With over 2.6 billion active users, YouTube is one of the most used platforms globally, and this begets the question is Youtube profitable.
It is common knowledge that YouTube earns its revenue from advertising and even pays content creators for that. So how much of its revenue does it get to take away?
Are there more ways in which YouTube makes money? What is YouTube’s revenue?
If you are curious to find out answers to these and many other questions, then stick to this article till the end!
Overview of YouTube
| Launch date | April 2005 |
| HQ | San Bruno, California |
| People | Susan Wojcicki (CEO), Sundar Pichai (Alphabet CEO) |
| Owner | Alphabet |
| Business type | Subsidiary |
| Industry | Video streaming |
About YouTube
YouTube was founded by Chad Hurley, Jawed Karim, and Steve Chen in 2005, who ran it from a small office situated above a restaurant in San Mateo.
The first ever video that was uploaded on YouTube was “Me at the Zoo,” featuring one of the founders, Jawed Karim. And by the end of the year, YouTube was already hosting more than two million videos a day and was seeing 20 million daily active users.
Seeing YouTube’s traffic, Google soon acquired YouTube for $1.65 billion in 2006. In the same year, YouTube made it to Time Magazine’s Person of the Year cover.
As the platform started to grow, it started adding new features such as a comment box, bell icon, rating, embed functionality, etc.
Many people became popular at that time because of YouTube, with the most popular content being vlogging, gaming, and comedy. But today, YouTube is home to hundreds of channels with millions of viewers and subscribers.
The beginning of YouTube
YouTube was far from making any money when Alphabet Inc. (GOOG) bought the company in 2006.
So why did Google purchase YouTube, then? Google did not purchase YouTube for its revenue but because YouTube’s traffic was through the roof.
After Google took over YouTube, it was believed that copyright issues would be sorted out, and the advertisers would join in quickly.
Even though YouTube faced plenty of challenges regarding copyright issues, advertisers did come on board.
Then when user-generated content started flooding in, advertisers backed out as they started seeing the wrong type of content.
Because of this, ad rates dropped as advertisers started pulling back.
How Does YouTube Make Money?
Here are three ways in which YouTube makes money:
Video Advertising and Adwords
Did you know that in 2021, YouTube generated total revenue of $28.86 billion from advertising, contributing 11.2% to Alphabet’s total revenues?
So YouTube runs paid sponsored ads that are generated based on the Google Adwords that is associated with the video.
So every time when a user clicks on the ad, YouTube earns money. Revenue per ad click could vary from a few cents to $50 depending on how competitive the search term is, such as loans, insurance, etc.
Additionally, YouTube also runs embedded ads that you might have seen during the start or in between YouTube videos.
Embedded videos are run on the basis of the demographics the video targets.
When each time the video is seen, these embedded videos generate a cost per view (CPV), which ranges between $0.10 to $0.30 and is split between the video creator and YouTube.
Paid Memberships
Using YouTube’s paid membership, subscribers can access exclusive content created by their favorite YouTubers.
Even creators can charge a channel membership fee from their subscribers to monetize their content even further.
However, Alphabet has not revealed the revenue earned from paid memberships.
YouTube Premium
Since more and more people are willing to pay extra for ad-free viewing, a lot of companies, including Netflix, YouTube, etc., have started offering this for an extra fee.
In 2015, YouTube launched a subscription service called YouTube Red that allowed the viewer to watch and download content without the interruption of any ads for $9.99 a month.
Then in 2018, YouTube re-launched the service as YouTube Premium along with a separate YouTube Music subscription service.
Viewers can also access YouTube music for free with ads, but its premium tier allows offline downloading and audio-only background playing.
As of now, YouTube Premium subscription costs $11.99 a month, which gives users access to YouTube Music Premium subscription and ad-free viewing.
How Ad Revenue Helped YouTube to Breakeven?
Despite bleak profitability hopes for YouTube, Google kept investing in the company.
Initially, YouTube made little or no money since the platform had to share a part of its revenue with the video creators, it had a slow ad rate back then, and viewers had the propensity to skip ads.
Thanks to the new ad strategy, the market for ads on YouTube has improved drastically.
Using YouTube overlays, ads could be now populated in the video at different viewing points rather than just having a pre-rolled ad.
Even after this, YouTube was not able to make enough by 2015.
Then YouTube approached video advertising through a new program called TruView. TruView includes two kinds of ads: video discovery and in-stream.
In video discovery ads, the user can see advertisement videos listed right below the video they are viewing and generates money only when the viewer clicks on them.
In in-stream ads, the viewer has to watch a video only for five seconds, after which they can skip the ad.
In this case, the advertiser only pays YouTube if the user watches the ad for a complete 30 seconds or clicks on any entity related to the ad.
Currently, Trueview and Google Preferred are YouTube’s revenue drivers that allow advertisers to show their ads on high-performing videos on the site, including nine different categories:
- Beauty
- Sports
- Gaming
- Fashion & Lifestyle
- Music
- Comedy
- Science
- Parenting
- News
How Much Revenue Does YouTube Take Home?
Since YouTube has to pay video creators or YouTubers for their efforts, you might be wondering how much revenue does YouTube get to keep.
So YouTube shares 55% of its ad revenue with video creators. This means a good part of YouTube’s revenue does not go to Alphabet.
As we have already mentioned, YouTube-embedded video pays $0.10 to $0.30 per view, with the average being $.18 per view.
If we break this down, this means that the YouTube channel receives $18 for 1,000 ad views. This is the reason why YouTube incentivizes creators to post more meaningful and engaging content.
Is YouTube Profitable?
Alphabet recently reported that because of economic uncertainty, advertisers are pulling back from the platform resulting in ad revenue falling 2.6% year over year for YouTube.
In the first fiscal quarter of 2023, YouTube only generated $6.69 billion in advertising revenue as compared to the advertising revenue of $6.87 billion during the same period last year.
The figure shows that this is the third quarter in a row where the revenue of YouTube has declined.
This is also because the platform is also seeing tough competition from platforms like TikTok and Instagram and now plans to focus on feature shorts more.
Even in 2022, YouTube saw a major slowdown in revenue, growing only growing by 1.3% and generating $29.2 billion. Despite the ups and down, YouTube is a reaching break-even.
Is YouTube Profitable For Google?
The advertising revenue of YouTube in 2022 was $29.2 billion, and this accounted for 11.35% of Google’s total revenue. So yes, YouTube is quite profitable for Google.
Check out YouTube’s advertising revenues as percentage of Google’s global revenues from the year 2017 to 2022 below:
How Much Revenue Does YouTube Generate?
Here’s the data showing YouTube’s revenue from 2018-2023:
| Year | Revenue ($bn) |
|---|---|
| 2010 | 0.8 |
| 2011 | 1.3 |
| 2012 | 1.7 |
| 2013 | 3.1 |
| 2014 | 4.2 |
| 2015 | 5.5 |
| 2016 | 6.7 |
| 2017 | 8.1 |
| 2018 | 11.1 |
| 2019 | 15.1 |
| 2020 | 19.7 |
| 2021 | 28.8 |
| 2022 | 29.2 |
YouTube Annual Users
Have a look this chart that shows the rise in the annual users of YouTube.
When Does YouTube Start Paying Money?
YouTube Premium Annual Subscribers
YouTube has been seeing a consistent increase in its premium annual subscribers for some time now, and in 2022 YouTube’s annual subscribers reached a staggering 80 million.
Top 10 Richest YouTubers 2023
Here’s a list of top 10 richest YouTubers in 2023:
| YouTuber | YouTube Earnings |
|---|---|
| Jimmy Donaldson (MrBeast) | $500 million |
| Jeffree Star | $200 million |
| Dude Perfect | $100 million |
| Logan Paul | $45 million |
| Tyler Blevins (Ninja) | $40 million |
| Felix Kjellberg (PewDiePie) | $40 million |
| Mark Edward Fischbach (Markiplier) | $35 million |
| Rhett & Link (Good Mythical Morning) | $30 million |
| Ryan Kaji (Ryan’s World) | $27 million |
| Lilly Singh | $20 million |
YouTube Vs. Other Social Apps
YouTube has the most number of users at 2.9 billion, followed by YouTube at 2.6 billion and Whatsapp at 2.4 billion.
YouTube Key Statistics
- In a month, over 2.6 billion people use YouTube.
- In 2022, YouTube’s premium subscription reached 80 million subscribers.
- Over 100 videos are uploaded on YouTube every 1 minute.
- In 2021, Mr. Beast earned the most revenue on YouTube, but T-series is YouTube’s most subscribed channel.
- YouTubers watch 4 billion videos every day and 6 billion hours of videos per month.
Wrap Up
Even though YouTube’s profit isn’t increasing at the same pace currently, its revenue is. The company has been growing as well, albeit at a slow rate right now.
The platform is trying to implement cost-cutting measures and is finding new ways to make more revenue so that it can finally start making a profit.
We hope you found this article on YouTube’s profitable useful.
FAQs
Which is the most viewed video on YouTube?
As of 2023, Baby Shark Dance by Pinkfrog Kids’ Songs and Stories is the most viewed video on Youtube.
What is the average length for videos on YouTube?
The average length for videos on YouTube is 12 minutes.
Which was the first video on YouTube that reached one million views?
The first video that reached one million views on YouTube was a Nike ad featuring footballer Ronaldinho.
What is YouTube worth today?
YouTube is one the most popular channels and has s whopping worth of up to $160 billion.
What is a YouTuber's average salary?
According to Ziprecruiter, on average, YouTubers make $65,999 annually with top 75% making as much as $77,000.
Amit Gupta is an experienced expert in digital marketing and co-founder of DrFranchises. With more than 11 years of knowledge in franchise digital marketing, SEO, email marketing, and social media marketing, Amit has helped many brands achieve incredible success online. As a passionate entrepreneur and owner of 7 franchises, he continues to study franchise models, looking at costs, revenue, and profitability to guide brands toward profitable growth. When he’s not working on digital marketing, Amit enjoys spending time playing with his beloved dog.