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How To Make Money On YouTube  - An Introduction

I often get people asking me how money is made on YouTube. Generally, people might understand the basics of it, that it’s funded by ads, or something like that… but beyond that, it’s not clear for the general YouTube viewer.

Just like TV, advertisers pay YouTube to serve ads on videos on YouTube. The great thing about YouTube, unlike TV, is that YouTube shares a portion of that advertising money with people creating videos for YouTube. Think of it as a reward for producing quality content.

But there’s a few steps and a few ways that you need to follow in order for you to get some of that money into your pocket, if you so choose.

1. Decide if you want to allow YouTube to display ads on your videos

By allowing YouTube to display ads on your videos, you’re essentially allowing YouTube to monetise your videos for you. By monetising your videos, you’re trading ad space on or around your videos in exchange for money. YouTube’s ad sales team sells different types of ads on your videos, depending on what types of ads the advertiser chooses to buy.

Below is a chart that shows you the different ad types that YouTube can sell on your videos from least expensive to most expensive.

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More info on ad types here.

If you decide that you don’t want particular ads served on your videos, then you can essentially tell YouTube to serve only True View ads and not Overlay ads, for example, which decreases the potential amount of money you can generate. This is done on the Monetisation tab in the Video Manager on the video.

If you decide that you don’t want any ads served on your videos, then your videos won’t monetise and you won’t make any money.

In order to maximise the potential amount of money you can make from ads sold on YouTube, you should opt into all ad formats for all of your videos on your YouTube channel. This is what is called “maximising monetisation”. Anything less than this, is not maximising monetisation.

2. Decide how to monetise

Did you know that there’s actually two different routes to be able to monetise your videos on YouTube? I’m going to explain both routes, and the benefits and drawbacks of each.

A. Opt into the YouTube Partner Program

This is by far the easiest and most often followed route to monetising on YouTube. Go to this page: logged into your YouTube channel. You’ll go through a few steps to confirm that you want to monetise your videos, sign YouTube’s terms and conditions, and you’re pretty much done. You’ll also need to set up an AdSense account in order for YouTube to know which bank account to pay the monies to, but beyond that it’s pretty straight forward.

The benefits:

  • Your relationship is directly with YouTube, there’s no middle man. This can be good or bad for certain people, but I’ve put it in benefits because some people really like the ability to say that they’re a YouTube Partner, and like to keep it that way.

The drawbacks:

  • If you need help, don’t understand something or have a technical issue, then you’re pretty much stuck with using YouTube’s help section on their website or searching through forums to find an answer from people who have experienced a similar issue to what you’re looking for.
  • You can’t monetise any videos where you’ve used “borrowed” content. By “borrowed” content, I mean when you upload a video where you’ve used music that you don’t own or have permission to use, clips from TV shows or movies, and sometimes even video game footage will prevent you from being able to monetise your video as well. Basically, YouTube’s Content ID system will identify anytime you use “borrowed” content, and will either block or monetise your video, depending on what the original owner of the content has told YouTube to do when someone uses that content. In these situations, you can’t monetise the video at all, and any ads served on the video (if it’s not blocked) go to the original owner of the content that you borrowed, not you.
  • You can only monetise your videos on your channel, and you can’t monetise User Generated Content (UGC). So any time someone uploads a video to YouTube using your music or video content that you created, you can’t get a share of the money from that person’s video.

B. Join a Multi-Channel Network (MCN)

An MCN is essentially the equivalent of a record label in the YouTube world. They “sign” channels to their network, where in exchange for a share of the money generated from your videos in your channel, they provide a whole raft of services that support your growth on your YouTube channel. This includes but is not limited to:

  • Channel Optimisation & Management
  • Audience Growth & Development
  • Partner Support (email support)
  • In-House Ad Sales Team (to sell ads at higher rates or more frequently to increase revenues)
  • Production Services
  • Cross-Promotion across the Network

The benefits:

  • MCNs can decide whether to monetise only the videos on your channel or to also monetise other videos using your content (called User Generated Content or UGC videos). By having the option to monetise UGC, this increases your revenues across YouTube.
  • Most MCNs will have a helpdesk or support desk that you can email or call to help you with any issues you have on your channel. This can be helpful in a crunch when you’re planning to put a scheduled video live, or when you need access to expert knowledge about YouTube that’s just not available in YouTube’s help section or in online forums.
  • If you’ve borrowed content (either music or video content) that you don’t own, and you didn’t get permission from the person that owns that content to upload it to YouTube, you can potentially share in some of the money from your video still. The original owner will still receive a share, but you can also share some of the ad money generated as well. Compared to the YouTube Partner Program where all of the money goes to the original content owner, some money is better than none.
  • If you’ve borrowed content that you don’t own, and you DID get permission from the person that owns the original content, then the MCN can help you monetise the video and you get all of the money, and don’t necessarily need to share the ad money generated from your video. This all comes down to what was agreed in the license from the original content owner, but the option to be able to collect all of the money is pretty sweet!

The drawbacks:

  • I have to say a few words here given my experience working on YouTube for almost five years now, that the reputation of MCNs has never been the best. Just like record labels, all have their drawbacks and criticisms. I’m not going to point fingers at some MCNs being better or worse than others, you can search online in forums and especially on Reddit where there’s some heavy criticisms of people having signed to MCNs.

In reality, all MCNs come in different shapes and sizes and are located in different parts of the world, are funded differently, sign particular channels over others (only music, gaming or beauty blogging channels for example), and provide different levels of support. What I can say is that, through Laika, we’re trying our best to change that image by providing transparent reporting and a high level of customer service for our channels. By being open and providing an ethical service, we hope that creators will want to work with us and grow with us for the long term rather than a short term.

So that pretty much sums up how money is made on YouTube in a nutshell. I hope this was useful, and if you have any further questions or comments, please comment below and I’ll do my best to reply.