Content partners face an increase in YouTube's ad share

This post originally appeared as an insight for Outsell’s customers. Republished with permission.
YouTube has increased the share of revenue it takes form its content parters from 30% to 45%. This may still be cheaper than going independent.
Important details
YouTube is changing the way it shares revenue with its content partners. It’s moving from taking as little as 30% from the ad revenues of (preferred, high-profile) partners to taking 45% of the ad revenue from (nearly) all partners.
The carrot attached to this stick is that partners will be able to keep 100% of revenue above the rate card. So, if a content partner can sell its ads at 150% of YouTube’s rate card, they can equal their current net revenue from ad sales.
YouTube is increasing its share of advertising revenues because…well, because it can. YouTube channels and multi-channel networks need YouTube more than YouTube needs them.
YouTube provides its partners with a reliable, low-maintenance platform for publishing their videos, an opportunity to offload ad sales, an existing social network within which to promote their videos, and a familiar interface for their audience. All of this has tremendous value for channel partners, so it’s not surprising they’re being called upon to share nearly half their ad revenue with YouTube.
YouTube’s revenue split may be a good deal for channels that can charge premium prices for advertising, or sell sponsorships inside their shows. Those channels are the ones that already have strong brands, great relationships with potential sponsors, strong influence with their audiences, and quality dedicated sales forces.
But they’ll need their own video distribution platform if they want a future beyond YouTube. Some MCNs have moved in that direction.
Maker Studios, one of the largest YouTube multi-channel networks, acquired its own distribution platform last summer when it bought Blip, for likely less than $10 million.
Revision3, owned by Discovery Communications, already carries its channels on its own site, in addition to YouTube.
YouTube’s new revenue split is going to split the market further into big channels with strong market presence (Maker, Revision3) and little guys who aren’t ready to cover the overhead of serving their own videos, let alone pay a decent sales force.
There are lessons for everyone in this turn of events:

  • Brands matter: A YouTube celebrity may not be the same thing as real celebrity.
  • Advertising doesn’t sell itself: Even in a programmatic ad buying world, someone has to make the cold calls, and they’ll want to be compensated.
  • Breaking free of ad networks is a key to success: Ad networks can fill gaps in a schedule, but they commoditize advertising.
  • Distributors will get their beaks wet: And they’re going to make long-term planning nearly impossible.