My kids and I recently went to a TED Talk youth event, and while we were waiting for the show to start, they played a bunch of videos from a fast-talking YouTube celebrity named Hank Green. Hank is the host of SciShow, a YouTube science show where he investigates topics like “The Truth About Gingers” and “The Terrifying Truth About Bananas.”

Hank and his brother John have produced thousands of YouTube videos, which have received a total of a billion views. A billion views! Considering there are only seven billion people on the planet, you would expect these guys to be filthy rich media moguls, sipping champagne out of Faberge eggs on their hoveryachts.

Hank recently wrote a radically transparent post on Medium about the economics of being a content creator — what he and his brother actually get paid for all that work. First off, he reveals they’ve actually lost money: they’ve earned $2 million in YouTube advertising revenue, but spent $4 million to create the content.

Then he breaks it down into CPM — cost per thousand, or what he gets paid for every thousand views of his videos — comparing it with the CPM of movies, TV, and written internet content.

Here’s a graph of his data:

His reasoning is that people will pay $15 for a two-hour movie, but people will pay zero for YouTube content. To get paid as a YouTube content creator, then, you rely on YouTube ad revenue. There are problems with his data*, but Hank’s point is valid.

Online content creators get paid far less than they are worth.

I speak here from experience. For fifteen years, we ran a comedy website called ZUG. In the early days of the web, it was a labor of love, but as the online advertising industry matured and our traffic grew, it became a real source of revenue. Slowly, however, the CPM of banner ads began to drop, and it never stopped dropping. In other words, as we furiously pumped out more content, working tirelessly to grow traffic, each pageview became worth less and less.

This is why your favorite content site is saturated with ads: every one of those ads is worth fractions of a penny to the content creator. (At a $1.00 CPM, each banner ad is worth one one-tenth of a cent). It’s a numbers game: the way to survive is to produce more and more content. It’s like running on a treadmill that gradually speeds up, until eventually a valve explodes. Also, the valve is in your heart.

This is why the moderately successful content creators are content factories: they put out a ton of content, sometimes five or six videos a day. Can you imagine writing, shooting, editing, uploading, and promoting five or six videos, day after day after day? You can’t appreciate this unless you’ve tried to do one video. It’s a modern-day sweatshop! But this is what is required by the economics of online content, when we all expect everything to be free.

As a reward for this ceaseless toil, you can then eke out a living from the crumbs thrown to you from the YouTube table. When the media writes articles about you (which they will, because you will now be an online celebrity), they will invariably write something like, “His videos now earn enough advertising revenue to make this his full-time job.” Well, I SHOULD HOPE SO! Considering he now works harder than any person on the planet.

The graph above shows there is a tremendous discrepancy between what online content creators get paid, and what, say, TV content creators get paid. Paradoxically, this is driven by the very transparency of online advertising:

  • When advertisers buy an online ad, the reporting is so precise that they know exactly how many views and how many purchases they’ve received from that ad. (The answer is usually lots of views, not many purchases.)
  • When advertisers buy a TV ad, they have very poor reporting, knowing only views (usually wildly inflated), and usually no real purchase data. This lack of transparency means they take educated guesses, giving TV far more credit than it’s likely worth.

In other words, because advertisers see exactly how an online ad performs, they vastly undervalue the online ad impression. Because TV reporting is opaque, they vastly overvalue the a TV commercial. This is a huge market inequity, and if you believe anything Adam Smith ever said, eventually the market will correct this: the cost of TV advertising will plummet, and Hank Green will become the most powerful man on Earth.

Meet your new overlord.


A Better Way of Making Money

For content creators who aren’t happy with just scraping out an income, but who want to build a media empire, there’s a better way.

In a nutshell: you need something to sell.

I recently went to a talk by the famous modern composer Philip Glass, in which he talked about his early childhood. His father owned a record store, and young Philip would often hang out at the store, watching people use their hard-earned money to buy records. “Every day, I saw this handoff of art/commerce, art/commerce, art/commerce,” he recalled. “So as I grew up, this was completely natural to me.”

But even Philip Glass, whom history will surely remember as one the most influential composers of the 20th century, was driving a cab to make ends meet until he was forty-five years old.

The economics of online content, in many ways, are the economics of art: until you have reached a certain level of notoriety, people simply are not willing to pay. Even if this post plants the seed of a business idea that generates millions of dollars — and I hope it does! — you would not have paid me $1.00 to read it. We expect online content to be free.

This is why the advertising model — “I’ll build up my audience, then sell their eyeballs to a butter company” — is a lousy business model for content creators. Hank’s suggestion is to ask for people to pay, but as he points out, this doesn’t work for lower-income customers or cheapskates.

The better way is to have something to sell.

Online content creators have to make their money by building up an audience, then direct that audience to some profitable business that they own. This can be a premium content product like a book, movie, album, or online course. Better yet, this is a premium service business: consulting, speaking, coaching, or doing the work you do, but for individual clients.

Every online content creator builds up a formidable arsenal of skills, simply from producing all that content. They know a ridiculous amount about writing, recording, publishing, social media, SEO, marketing, advertising, and building online communities. Who wouldn’t want Hank Green to advise them on a video strategy? How much would a big brand, or a major advertising agency, pay for that?**

At Media Shower, we specialize in helping businesses create content to attract more customers. But we’re lucky: businesses already have a business built in. The content naturally leads to more business, which is why content marketing is a rapidly growing industry. As author Seth Godin said, “Content marketing is the only marketing left.”

If you’re a content creator with no business, you should find a business that your audience wants and needs from you. What is it you do best? Make it the focus of your website, and direct your audience there instead. Why sell your business to YouTube advertisers who don’t care about you anyway?

By all means, keep up the quality and quantity of content; never compromise on that. But find a funnel to direct your audience, one that provides additional value for them and additional revenue for you, something which you control. Keep doing this, and one day, you’ll wake up to find your Faberge egg, still half-full with champagne, on the deck of the hoveryacht.

Sir John Hargrave is selling two things in this post: he’s the CEO of
Media Shower and author of the upcoming book Mind Hacking. However, the post is free to distribute under CC 4.0: if you like it, please share it.


* In my view, Hank is mixing CPM (cost per thousand, or what an advertiser will pay) with RPM (revenue per thousand, or what the content creator receives). A movie screenwriter does not directly receive $15 from every person who watches a movie; there are a long line of people who need to be paid in between: theaters, distributors, movie studios, lawyers, craft services, etc. Ideally the data would compare RPM for all four media types; if any TV or movie creators want to let us know what they get paid, we’ll be happy to update the data.

** Hank and his brother John are actually successful entrepreneurs with multiple businesses in addition to their YouTube channels … which proves my point.