YouTube economics now, with Justin Kuiper

**Justin Kuiper** (0:00)
If you are making YouTube videos, they get around 10,000 views per video, you are probably making around 30-ish dollars per video in AdSense. This is not really what you would think of as real money.

**Patrick McKenzie** (0:11)
YouTubers are businesses, and some of them are sophisticated about being businesses.

**Justin Kuiper** (0:15)
I think that this is descriptively probably why, for example, MrBeast sells chocolate bars, right? It is rare for him to find a business that is willing to basically buy a Super Bowl ad.
So what he can do in the absence of having a very big sponsor who is willing to foot that bill is to say, hey, this video is brought to you by me and my chocolate bar.

**Patrick McKenzie** (0:36)
You've told me that it's also the best time to become a creator from ground zero. Hi, everybody. My name is Patrick McKenzie better known as patio11 on the Internet. I'm here at Lighthaven sometime between less wrong and manifest with my buddy, Justin Kuiper.

**Justin Kuiper** (0:54)
Hey, Patrick. Great to be here with you.

**Patrick McKenzie** (0:56)
Thanks very much for coming. So we're going to talk about the economics of YouTube today. And I suppose the microeconomic view most of all, how creators actually make a living and how so much of this is not really legible to people that are behind the screen as opposed to behind the camera.
But let's start out. In the midst of prehistory, there was YouTube and someone got on, they made some videos, some people clicked on them. How does that person actually make money before they get good at this?

**Justin Kuiper** (1:27)
There are several ways that you can make money on YouTube. I would say that YouTube revenue became real in the early 2010s, when they added TrueView ads, the ads that you can skip. This is when the financial incentives on the platform became very different. There was very much an initial land grab during that period, when there was a lot of capital investment because people realized, this is a place on the Internet where you can make money.
Then downstream of that, there is of course all of the people who contribute their labor to the engines that are YouTube channels without being YouTubers themselves. In the sense of being on-camera talent, I can speak more to either side of that if you would like.

**Patrick McKenzie** (2:14)
Sure. I think the land grab dynamic is something that we see very often as new platforms get developed, where the people for whatever reason assume that a new platform will be won by incumbents on the old platform. But often when the form factor for the new platform is discontinuous with the old platform, this isn't the case.
While there are certainly name brand comics that are on YouTube, the people that won YouTube comedy in the late 2000s, early 2010s were largely not name brand comics. You mentioned earlier that the singer that won YouTube was this no-name Canadian Justin Bieber rather than somebody that actually had a recording deal.

**Justin Kuiper** (2:53)
Yeah, I think that both sides of that are true to a certain extent. I think that this was especially true back in the early days of YouTube when they wanted to, if you logged on to YouTube, when you were signed into your account, it would show your subscriptions. But if you went to youtube.com for the very first time as a brand new user, they want to show you something that is corporate safe. They want to show you something that if you are a teacher and you type youtube.com into the address bar in front of your classroom, nothing embarrassing is going to appear on the screen. And so that is the world in which clips of Jimmy Kimmel become one of the main forms of safe content on YouTube. Over time, they have gotten much better at realizing, ah, well, we have this fellow, Mark Rober. He was not a preexisting celebrity, but he has put in his time as a YouTuber. He has revealed himself to be somebody who creates safe content that you can put in front of 10 year old eyes without upsetting anybody. And so over time, they have managed to just discover the creators on their own platform. But there was definitely a period during which the after the initial land grab, when it took time for the attention to sort of make its way down to the platform natives as it were.

**Patrick McKenzie** (4:06)
So my understanding is for like the core YouTube ad units, the skippable ads that you were mentioning, they're primarily sold on a CPM basis, which is cost per mill. For those of you who don't make your mortgage doing advertising, cost per mill just means for a thousand people watching a video, for example, and perhaps there are some people that are included or excluded in this, but at a gross level for a thousand people watching the video, you get paid X amount of dollars. And can you give people a range for what CPM ads are on YouTube?