube has been investing in providing studio space for video creators, giving out grants and sharing revenue with almost anyone that uploads content that doesn’t violate copyright. But as more users get involved, costs continue to go up while pay goes down. Indeed,  it’s getting harder to make a living on YouTube.

While the revenue-sharing model has been in the works on YouTube since 2007, the less complicated system introduced in 2012 sparked a gold rush. All you have to do is click the “monetize” button next to your video and wait for the cash to roll in. Unfortunately with increasing competition, many creators have found that monetizing isn’t as easy as it was just a couple of years ago.

With an increasingly saturated market, individual users have seen their view counts fall, and ad payouts tumble. “Everyone is a little afraid for their income levels,” YouTube Creator Olga Kay told The New York Times, “we are all growing in subscribers yet decreasing views and advertising.”

On the other hand, since YouTube’s share of generated revenue is 45 percent, the video-sharing site is faring pretty well. According to eMarketer, YouTube brought in $5.6 billion in 2013, up 51 percent from the previous year. When you consider that there are one million channels trying to monetize videos on YouTube, the problem becomes more evident.

At present, the average cost of a 30 second pre-roll ad is $7.60 per 1,000 views, down almost $3.00 from 2012. There are more than 100 hours of video uploaded to YouTube every minute, and most of that is unlikely to ever generate substantial income for the creator. Despite the fact that YouTube gets larger and more dominant every year, the pie is getting smaller as everyone fights for a piece.

According to one of the YouTube grant recipients and serial entrepreneur Jason Calacanis, “YouTube is an awesome place to build a brand, but it’s a terrible place to build a business.”

Image credit: karljonsson