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The YouTube reality: Big audience, small reward

Psst, YouTube star: Don't quit your day job just yet.

Over the past few years, the business and lifestyle pages have been filled with upbeat stories about unconventional creators who have developed mammoth audiences on YouTube, earning so much money from ad sales that they can spend all of their days making videos instead of living 9 to 5 in a cubicle and pushing paper around for The Man.

Jenna Marbles, perhaps the biggest female YouTube star, has more than 9.8 million subscribers who watch her weekly comedy videos. The goofy troupe Smosh has more than 11 million subscribers.

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However, even as viewership on the Google-owned platform grows by double digits (it's now up to four billion hours per month), YouTube has a stubborn problem: A lot of the content is toxic to traditional advertisers, who don't want their brands associated with stuff that's too edgy. Worse, by YouTube's own admission, its core user base belongs to a highly connected, but extremely young demographic that isn't looking to, say, buy a $30,000 (U.S.) car or get a mortgage or even buy dishwasher detergent.

So last year, in the hope of attracting a new audience of viewers and advertisers, YouTube reached out to dozens of creators with a dependable track record, threw an estimated $100-million at the lot of them, and pledged to promote their videos. Earlier this year, recognizing that it may take more than 12 months to create a committed audience base, it renewed many of those deals.

But not everyone signed up for Round 2. Last month, Internet entrepreneur Jason Calacanis wrote an essay, titled "I ain't gonna work on YouTube's farm no more," in which he explained that, despite the site being an awesome platform, he was tired of sharing as much as 45 per cent of ad revenue with the company. He also warned other creators that their subscribers actually belonged to YouTube, which would make it difficult for the producers if they wanted to move their content to other sites.

Mr. Calacanis isn't the only one taking a second look at YouTube. On Thursday, the trade paper AdAge noted that a growing number of traditional Hollywood-based producers are beginning to put their content on other sites such as Hulu, whose programming consists primarily of TV network fare and where the audience is therefore more likely to consist of the traditional TV demographic of 18-to-54-year-old women.

Still, plenty of creators are playing on YouTube, including Simon Cowell of American Idol fame, as well as comedian Sarah Silverman and actor Michael Cera, who have formed a comedy channel called JASH.

And somebody is certainly making a lot of money. BroadbandTV is a Vancouver-based company that operates something known as a "multichannel network," a popular strategy involving the aggregation of many channels under one administrative umbrella. Two weeks ago, the company, which counts about 7,800 channel creators in its stable, signed a $36-million deal with RTL Group, a large European entertainment network (whose properties include American Idol and The X-Factor) looking to get more deeply involved in online video. While a select few of those creators may become rich if their videos are licensed to RTL's TV properties, most will continue to be mere digital foot soldiers, making pennies as they watch their clicks inch very slowly upward.

YouTube acknowledges that the odds of making it really big are actually really small.

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"There's thousands making six figures," said Jeremy Butteriss, the director of strategic partnerships at Google Canada. Still, he cautioned, "you've got to think about multiple sources of revenue, not just YouTube revenue alone."

He mentioned Michelle Phan, a beauty and makeup expert with 4.2 million subscribers. "She has a very strong website that her users visit and she generates a lot of advertising revenue there," he said. "She has also tried things like shipping beauty kits to her users for a fee." He also lauded Epic Meal Time, a Canadian-based purveyor of extreme-food culture that drives viewers to its own site, where it sells T-shirts and other branded memorabilia.

Mr. Butteriss draws a comparison with cable channels, whose appeal was not always obvious in the early 1980s. "If you look at the number of cable channels launched from 1980 to now, there were a few hundred that were highly successful, a few thousand that tried to launch and didn't work out as the industry matured. We're still in those early days."

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About the Author
Senior Media Writer

Simon Houpt is the Globe and Mail's senior media writer, charged with covering the industry's transformation. He began his career with The Globe in 1999 as the paper's New York arts correspondent, covering the cultural life of that city through Canadian eyes. More


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