Platforms for Monetizing User-Generated Content: Business Models and Strategies of Youtubers

Friday, June 24, 2016: 2:30 PM-4:00 PM
107 South Hall (South Hall)
Bryce Anable, Community and Regional Development, UC Davis, Davis, CA
Martin Kenney, University of California, Davis, Davis, CA
User-generated content (UGC) is one of the most intriguing phenomena in the emergence of Internet platforms. The relationship between creators has attracted much attention, particularly the uncompensated content creation on platforms such as Facebook, Instagram, Pinterest, and others (see, for example, Terranova (2000) and Lanier (2014). In parallel with the rise of these unpaid UGC sites, a number of UGC platforms where the content creators can receive compensation have emerged. In addition to the Apps stores, the most important of these is Google’s YouTube (YT), but there are others such as Amazon self-publishing, Vine, Vimeo, and the various blogger sites. The direct compensation schemes for these, what we have termed “virtual consignment” platforms vary from direct payment for access such as is the case for Apps and self-publishing to advertising. However, in the case of YT, in particular, we show that the successful participants, in fact, create quite complex business models in which the advertisements served during the video account for only a fraction of their total income. In our paper, we propose to study the development and growth of YT, the business models of YTers, and reflect upon the type of labor market being created.
YouTube began as video uploading and sharing service in 2005 and was acquired by Google in 2006. The rapidity with which YT grew, its sheer size, and its centrality in youth culture and viewing habits have given it enormous social and cultural power. Initially, YT’s model was rather like the free UGC platforms in that the video producers were not compensated. Rather, as is the case with Facebook, content creators were “compensated” by being allowed to use the platform. Google’s monetization model was to serve advertising to the viewers. In the early stages, YT’s content providers had no commercial motivation. In 2007, drawing on the example of Amazon’s Partner Program, Google initiated a “Partners Program” by which content generators could share in the ad revenue their content generated. This decision created the possibility that the content generators could monetize their creations.
While monetization is clearly important, successful YouTubers can translate their success into fame, e.g., Justin Bieber and develop other income streams. During the decade, YT has transformed into a lucrative career for its most successful content creators. Moreover, given the breadth of its offerings YT provides a wide variety of commercial opportunities. However, content creators are generating income, as top earner, “PewDiePie,” earned $12 million pretax in his most recent year on the platform (Forbes, 2015). However, even while it offers income generation opportunities, in keeping with many other businesses in the Platform Economy the available evidence suggests that the returns are distributed in a power-law fashion (Brynjolfsson et al. 2014).
Our paper examines the business models of YT content generators exploring what a “career” means as YTers cobble together a pastiche of income sources that starts with pre-roll videos and in-video banners (from which they receive 55% of the advertising revenue as determined by the opaque Google compensation algorithms (Warner, 2014). However, the visibility generated on YT can allow them to profit from sponsorship, product promotion, and product placement. But, also from appearances, creating and selling branded merchandise, and encouraging viewers to donate to their personal crowdsourcing pages; all of which are derivative of their YT fame. Effectively, the successful YTers become personal brands.
As is the case with many successful platforms, YT has also spawned an entire ecosystem, in part driven by Google’s strategy, but also more organically. In the process the production quality and intricacy of videos has skyrocketed, as the platform and its content transformed into a business. YouTube has not only directly invested millions in content creators and their new programs, but YouTube Spaces offer strategic programs and workshops to boost video production quality (Adweek, 2013). These developments have led to the creation of YT-focused multi-channel networks and management firms based largely in Los Angeles. Sponsored videos, brand deals, and partnerships are often organized and negotiated by professionals who specialize in the management and monetization of YT stars.

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