It’s amazing when you can’t find something on YouTube. The site started off as a place for sports highlights, home videos, and TV shows and movies before the copyright hammer started swinging around.
Nowadays, it’s amazing to see that plenty of people on YouTube are not only making money, but making a fantastic living. Check out this list of the top earning YouTube stars. On there, you’ll see some names you surely recognize like PewDiePie (the most subscribed YouTube channel out there), Dude Perfect (trick shot masters), and the Paul brothers (terrible human beings).
But how do these YouTube stars make money? Can they just throw up a video and expect to bring in the cash?
YouTube is Massive
First to understand how it can be a business, it’s important to understand how big YouTube is. The video website has over 1.3 BILLION users, meaning there are millions of people browsing every second of the day.
Secondly, in between 300-400 hours of video is uploaded to YouTube every minute. For those without a calculator at home, that’s about 504,000 hours per day.
Essentially, there is a massive, interactive audience that is constantly on YouTube to watch videos and upload their own content.
The Advertisement Game
No matter what kind of social media account you have, chances are you have seen plenty of influencer posts. X social media star teams up with Y product to promote it through a post.
“Hey everyone, I’ve used World’s Best Sunscreen for my recent trip to the Caribbean and it worked wonders! It didn’t come off in the water, kept my skin looking great, and even turned my invisible at one point! While they have many types, I used the SPF 300 kind because I’m whiter than snow. A regular bottle is just $3000 but with my special code INFLUENCER20 you can get 20% off on your first order!”
While we’re all used to ads coming before a video, it’s becoming almost a staple to have ads inside the video as well.
These companies usually pay per views/clicks/shares/likes. So if a video gets 1000 views, that means $10 for the YouTuber. The amount varies greatly between YouTuber and product, depending on their channel and contract.
In addition, they’re also getting money per view for those ads that start at the beginning, or more annoyingly, right in the middle of video.
Even though all you may see are the funny graphics, great videos, and superb editing, there is a lot of work that goes into the business side of the channel. For starters, most YouTubers have to choose between becoming an LLC or a corporation.
An LLC, limited liability company, protects the YouTuber’s personal assets (their house, car, etc.) from being taken in case their business goes under. A corporation is much more complicated, and involves multiple people being a part of the entire business. Typically corporations are more reserved for the big stars.
Both are separate because of how YouTubers will eventually pay taxes. If a YouTuber is an LLC, then the profits and losses they experience while working are reported on their own tax return. They will not see a double tax. This is called passable taxation.
If it’s a corporation, then both the corporation and the star themselves are going to be hit with taxes. All YouTubers have an account to help them manage these issues.
Take someone like Mr. Beast for example, who is regularly giving out money or making donations. Donations are tax write-offs, only further complicating April 15th for him.
YouTube is Ever Changing
While this information is all important and vital, it’s worth pointing out that YouTube is a changing beast that has come under a lot of heat lately for demonetizing its content creators.
Couple this with the fact that only 30-60% of YouTube’s videos are monetized throws a whole other wrinkle into the situation. This is why YouTubers are putting out so much content. It’s a simple equation: the more content they have, the more views they get, and the more money they can potentially earn.
Many “middle-class” YouTubers, those who have between 50K-500K subscribers, may not have the luxurious life that they seem to project. Estimates say that a channel generating around 10 million views per year will put you in the $45,000/year range. Not bad, but certainly not the Ritz Carlton.
If you’re thinking about becoming a YouTuber, you may certainly be facing an uphill battle. It is far from the easy path to riches that you may think and requires a whole lot of work and a bit of business savvy.