The problem with Youtube's new monetization strategy for creators

At Vidcon 2018, Youtube announced that it was rolling out new features for creators with 100,000 or more subscribers. One of these initiatives, adding a subscription feature to channels, caught my eye in particular.

Why Youtube is rolling out the paid channel subscription feature

According to Youtube's Chief Product Officer, Neil Mohan, "we... want to think beyond ads. Creators should have as many ways and opportunities to make money as possible." 

Mohan's right... partially. Creators should have as many ways to make money as possible, and adsense revenue is notoriously low, especially in the wake of the adpocalypse and rampant demonetization of videos that have creators scared and uncertain.

But the real problem that Youtube creators are facing isn't a lack of on-site integrated ways for people to pay their favorite creators. And until Youtube fixes this fundamental flaw in its platform, creators will be left swimming without really knowing what's wrong.

A brief history lesson on Youtube as a career

Youtube's current success stories, by and large, did not orchestrate their success with intention. The majority of these creators were looking to connect with an audience over something they were passionate about, but could not have predicted the multi-million dollar empires they've created now.

Those empires have largely been built, up until about two years ago, on two strategies, for the most part: Affiliate marketing and brand partnerships.

Affiliate marketing requires the placement of a link in the description box of a video; when a subscriber clicks on the affiliate link and purchases that product, the Youtuber receives a commission. This is how the majority of Youtubers monetize their content outside of ads.

The second stream, brand partnerships, is a bit more complicated - a brand can sponsor a creator's video (or series of videos) where the creator is monetarily compensated (ie: this video where ColourPop partnered with MannyMUA) or they can recruit an influencer to design or curate products that are purchased primarily by their audience. The quintessential example of this second form is the ongoing collaboration between Desi Perkins and Quay Australia

The latter collaborations are much more lucrative for influencers as they're essentially partnering with an established brand to create and sell products as opposed to just creating a video.

Seeing the wake of the success of these original influencers, becoming a Youtuber as a career has now become a profession that some youngsters aspire to - this has given rise to the Jake Paul, Tessa Violet, Tana Monegeau's of the digital space.

Creators as Entrepreneurs

The third stream that I mentioned above is the creator as entrepreneur.

This typically takes two forms: In the beauty community, it's meant the release of product lines created by influencers. To public knowledge, these brands are entirely funded and owned by the Youtubers who hire chemists, designers, etc. to help with the formulas.

For other creators, it's meant the creation of tours, conventions, and other events where fans can interact with them, usually in partnership with their management company. Hank and John Green, the original founders of VidCon, are the most important examples of this, but the brothers have an advantage over most of the other creators in that they worked as a team and were at least a decade older than most of the other prominent platform creators.

The problem that's plagued Youtube Creators since the very beginning of the platform (that Youtube refuses to address)

The fatal flaw that has always plagued creators since the very formation of the platform, which Youtube refuses to address is that it's got a critical mass of people who use Youtube as a primary business platform... with no formal business training.

As the creator space has grown, creators have largely flown by the seat of their pants, reacting to Youtube's changes, doing the best that they can, but remaining forever reliant on a platform which has shown, time and time again, that it does not know how to mitigate the damage it does to creators' incomes on a daily basis because creators don't have the proper business education that they need.

What this has led to is a generation of influencers relying on other people who do know about business - their brand collaborators (see Quay x Desi again) - to grow their business and on the continued partnerships with brands for sponsored content. Most Youtubers have become glorified product pushers. 

When Youtubers release their own brands, this can prove problematic as they're releasing products without following proper business development techniques, seeking investor funding and partnerships, or creating long-term sustainable business strategies. 

Instead, they are selling their products primarily to their existing audience of around 4 million subscribers and the ancillary audiences of other gurus. They continue to think like a Youtuber when launching their own brands as opposed to thinking like entrepreneurs... because they don't know that there are other options available that don't require an algorithm or notification bell to communicate with their audiences and that don't rely on their existing subscriber base for sales.

And yes, many of these people have talent managers who help them to secure brand deals, but that's not universally the case. Many of the larger beauty gurus, including Jaclyn Hill, Desi Perkins, Katy De Groot aka Lustrelux, Tati Westbrook aka GlamLifeGuru, Laura Lee, etc. are self-managed and are largely on their own when it comes to creating products and moving to the next stages of growth for their own brands.

The exceptions to the rule

There are two key exceptions to this "rule" particularly in the beauty community.

Michelle Phan, one of the co-founders of Ipsy, saw Youtube for what it was: An opportunity to build an audience that she could then monetize without relying on Youtube. She launched the monthly subscription service, which landed her spots in every major news outlet, helped foster the careers of other gurus including Perkins and De Groot. Now, she's left to focus on the growth of her own brand. 

Phan's entrepreneurial savvy allowed her to depart from the standard path of most Youtubers and instead built a multi-million dollar empire that she owned and controlled.

The other exception is Marianna Hewitt, of the blog + channel Life With ME, and one of the co-founders of the instant bestselling brand Summer Fridays. Unlike the majority of creators, who launch without learning about the missing entrepreneurial skills they need to ensure the long-term health and longevity of their brand, Hewitt spent the summer of 2017 at Harvard, learning about business for an unnamed project, which we now know to be Summer Fridays. The cataclysmic success of Summer Fridays from its launch in Sephora to the endless press features, was carefully planned and orchestrated by Hewitt and her partner, Lauren Gores.

What Youtubers need to focus on instead

Youtube's goal, at the end of the day, is always to maximize Youtube's bottom line. Simple, end of story. Because Youtube is a business.

Youtube's new monetization strategy serves its end goal of keeping consumers on its platform and being able to swipe a portion of the profits from having people subscribe.

Instead of focusing on Youtube's ever changing algorithm and related algorithm changes on social media, creators need to focus on two things:

  1. Hiring a business development manager who can help them put together a strategic growth plan for their new brands that allow them to truly their grow their businesses into a force to be reckoned with that leverage their existing audience as the starting point of a larger strategy to grow their market share and prove to investors that they are a viable brand worth investing in, as opposed to relying on audience that they have an increasingly difficult time communicating with on Youtube.
  2. Utilizing digital marketing strategies to communicate with their audiences without the use of an algorithm or notification bells or any of the other strategies that large social media and video sharing platforms are putting into place that reduce reach. 

If you're an influencer who's ready to take back control of your audience and strategically grow your brand, shoot me an e-mail at hello@erikaashley.co and let's chat about how I can help you.