Making Money on YouTube [How I Made Over $25K the First Year]


Learning how to make
money on YouTube is much more than just using ads on your videos

In less than a year, YouTube has grown to half of my online
income. That’s not because income from my four blogs or 10 self-published books
have fallen but simply the speed and power of making money on YouTube.

You can make a LOT of money on YouTube!

But like running a blog or other online businesses, you need to understand the potential income sources and how to use each if you’re going to make real money. Waiting around for Google, YouTube’s parent company and ad network, to make you rich is going to be a very long wait.

Building a multi-stream approach to making money on YouTube
will not only make you as much as possible but will also smooth out the
ups-and-downs so you’ve got an income every single month.

Let’s look at six income sources for YouTube creators, the
pros and cons of each, and how to get started making a steady paycheck for your
videos.

Here are the income sources I’ll talk about as well as how
to put them all together.

  • Sponsorships
  • Affiliates
  • Own Products
  • YouTube Ads
  • SuperChat
  • Patreon

The Right Way to Make
Money on YouTube

Click through to almost any “How Much Did I Make on YouTube”
video and the conversation is almost entirely about how much the creator made
in ads. This leads to the general feeling that ads are THE ONLY way to make
money on YouTube.

Since ad income is so low…that leads to the general opinion,
and a lot of blog posts, that creators don’t make much money on the platform.

Maybe it’s just coming over from years of blogging that I
knew, if I was ever going to make money on YouTube, it would have to be with
other sources rather than just ads. Google ads on a blog pay very little,
around $14 per thousand impressions, while even the better ad networks usually
only get you around $24 per thousand impressions.

That means you need tens of thousands of page views to make
any amount of money…and it’s even worse for YouTube ads.

 I was able to start
monetizing my videos with ads on June 26th, almost exactly six
months from starting the channel. Monthly video views were around 150,000 so
the channel was growing quickly but that still only translated into about
$1,500 for the month.

I made just over $9,000 over the first six months of YouTube
ads on around 800,000 views over the period.

That number doesn’t even compare to the $16,000 I made in
sponsorships and affiliates over the period and those got started months later
than ads…and I’ve only just started selling my own courses and books through
videos.

If you want to make money on YouTube, you need a strategy
for making money through multiple sources!

YouTube income

We’ll start with my three favorite sources; sponsorships,
affiliates and own products. Own products will generally make you the most
money if you can develop the marketing funnel around them but they also take
the most time. Affiliates are probably the easiest. Sponsorships come a little
later after you’ve built a community but can be big money as well.

Making Money through
Sponsorships

Athletes do it. Movie and TV stars do it. Anyone with a
handful of followers on social media seems to be getting sponsors.

As a YouTube creator, one of your biggest income sources will be sponsorships from companies (brands).

Sponsorships tend to come in three types,

  • A fee for producing a video or series of videos
  • A base fee plus commission on clicks or sales
    for a video or series
  • Free products for the creator

Free products are nice and can be significant compensation,
especially for smaller channels that might not yet be able to get much in a
direct fee, but I want to concentrate here on making money for your channel.

If you are interested in getting free products, watch videos
on similar channels to see what they review or just look to the products/services
available in your niche. Make a list and go to companies’ websites to find
contact information. Then tell them you’d very much like to try their product
to review it on the channel if they would send you a sample or sign you up for
a trial service.

Always check any existing deals or discounts they have on
the product and ask for more than this. After all, you need to be getting
something extra for your efforts.

Getting paid to do a video is the ultimate validation of
your channel. You’ve joined the professional TV and movie producers…but how do
you get to that point?

  • Use the same approach as getting free products. See what other channels are promoting and visit blogs in your niche. Look for a Resources Page to see what is most often recommended.
  • Conferences can be a great way to find sponsors. If the company is willing to pay for a booth at a conference, they’ve got a marketing budget and might be willing to do a deal.
  • It helps to have some hard data to pitch the value of your channel so I’d recommend doing a few videos promoting some affiliates first. Use a link tracking tool like the PrettyLink plugin to give you data on the click-through-rate (CTR). You’ll know the video views and will get conversion data from the affiliate program. These three points will help prove what you can bring to a sponsor.

There are two types of videos you can do for a sponsor.

The first is a general interest video related to the
sponsor. For example you might do a video on repayment plans available for
student loans in a sponsorship with a student loan refinance company. You mention
the sponsor a couple of times, talking about using them as an option and features
of the company.

General interest videos have the benefit of appealing to a
much larger audience and not coming across as a commercial. You’re still
providing valuable information through the video’s content. The audience appreciates
the content and gets the sponsor pitch on a more subconscious-level.

The other type of sponsored video is a direct review of the
product or service. This is popular in the ‘unboxing’ theme or just reviewing a
company’s website and service.

The benefit to review videos is that they are generally
easier to rank for that keyword and have a higher CTR and conversion rate. This
makes sense because anyone clicking onto a video titled ‘Company XYZ Review’ is
probably already interested in the company or at least aware of the problem
they need solved.

The best strategy is
actually a mix of these two types of videos [and I feel like I’m giving away
one of my biggest secrets here].

When I approach a sponsor, I like to pitch for a series of
videos including two general interest videos and one review.

The campaign starts with the two general interest videos to
draw in as many viewers as possible and warm them up to the idea of the company’s
product or service. The third video, the direct review, benefits from more
views and an audience that is already aware of their problem and recognizes the
company’s brand.

This is not only a great way to get more conversions for
your sponsors but also a persuasive way to sell the sponsorship to the company.
Most of the people you talk to will be from the old school of marketing,
relying on blanketing TV with multiple commercials to build brand recognition.
They love hearing how your campaign idea ‘warms up’ an audience and offers
those multiple touch-points.

Of course, I also like
the strategy because you get paid for three videos instead of just one!

Each video includes a link to the company in your video description. I like to include in the pitch that I transcribe the videos and upload as a blog post as well to give the company double the exposure. Of course, I don’t tell them how easy this is because I script all my videos or that I put most of my videos up as blog posts anyway because it helps trigger the YouTube algorithm.

How much you charge your sponsors will depend on your niche
and how many conversions typically come from videos. Here’s a good way to find
how much to charge,

  • Look at how much affiliates in the industry are offering per lead or conversion
  • Find the median (not the average because it’s skewed by high-view videos) view count for your videos over the last month or two
  • If you have data on click-through-rates and conversions for your videos through affiliates you’ve highlighted then you can use that. Otherwise, a good rule-of-thumb is a CTR of around 5% – 10% and a similar conversion rate on your videos.
  • You can also look to see how much advertisers are paying Google Adwords for clicks on a certain keyword
  • This will give you an idea of how many conversions or clicks you might expect to the sponsor from your video and how much to charge them.

For example:

  • A related affiliate to the potential sponsor
    offers $50 commission for each conversion or you also find that advertisers on
    Google Adwords are paying about $4 per click for a related keyword.
  • You get approximately 1,000 views on your videos
  • You estimate that 6% of viewers will click
    through the sponsored link in your video description and about 5% of these will
    end up buying the product. It’s always better if this data comes directly from
    other campaigns you’ve done but an estimate will work too.
  • 1,000 views times 6% means 60 clicks and 5% of that
    means 3 conversions
  • A sponsor would expect to pay around $150 for those
    three conversions ($50 times three) or $240 for the clicks on a pay-per-click
    ad campaign.

I’ve also seen creators talk about charging an average of
between $0.05 to $0.15 per views you typically get on a video. As a numbers
nerd, I like the procedural estimate better and sponsors respond more favorably
when you can prove some estimate of value.

Some sponsors will try talking you into only accepting a
commission on sales through an affiliate program. I will generally drop my fee
a little if an affiliate program is included, so I stand to make more money
with commissions, but I always charge a base fee as well. Explain to the
sponsor that you stand behind your videos and know they convert but production
costs for video are so much higher than a simple blog post that you need a base
fee to cover some of those up-front expenses.

I always ask for at least half the total fee upfront before
I start work on a campaign and then the remaining payment payable after the
final video is published. If the sponsorship is for just one video, then the entire
fee is paid upfront.

By law and YouTube terms, you need to disclose whenever you
receive compensation from a sponsorship. You should do this both verbally in
the video as well as through YouTube’s sponsor declaration in the video’s ‘Advanced
Settings”.

  • I like to add in the lead-up to the video content something like, “I put this video together in partnership with XYZ company,” or “…in partnership with XYZ company, I want to show you…”
  • When you’re uploading the video, go to Advanced Settings and click on the Content Declaration box.
  • Checking the box marked ‘Help me inform viewers…’ isn’t usually required but you can check YouTube’s disclosure rules. Checking this will put a small text box “Includes Paid Promotion” in the lower-left of your video for the first minute.
Make money on YouTube with sponsorships
How to Make Money on YouTube with Sponsorships

Making Money with
Affiliates on YouTube

Affiliate commissions account for the bulk of my income on the blogs, around 45% to 60% some months, but seem to be less on YouTube. Part of that is probably because I focus more on sponsorships for the channel than only on affiliates.

I might do a few videos including affiliates if I think they
will convert especially well or if I can include a few different affiliates
into one video idea, but generally I like to try getting a sponsorship fee plus
commissions if I’m going to be talking about a company.

It means MORE MONEY!

Your strategy for promoting affiliates can work in much the
same way you approach sponsored videos, mentioning affiliate products in general
interest videos as well as directly reviewing the company. There are a few
points I’d recommend on finding affiliates and monetizing your videos.

  • If you don’t have a blog [you absolutely should
    because it’s a great complement to your channel] to tell you which affiliates
    convert the best for your audience, look to related channels and blogs to see
    what they promote.
  • Don’t waste your time with unrelated affiliate
    links in the video description. Anytime you’re planning on sending someone off
    YouTube through a link, ask yourself if it’s really worth it. YouTube doesn’t
    like when people click out of its site so you better be building a list or monetizing
    that traffic for it to be worth the potential hit to your video.
  • It’s up to you whether you do a call-out of the
    affiliate in the video, mentioning the link in the description, or just place
    the link. I try to reference at least one other video and tell people to look
    for the link in every video so that at least gets them looking in the video
    description, potentially clicking on the affiliate as well.
  • Just as in blogging, list posts work great and
    can be an excellent way to make money. Put a video together in a theme where
    you can include or compare five or more affiliates and other companies. Make it
    impartial and just focus on providing valuable content, then add all your
    affiliate links in the description.

Despite the potential hit from the algorithm for having an outbound link in your video description, I would recommend you try to include at least one related affiliate in most videos.

You never know which video is going to blow up and you don’t want to change the description after it already has. You’ll kick yourself later if there was a perfect affiliate you could have included in a video that ends up getting a million views.

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Selling Your Own
Products on YouTube

Selling your own products on YouTube makes a lot of sense.

First, you have nobody taking a share of the profits. With
affiliate sales, not only is the company going to take their cut but also the
affiliate network. With sponsorships, you’re selling another company’s product
for a small percentage of what a customer is worth to them.

I have friends that charge $1,000 and even $10,000 for a
course. That’s a lot of money compared to the typical $50 payout for an
affiliate sale.

Selling your own products also works well because people on
your channel are more likely to trust you or you at least have some brand recognition.
They’ve seen your videos, know that you try giving them the best information you
can, and that trust carries over to your products.

This can translate to a lot of money from dozens of
different product ideas,

  • Merchandise like t-shirts and mugs with your
    logo or interesting quotes printed on them
  • Mastermind groups, weekly or bi-weekly meetings
    with you and a group of people
  • One-on-One consulting
  • Books and Video Courses

There are two drawbacks to selling your own products that
you need to consider.

It sucks but it’s not enough to create a great product. You
have to market it and get it in front of people. In fact, as someone that’s
created multiple courses and books, I’d say marketing is 75% or more of the
work.

That means you’ll also need to develop a marketing funnel through
which to sell your products. It might not be necessary if you’re just selling a
$10 t-shirt but if you’re trying to get $100 or more for a course, you’ll need
to warm people up to the idea.

  • You can use videos to draw people in and offer a
    free webinar
  • Pre-webinar emails can warm them up to the solution
    of a problem they share
  • Through the webinar, you give them as much value
    as possible to grow that trust factor, then pitch a special offer on your course
    or other product
  • Post-webinar emails drive home the value of the product
    and special offer

This is a pretty typical example of a marketing funnel but
there are other things you can do including using Facebook or YouTube ads.
Typical conversion rates are about 20% to 30% of your webinar sign-ups will
actually show up and between 5% to 10% of those will end up purchasing.

Doing the math on that, and you can see you need a lot of
video views to produce sales. For example, if 15% of your video views click to
the webinar signup and 30% of those register, then 25% show up and 10% end up
buying…you need just under 900 video views for each purchase.

The second drawback of selling your own products is the time
and effort it takes compared to other sources like sponsorships and affiliates.
You need to consider the time developing and managing your products as part of
the costs.

If you’re selling a course, that means developing the course
and marketing. It also means managing the sales process and students in the
course.

None of this is to say that your own products aren’t a great
money-maker on YouTube. I’m just getting started selling my courses through the
platform and it’s been worth it so far. Just understand it’s not the get-rich
idea that some would have you believe.

Just one warning about selling your courses, merchandise or other products on YouTube…don’t make it ALL about the sales. I see so many creators spend years to build up a community then alienate everyone with continuous pitches to buy everything from t-shirts and courses.

I’ll talk more about this later in the chapter but moderate your sales pitches and make sure you’re always providing quality information.

how to make money on youtube fast

Making Money on
YouTube Ads

Despite not paying much compared to other income sources,
YouTube has a great system set up in their ads platform. This is where the bulk
of most creators’ income comes from though we’ve seen already that maybe it
shouldn’t be.

Once you’re approved for the YouTube partner program, the
platform will start showing ads on your videos. To get accepted into the
program, you need over 1,000 subscribers and 4,000 total watch-hours over the
last twelve months.

Once you meet these requirements, it might take a couple of
months to get approved but then the ads will start appearing automatically.

That’s the great part about YouTube ads. After a few minutes
applying and setting things up, everything is done for you.

This is easily done by going to Creator Studio à Channel Settings à Monetization

how to set up YouTube monetization
How to Set Up YouTube Monetization
  • First ‘Apply to the Partner Program’ which is
    just a one-click action. You’ll see your watch-hours here as well as whether
    you qualify on the subscriber count basis.
  • You’ll need to open a Google Adsense account and
    associate it with your channel. This is how you’ll be paid as well, with a monthly
    ACH deposit or check. You also need to tell YouTube which ads you want to show
    on your videos.
  • Go to the Monetization Settings to tell YouTube what
    kind of ads you want to show

Here are the types of ads YouTube currently uses,

  • Overlay in-video ads are transparent boxes of
    ads shown on lower part of video
  • Skippable video ads come on before your video
    and skippable after a few seconds
  • Non-skippable video ads
  • Sponsored cards are notes appearing in the
    upper-right just like your own cards
  • Automatic mid-roll ads are video ads that interrupt
    your video after a certain amount of time
  • Display ads are shown to the right of your video
    in the sidebar and are always turned on.

Most of my ad revenue (85%) will come from Skippable video
ads, usually followed by about 11% from Display ads and 2.3% from Bumper Ads. I’ve
turned off non-skippable ads though they tend to pay higher rates, I just don’t
like the idea of forcing viewers to sit through a 15-second or longer ad.

I’ve also turned off the mid-roll ads on my videos. Most
people don’t think anything of commercials during a TV show but it’s still a
little off-putting to see a YouTube video interrupted for an ad. You’ll see
viewer drop-offs increase during ads but it still might be something to
consider if you’re not monetizing much through the other income sources. After
all, more ads means more money!

You can also turn monetization off for individual videos. You
might do this on a sponsored video if the partner requests it though I usually
keep it turned on for all videos.

YouTube gives creators 55% of the ad revenue it collects
from advertisers on your videos. The actual amount you will earn depends on
your niche. Some niche like personal finance, investing and education tend to
pay higher rates while other niche like beauty or kids toys pay a little less.
It just depends on what YouTube is able to get from advertisers.

I’ve seen rates that translate to about $0.0035 per view for
some channels, mostly in those lower-paying niche, while my income and other
channels in personal finance average $0.01 per view on ad-monetized videos.

Other Ways to Make
Money on YouTube

There are two more ways creators are making money on YouTube,
both with their pros and cons. I haven’t used either but have spent a good deal
of time researching each and talking with others using them.

SuperChat is a
viewer sponsorship during livestreams. Basically it’s like a donation the viewer
gives you for doing a good job. The viewer ‘buys’ a superchat, usually from $5
and up, and you receive a notification in the comment section during the
livestream.  

YouTube takes 30% of your Super Chat revenue and passes the remaining
on to you through your Adsense account.

The upside to a Super Chat for viewers, beyond supporting
their favorite channels, is that it highlights their comment and is usually a
good way to get their question answered or an appreciative shout-out from the
creator.

Some creators like to make a little pitch for super chat payments
occasionally during a live stream and thanking others for their Super Chat
always helps to bring out a few more. It’s only available through livestreams
so if you’re not doing these, it won’t be much of an income source.

Besides the fact that I don’t often do livestreams, YouTube’s
30% take on something it really doesn’t have to do anything turns me off the
source. Livestreams can be a good way to connect with the community though so
this might be a bigger part of your YouTube income.

Patreon is
another popular income source for creators. The website is based on the old
system of patronage that’s used with artists and other creatives. This is where
someone will support an artist with a monthly income in exchange for rights or
just to enjoy the works they create.

This system has given us some of the most beautiful
renaissance works and paintings from Michelangelo and Botticelli. Applying it
to YouTube is an interesting idea and can be significant income.

YouTube creators start a page on Patreon and offer extras to
patrons in tiers. These might include early access to videos, exclusive videos
or behind-the-scenes, group meetings or really anything extra. Patrons sign up
for a tier, a specific charge, and that amount is deducted monthly until they
stop.

From the patronage fees to your profile, Patreon takes:

  • A 5% fee on all money collected from Patrons
  • A processing fee around 3% charged to Patrons
  • A payout fee of between $0.25 to $20 to transfer
    your money to a bank account, PayPal or Payoneer

For example, Ross Tran offers five tiers ranging from
monthly patronage of $1 to $100 for different benefits in each.  He’s got over 1,000 patrons so is making
anywhere from $1,039 to $103,900 per month depending on what tiers his average
patron is choosing.

making money on youtube with patreon
How to Make Money on YouTube with Patreon

The problem I have with Patreon isn’t the amount charged by
the platform which is well under what YouTube takes on its Super Chat program.
It just doesn’t seem to be much money compared to other income sources.

Case in point, Ross Tran has over 800,000 subscribers on
YouTube but only a thousand patrons. Another popular YouTube creator that
actively promotes his Patreon page, Tim Schmoyer, has over 450,000 subscribers
but only 151 patrons.

It can still be a lot of money if you’re able to get people
over to your Patreon page and offer some exciting benefits for monthly support…to
me it just doesn’t seem like it’s worth the effort to manage versus some of the
other income sources.

YouTube has launched its own membership feature directly on
the platform where viewers can support a channel on a monthly basis. Like many
YouTube features, the program is constantly evolving but currently you need
more than 30,000 subscribers to qualify.

The program works very similar to the Patreon model except
you run into the same problem as the SuperChat function with YouTube taking 30%
of the donated amount. I appreciate YouTube coming out with new ways for
creators to make money but that’s a deal-breaker for me.

The warning I pointed out in selling your own products applies
to all income sources so it’s worth repeating. Turning your videos into
constant commercials and sales pitches will drive away your community and cause
your growth to stagnate.

There’s no rule for how many of your videos can be directly
monetized, i.e. sponsored or product-focused, without turning off subscribers.
I like to keep it under a fifth or a third of the videos published. This doesn’t
mean you can’t add an affiliate link to each video description, it just means I
try not to make a sales pitch or referral within the video content for more
than a third of the videos.

It’s also the reason I like doing general interest videos where I can provide quality information while still calling out an affiliate or sponsor rather than just a direct review of a product. Viewers are much more accepting of a monetized video if they’re getting some great information that helps them whether they buy a product or not.

Making money on YouTube isn’t the get-rich scheme some creators make it out to be but it also isn’t the slow grind of making pennies per video on ads. Learn how to integrate different income sources into your content strategy and your videos will continue making money years after you’ve published. Spend the time to understand YouTube as a business and you WILL be rewarded!

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