Why YouTube can't survive without ADS

“The internet runs on ads” - Marques Brownlee

Yeah it does & it sucks, people hate them so much that they are willing to pay not to see them. But ADS are everywhere on the internet, they have been around forever and they seem like a necessary evil.

But what if it didn't have to? What would the internet be like without advertising? Can you imagine that? An ad-free utopia;

Ugh, we can't go back to 90s style websites, but maybe we can do something about YouTube.

CAN YOUTUBE WORK WITHOUT ADS? WHAT WOULD THAT LOOK LIKE?

It's not hard to imagine a YoutTube Without ads, because that's how it originally was when youtube started out. They were growing tremendously quickly and the Ex Paypal employees had no way of making money so they quickly burned through the cash they got from angel investors, and the only reason the whole entire project did not die, was because a Google Employee begged Google to buy the platform from them for 1.6 billion usd.

In hindsight It seems stupid to have to convince the #1 largest search engine in the world that buying the 2nd largest search engine in the world that makes them 28 billion usd a year, would be a good idea, but at the time Google was not big on ads.

In fact Google originally thought that most of their money was going to come from licensing their search engine to corporate clients & maybe 15 percent of their revenue was going to come from ads; Nobody really thought much of ads at that time and This is ironic; because their search algorithm was the origin of programmatic ads which would usher in LUDACRIS AMOUNTS OF MONEY from big companies.

Programmatic advertising is a system that automates the processes and transactions involved with purchasing and dynamically placing ads on websites or apps.

In the old days, ads were sold the same way they’re sold by a newspaper: you got a call from someone who wanted to buy a banner ad on your website and it was placed and removed manually there by a programmer. Now this process could take weeks, and Google crunched it down to less than a second, because of this now everything in the internet relies on ads.

It's just the simplest and sure fire way to make money on the internet, with enough traffic you can earn ridiculous amounts of money.

The real trouble came when this business model was applied to social media sites such as Facebook, Instagram and YouTube. With that, a chain of unfortunate events was set in motion.
TIME ON SITE : the metric to rule them all
In order to make money & stay free, the user of the social media platforms must be shown ads. And unlike Google who can only suggest stuff to other websites with tools, these Social Media platforms can collect data on their users to hone in on one single metric over all: time-on-site.
The longer you remain on YouTube, the more ads they can show you. More ads = more money. Whichever video succeeds at trapping the audience the advertisers want for the longest makes YouTUbe the most AMOUNT OF money, the channels that make the most money get recommended the most & grow quicker

This means that discoverability for new channels or channels with an audience that Advertisers don't look for, goes out the drain.

This mostly affects the content creators, who have gotten their VIDEOS DEMONETIZED, OR EVEN their whole channel cancelled. To make the amount of money that they were making before, Most of them have had to shift from a creative high quality type of content, to whatever trend or audience the algorithm is optimising for.

So in short ADS BAD!

But without them, YouTube would quickly go BankRupt because who is going to pay for all the video hosting?

Everysecond.io says that 400 hours of video get uploaded every minute to YouTube. This site estimates that YouTube makes around 35k per minute, if this metric is somewhat correct, I would only imagine their hosting and other costs would have to be much less than that. That is still a lot of money.

BUT BENJAMIN, WHAT ABOUT SUBSCRIPTIONS?

Youtube has implemented many other monetization options to reduce its dependency on ads, one of them is its monthly Subscription, but according to businessofapps.com
YouTube premium has only managed to reach 50 million subscribers as of 2021, that's a lot of subs but if you compare it with its 2.5 billion monthly active users, it's barely 2%.

The global online advertising market size reached US$ 186.6 Billion in 2021. Looking forward, IMARC Group expects the market to reach US$ 349.6 Billion by 2027. There is just so much money being thrown at ads by big companies that subscriptions are nowhere near what a platform can make with ads. This is something that even Netflix has had to come to terms with, they are now offering an ad supported tier to grow its user base.

Now content creators have brand deals, and Patreon to help them monetize their videos without having to sacrifice THEIR REAL INTEREST in order to make whatever the algorithm promotes best. But that doesnt help small channels that have not yet amassed a big enough audience and following to get brand deals and patreon donations. They have to suck it up and grind their way to enough subscribers to start making any amount of money at all and that if Google can fit ads in their videos.

And that's an ok system, most of those channels, myself included, are bad initially at making videos, so grinding out a lot of videos helps them get better at making videos but not necessarily at making better, or unique kinds of content. Most of the cases they deviate towards what makes them money and not to what they are passionate about or creatively want to express.

Ad revenue mostly benefit big channels that work best with what advertisers want to sell

And that's a bummer because the opposite of those channels are the kinds of channels I would like to make, and knowing that I will most likely get treated as a financial burden to the platform, is sad.

Advertisers want to sell people stuff, I get it, they want their ads to be shown in channels that a lot of people that could buy their stuff watch. It makes perfect sense.

But What if we could inject more money into the YouTube platform in a way that newly created channels and channels that don't fit well into the advertising business model could receive income from the get go?

INTRODUCING MICROPAYMENTS

A **micropayment **is a small transaction amount that is usually spent on digital products over the internet.

Micropayments can work in one of two ways:
through a prepaid system or
at the point of sale.

A micropayment can RANGE FROM A few pennies UP TO several dollars, or even as small as a fraction of a penny.

A number of micropayment systems were proposed and developed in the mid-to-late 1990s, all of which were ultimately unsuccessful because transaction fees often exceeded the payments themselves.

Up until recently Micropayments were not ECONOMICALLY FEASIBLE, but recent technologies have opened the doors to this sort of payment.

One example is Dropp this is a micropayments platform that allows consumers and merchants to make and accept payments as small as a fraction of a cent for both physical and digital goods and services.

Dropp is unique In that it accepts both FIAT and cryptocurrency, as well as maintains complete privacy of consumer transactions. They recently added a plugin in Shopify that lets its merchants charge fractions of a penny for digital goods. Check them out at drop.cc shopify app

MAKE CONTENT CREATORS MORE MONEY WITH MICRO TRANSACTIONS

What if we made all current vanity metrics on YouTube a micropayment?

I made a list of all the desirable metrics inside YouTube and thought what if we added a fraction of a penny to each one.

• Likes
• Shares
• Comment likes

How much money would a small channel that gets likes make?

Even its Audience could make money from a helpful, or witty comment

What else can we add money to besides vanity metrics?

SO IN CONCLUSION

Ads aren't going away anytime soon. There is just way too much money being poured in by big companies, that it wouldn't make economic sense to replace them.

I think a YouTube without ADS would not be as big as it is, but maybe adding Micro Payments can help small channels, users, and YouTube inject more money into what elevates the value of each video.

I will be making a small demo of what a YouTUbe with Micropayments would look like, and later on adding real microtransactions to that demo to simulate real money being transferred around with each action.

If this works, I will share this with people smarter than me, ask for their feedback, iterate and tweet to people that work at YouTube, and different content creators to hopefully push for this to get implemented.

So what do you think? Can we make YouTUbe more money while helping out small content creators and channels that don't fit in with its advertisement model?

Let me know what you think in the comments below, and if you do know someone who could make this happen, please share this video with them.

Thank you for reading.