Youtube Business Model Explained | How Does Youtube Make Money?

Launched as a dating website by Chad Hurley, Steve Chen, and Jawed Karim in 2005, YouTube is the world’s largest video-sharing website and the second largest search platform after Google. If you need to learn more about the platform, you are in the right place; this article helps you have a quick glimpse of how Youtube works? Youtube business model, revenue model, and much more.

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More than a billion hours are spent watching YouTube videos; there are around 500 hours of video content uploaded every minute on the platform. This equates to around 30,000 hours of freshly uploaded content per hour. The amount of content on YouTube is increasing dramatically as customers’ appetites for online video have improved. The number of video content hours uploaded in 60 seconds grew by around 40% between 2014 and 2019.

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YouTube is available in more than 76 different languages and is widely used by users, big brands, celebrities, and many more. Youtube exclusive influencers use the platform to promote themselves and to earn money. Let’s explore more to know how YouTube works? Which business model does youtube follow, and it helps users make money and much more right here.

YouTube: Let’s Explore its History Right Away!

YouTube is an American social media and online video sharing platform owned by Google. Originated in February 2005 by Steve Chen, Jawed Karim, and Chad Hurley. It is a popular website among users with more than billions of monthly active users who utilize the platform to more than one billion hours of videos each day.

In October 2006, YouTube was acquired by Google for $1.65 billion. Google’s acquisition of YouTube has changed its business model; now, it doesn’t generate revenue from ads alone. The online video sharing platform now provides paid content like movies, videos, and other exclusive content.

YouTube and other approved creators participate in Google’s AdSense program to generate more revenue for both parties. The platform has then evolved from a small video streaming platform to a comprehensive service with reported revenues of $19.8 billion in 2020. After the acquisition from Google, YouTube has expanded beyond the website to network television, mobile apps, and the ability to link with other services.

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Some of the video categories on YouTube include short films, music videos, feature films, video clips, documentaries, movie trailers, live streams, audio recordings, vlogs, and more. All of this content is generated by individuals; this includes collaborations among YouTubers and business sponsors.

Since around 2015, established media corporations like WarnerMedia, Disney, and ViacomCBS have created and extended their corporate YouTube channels to promote to a larger audience. The online video sharing platform also acts as a social network by enabling users with a Google account to upload and watch their own videos, rate, and comment on the videos. They can even respond to likes, comments, and dislikes.

YouTube enables users to create their own playlist and also subscribe to other channels and users as well. YouTube has a substantial social impact, internet trends, influencing popular culture, creating multimillionaire celebrities, etc. It has been criticized for facilitating copyright issues, the extent of misinformation, violating its users’ privacy, enabling censorship, as well as endangering child safety and wellbeing.

Looking at the success timeline of YouTube, if you’re looking to build an online video-sharing platform similar to it, then we can help you with it. Have a look at YouTube clone features, working, and much more. You can even contact us to know how we satisfy streaming businesses’ requirements with our development strategy.

How Does YouTube Work to Provide Improved Experience?

The Google-owned website enables its users to upload, share, and comment on videos, subscribe to other users’ channels, and make money by monetizing the videos. The content uploaded on the platform is free to watch. Besides providing video-sharing services to users and small businesses, YouTube provides a specialized platform for games and music.

If you are looking, how does YouTube make money? It might sound confusing how you can use this platform to earn revenue when the content is free to access. But in reality, it is pretty simple. As of now, YouTube provides numerous tabs to optimize users’ experiences.


Home is the page timeline where all the suggested content is placed. All the suggestions are based on what users have previously viewed, subscribed, shared, seen, liked, or commented on. Note that if you like special uploaders, you can subscribe to their channels, and the content will be placed at the priority on your screen, and you will also be notified about the new content placed on YouTube.


The trending section of YouTube is much similar to discovery. Views and likes make out trends; all the viewed and most liked videos are placed here. The trend might differ based on the selection of location.


Subscription shows all content from the profiles you have subscribed to. It’s a filtered timeline that only shows a list of videos from people you subscribe to.


If someone comments or shares on a video you uploaded, the inbox is a one-stop tab for all activities and notifications on the profile. It’s like a mailbox where all the messages, as well as notifications, are stored. Users might get notified or message if someone replies to comment on the video.


It’s where all offline videos are stored. YouTube provides users to download their favorite videos as well as them on YouTube. Users are allowed to view these downloaded videos without the requirement to connect to the internet.

Along with all essential features such as viewing and uploading videos, YouTube provides different features such as analytics, where you get to check the statistics of any videos. It’s a reporting tool where you can check the demographics details of the views you have got from video and the number of shares and likes as well.

Is Advertising the Perfect Business Model for YouTube?

As described, “As interactions between advertisers and users change and as online user behaviors evolve, the platform is evolving and expanding to serve their changing requirements. Over time, the team monetization trends fluctuate. For instance, there is a steady increase in YouTube engagement ads that monetize at a lower rate than traditional desktop search ads.

Businesses are searching and implementing effective marketing tips helping them to connect with the right users. However, they even use YouTube engagement ads to drive traffic. The decrease in cost-per-click was driven by the continued increase in YouTube engagement ads, where cost-per-click continues lower than on other advertising platforms.

Understanding YouTube’s Business Model: Check Everything Here!

Most YouTube content is free to access; you can watch millions of videos for as many hours as you want. Even though a few movies are provided for free to watch, the actual product that the online video sharing platform sells is its users. Youtube works on an advertisement-based business model.

The company successfully pulls around 1.8 billion users every month. Google records each activity on Youtube as well as other websites and later combines it with their profile to help promoters in targeted advertisements on Youtube.

According to eMareter’s latest ad spending, video content grew around 30% to $27.82 billion in 2018. That simply means video ad investment will make up 25% of digital ad spending. The same report shows that Facebook will apprehend nearly one-quarter (24.5%) of all video ad spending this year in the US, at $6.81 billion. It makes Facebook the top social video ad solution in the US. The video-sharing content controls around 87% of US social network video ad spending.

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However, YouTube makes money through a subscription-based model, YouTube Premium. The social sharing content provides certain exclusive advantages to the subscribers by charging an amount for the membership.

How Does Youtube Make Money?

YouTube earns most of the revenue from advertisements and represents Google’s net ad revenues. Even the company is moving towards the subscription-based business model. Online video sharing remains a secondary revenue source.

One of the effective ways through which YouTube makes money is through sponsored ads. The result is a paid ad; it’s a sponsored video, the advertiser pays YouTube based on the number of views it gets after such an ad has been clicked on; it’s called SERP advertising.

Embedded Advertisements

The advertisement revenue stream of the video-sharing content is embedded ads. The ad is played before the actual video starts. However, short ads are placed among the videos, also for generating income. This is considered the best way to earn money from the advertisers based on the number of views the ad gets. The dimension of the feel is paid to the creator of the video.

Landing Page Advertisements

The landing page is the homepage which appears first in front of you without logging in. The landing page advertisement is a banner-style ad that can contain both videos and pictures. Advertisers can use it in different ways to shout out loud in the story.

YouTube Premium

Like Netflix’s business model, the online video sharing platform has originated its subscription-based freemium revenue model. The YouTube premium provides you an improved, continuous experience across YouTube, YouTube Gaming, and YouTube Music.

  • YouTube Premium membership has the subsequent perks:
  • Ad-free videos;
  • Access to exclusive Premium content;
  • Youtube Music Premium access;
  • Offline songs and videos;
  • Background play while using apps or when your screen’s off.

The subscription cost to follow Youtube Red is $11.99 in the USA, but it varies for different countries.

Channel Membership

YouTube revenue sources do not stop at ads. Launched as sponsorships, the channel membership features enable YouTube publishers to engage more deeply with the fans and earn more than putting ads. Advance features facilitate the partners to add a “Join” button on the channels and video pages.

Patreon’s business model stimulates the membership features. It allows the creator to extend special perks like merchandise, discounts, offers, other official products, etc., to the subscribers who spend $4.99/month. The online video sharing platform keeps around 30% of the membership fee paid by the subscriber.

Youtube TV

YouTube TV is a US-exclusive live TV streaming service that lets the subscribers watch cable channels such as ESPN, ABC, Disney, NBC, FOX, and many more on Youtube. It’s a subscription-based service and is predicted to expand at a fast rate. With more than a billion users, it’s a great addition to YouTube’s revenue model and is a powerful competitor to Hulu.

YouTube TV service is provided at $49.99/month cost and provides users with six different accounts and allows them to stream for 70 networks. Moreover, there are premium channels that can be subscribed to after paying an additional subscription amount. Youtube TV can easily be streamed on a device and comes with a respectful Chromecast with each subscription.

Affiliate Earning

You might have noticed products under some videos on YouTube. The products link to affiliate partners and pay a commission to YouTube if users buy the products.

Is YouTube Profitable?

Undoubtedly YouTube is profitable as an entity, except, of course, the high-tier folks at Google. YouTube ads earnings are expected to reach $34 Billion from 2017 to 2019; there was no profitability breakdown for the video-sharing platform. Its other revenue sources, the one discussed, were bundled under bets, making it challenging to determine profit.

YouTube is a popular social media platform. It is excellent for personal use, but it can be used by businesses to build a brand. The videos uploaded will be shown on YouTube and different search engines such as Google. 

If you’re thinking of investing in a video streaming script and launching a platform similar to an online sharing platform, make sure to choose the right development firm. Get in touch with us to know how we can help you develop and launch an online video-sharing platform similar to YouTube.

Post by Gaurav Kanabar

Gaurav Kanabar is the Director of Alphanso Tech, a globally acknowledged IT consulting company providing the services in the arena of the WordPress Development Services & iPhone App Development Services. With the immense support from the adroit team, Alphanso Tech has been serving a huge client base worldwide.

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