You can’t live on CPMs alone

Posted 5 years ago by Michael Estrin

Peter Kafka has a long look at a big problem facing YouTube’s content creators. In a nutshell, viewership on YouTube is growing, but CPMs aren’t rising fast enough to make back the money spent on production or make producing for YouTube profitable. Kafka writes at All Things D:

The dollars programmers earn from YouTube’s ad-selling efforts range widely. But many big publishers say that after YouTube takes its 45 percent cut of the ads it sells, they frequently end up keeping about $2.50 for every 1,000 views their clips generate — that is, if their video generates a million views, they get $2,500. Other publishers say their split can be as high as $10 per 1,000.

The thing is, this isn’t all that surprising. Kafka points out that YouTube’s big spend on premium channels last year was supposed to attract advertisers. Maybe. But it’s hard to see how that strategy makes much sense. After all, YouTube may have spent enough to underwrite better quality content, but they spent big on so many channels (more than 100!) that they also over-saturated the market in the same move.

Of course, traditional media (for the most part) doesn’t rely solely on ad dollars because as any media exec can tell you a dual revenue stream is always preferable.

So where does this leave YouTube’s premium push?

Well, as Kafka points out, plenty of YouTube’s bigger multichannel networks are looking for ways to monetize outside of YouTube.

Some of them may find revenue in the form of selling t-shirts or holding events, while others are selling their own integrations. But the short answer is that without YouTube funding, a lot of these channels would be in real trouble.

That’s not to say that the players in this market weren’t betting on the future. They were. But from where we stand now it seems like YouTube and those who operate its channels might have a different definition of when the future will arrive. Put another way: some of these channels may be on a path to profitability that could take five years or more. But if YouTube is measuring them against the CPMs of today, there’s a big gap between success and profitability.

In the meantime, videos like this will earn publishers a few bucks.