Assessing YouTube’s Monetization EcoSystem:
Where Offline Strategies for Monetization Fall Short
By Adam Winnick
I’m an investor in several companies that work closely with YouTube partners and have seen first-hand how difficult it is to monetize audiences, especially without alienating them. The YouTube platform is caught in the awkward adolescence that’s an inevitable part of growing into a self-sustaining social network that can support its talent and fans. In a column last month, Peter Kafka of AllThingsD articulated the economic challenges of supporting premium content with ad dollars: small revenue splits, inventory gluts, and no optimized sales-force for video.
Many YouTube partners, both networks and the channels with which they work, have developed strategies to make more money off-YouTube and for the most part, off-line. For channels in particular, most of these strategies won’t work except for a lucky few, and here’s why:
Participating in traditional media distribution channels will certainly pay well in the short-term and may even lead to a few break-out stars and shows. But these opportunities can be risky, as they pull personalities from their native and creatively-liberal platform and put them into a system that threatens their authenticity. YouTube content – unlike anything on primetime TV – is about a two-way conversation between talent and their fans. Traditional media distribution channels disintermediate talent from their fans. Even worse, they draw precious resources away from these important conversations on YouTube.
Creating and Selling Products
Some channels have moved beyond personalized merch stores to selling their own products. YouTube has whitelisted a few commerce platforms that let creators sell their own products through merchant annotations. This can work well in a few verticals like fashion, food, or fitness but it is no panacea. Making videos audiences love is very different than the responsibilities of managing a business that may require dropshipping (for more on this check out the YouTube content creators playbook and the playbook on how to run an online business by Shopify, one of the companies YouTube has whitelisted). Running a full time business will surely detract from the primary goal of entertaining and informing audience. Hiring a business partner invites its own set of challenges without fully relieving a channel from their responsibilities.
Seeking Brand Endorsements
Channels often make videos for brands, acting as a spokesperson. Some are taking this relationship to the next level by partnering with these companies off of YouTube. Unless a channel works with well-established brands or has done extensive due diligence (often not the case), this strategy is extremely risky. Channels become vehicles for driving traffic and nothing more. By tying themselves closely to a single brand, without creative control they jeopardize their unique voice and potentially compromise their hard won influence and authenticity.
The reality is that monetizing media online without alienating audiences still has a long way to go. Few have been able to hit this sweet spot, which is a shame given the potential of this platform to cast a wide net and catch niche audiences.
Though no winning strategy has yet emerged, there are three takeaways that are simple enough in concept, but critical for content creators to consider:
Make YouTube audiences happy; earn enough cash to keep creating quality content; do so with ease and authenticity.
Sound easier said than done?
Today it is, but the smart networks and channels are starting to figure it out.
Adam has been investing in and creating companies that create win-win solutions for customers and their partners for nearly a decade. Adam is the CEO/Founder of Subblime, which works closely with content creators on YouTube to help them monetize their audience without alienating them. Adam is also an investor in EQAL, Spreecast, and Little Black Bag. Adam has an MBA from Stanford and a BA in Econ from Tufts University.
Tags: Adam Winnick, creators, creators playbook, endorsements, monetization, voices, youtube