When Will I Make Money on YouTube?
As with every business endeavor, that is a key question. At some point, we all hope, revenue exceeds expenses; and then exceeds them enough additional effort is justified. Most people will only look at the top and bottom lines, what came in and what is left, never digging deeper into the numbers to understand why those numbers happened. Many years ago I had the opportunity to rapidly expand my piano business. Up to that point, I had bought a piano or two at a time, rebuilt and refinished them, and then either sold or rented them. Growth was modest. Upon the death of an area dealer, I was asked by the family to sell the inventory on consignment. Within a couple of years my business tripled and then quadrupled. I had to come to grips with a much more complex business which was quickly driving me broke. I went to the University of Hard Knocks and took a crash course in corporate finance. I learned more than I ever wanted to know about all sorts of ratios, depreciation, time value of money, etc. I learned how to better understand how all of the components which went into my bottom line interacted and how even small changes in the right place could have an outsized impact, positively and negatively.
After spending a little over two years as a YouTube creator I would like to share a little of what I have learned. I would hope that this brief look at some of the ratios present within our analytics can help you better understand what it will take to improve your profitability. This is not a “how to grow your business” article, but rather a look at where the growth, or lack of growth, is happening and why it might be important.
For our purposes today I draw the following numbers from analytics: views, minutes, revenue, subs, and video count. I record these numbers in three categories: as grand total, month to date, and subscriber month to date.
- DV Daily Views
- DM Daily Minuets
- R Revenue
From this data I do the following analysis in each category:
Functions: (by the month)
- Average DV. Taking the month to date view and divide by the day of the last date in which analytics data is provided.
- Average DM. Same as average daily views.
- Average daily R. Same as average daily views.
- Average views per video per month. Divide DV by the number of total videos posted
- Average views per video per day. Divide #4 by last day information is provided
Month to month comparisons:
This requires you to extract the growth between the months and divide that amount from the compared to month. January’s growth is: ((January-December)/December)*100 to give you the percentage of growth.
I perform this function on the following numbers:
- Videos average daily views
For subscribers I perform the following functions in both absolute numbers and percentage growth:
- View growth
- Minutes growth
- Subscriber growth
Percentage subscriber activity has in the overall numbers
- Views as a percentage of overall views for the month
- Minutes as a percentage of overall minutes for the month
- I also track how many non-subscriber views it takes to generate a new subscriber.
Growth percentage is the most important metric we can use to determine if our business is viable. Every new business is in a race to get sufficient growth established before the money or the founder’s time and patience runs out. Early growth numbers can be very deceiving; it is very easy to go from one to two. You can view this as 100% growth, a doubling (geometric growth, the best kind), or simply as a growth of one. While doubling is fun, and you may even be able to maintain that level of growth for several months, in time the numbers simply become too large to double. The same goes for high double digit percentage growths. Larger numbers become increasingly hard to improve upon.
You may find a direct correlation between view growth and the number of new videos you produce. If you produce nothing new, you numbers may remain flat or as is always inevitable, decline. Or if you are producing new material regularly, the average video views can help you understand if you are penetrating your market any deeper. A growing number means your marketing efforts (or the efforts of your fans) are working. If the number is stagnant or declining, marketing may be your biggest problem.
These growth ratios will give you some indication as to the level of new production needed for new growth and the need for greater marketing efforts to get more production out of the work already done.
How much income you receive for your efforts are based upon the following variables.
- Total views
- Productive life span of your video
- Views per video per month
- Revenue per mille
- Number of videos produced
While the total views and revenue produced may give you some idea of your success, they tell less about long term success than the life span of your videos, views per month per video, and the number of videos produced.
If you make 10 videos and one just happens to hit it big and you get 100,000 views in a month, congratulations, you probably just earned $100 – $200 for your efforts, now what? Do you have the next “hot” video ready for next month?
But if you had 100 videos, getting just 1000 views each month, with a life span of even just one year, you could have an income stream of totaling +/- $1500 for the year.
The productive life span of a video resembles the old Aesop fable about the tortious and the hare. A high flying viral video will often fall as fast it went up. The video which experiences steady growth over a long period will be productive for a very long time. While a viral video may be exciting, unless you are positioned to take full advantage of the exposure, it will do you little long term good.
The Time Value of Your Effort
This is very dependent upon how timely or timelessness is the subject of your video. If it is based upon current events or current technology you could measure its earning lifetime in months or a year. If your subject is not based on anything current the earning lifetime will be measured in years.
Subject matters with short lifetimes need to make large and quick impacts, if they haven’t reached a sizeable audience within a few weeks of release they may never be large earners. Less time sensitive work may take a year or two to be productive, yet it still may be generating income 10 years later.
Average daily views per video is all about marketing. If there is a sufficient number videos (1000+) increasing this number will have a very dramatic effect on your net results.
YouTube does extensive marketing of our videos with their suggested videos and various YT curated playlists. Our ability to take advantage of this is influenced by SEO efforts and fulfilling the ever changing YT algorithm’s requirements. Much can be learned by studying other successful YT’ers in your niche. What kind of information is included in their description? How do they organize their vid’s into categories and playlists? Are there links to outside sites? YT playlists?
What is the impact of an outside link to the video? You can do an experiment very easily by monitoring one of your video’s SERP placement after establishing an outside link. You can do the same experiment with an internal link.
This is just a sample of the type of information which can be learned by drilling just a little deeper into your analytics. Every niche and channel will have somewhat different results and it will take some time to figure out what is most important for your channel. As an example: you may find demographic information more relevant than I have.