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Why YouTube earnings have dropped?

by vignesh p


4 months ago



If you are wondering your lesser than expected earnings, you are not alone. Many Youtubers have now complained that their earnings have dropped. There are numerous videos explaining that there is something wrong with the settings and you should set it right or there inadequate SEO resulting in lower hits or that Youtube premium may have began its impact. But Economics tells us this was waiting to happen.

Its Economics Stupid!

As with everything in life, economics explains this drop as an event waiting to happen. Consider for example, taxi aggregators, you would have heard your taxi driver grumbling that earnings have dropped by almost 20% as when compared to the beginning period of the service. The reason is this. When the taxi aggregators first arrived, they required to capture market share, which compelled them to focus on taxi drivers. So they gave incentives which made these taxi drivers partner with them. With double bonuses and other rewards, the aggregators built up a base of taxi drivers. While the customers too benefitted from low prices (Remember those low prices you used to travel in?) Have you thought about where these aggregators got profit? Truth is they didnt. They were increasing their market share which was their aim at that time. Once that was achieved, have you noticed how the fares are now normal or at times 'surged'? This is how they are running their business. Fair enough!

But what has this got to do with YouTube? I am coming to that. There is another reason for drop in drivers' earnings. At first, the earnings were high which prompted more drivers to join the group. So there was a deficit in supply of taxis. Remeber how you wouldnt get cabs whenever you wanted? So the few drivers associated with the aggregator made a good deal of money. Seeing this, many other drivers bagan to join. This improved the supply. But you may argue that it also improved the demand.It all comes down to the difference in the growth rates. The rate of growth in supply is far greater than rate of growth in demand. Notice how these cab companies are still offering discounts on rides for users. This disparity in growth has impacted the earnings to a greater extent. So there is now greater supply of cabs hence the same earnings is now distributed among many drivers. So initially, a driver made X, now he is only able to make X/2. The other  X/2 is distributed among the newer entrants. 

Similar is the case with YouTube. Replace taxi drivers with content creators, the rest is the same story. Increase in content creators have provided viewers with choice. Earlier, a normal content creator would have had atleast two to three videos breaching 1 million mark. Today it is difficult to break in even 1 video. With the launch of YouTube premium services, it is further going to erode. The solution for now is to shift to a pay-per-view platform that offers the flexibility for content creators to charge their own viewing charge. 

For more on this read here.

Conclusion

It is now urgent for content creators to shift to newer platforms that offer a better monetizing potential than YouTube. Control over pricing is the most important aspect of this. For creators need to win back that freedom which is now dependent on advertising and earn based on the strength of the content itself.

 

 


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