Power to the Viewers: Tip Jar and the Changing Economics of YouTube


Article by Alison K. Lanier | 829 words

Professional YouTubers can make a handy profit on their given YouTube channels of cooking shows, exercise videos, or tirades. Video game players, comedians, musicians, authors, and gym instructors all cultivate a following of ad-clicking viewers. YouTube announced at VidCon this year that viewers will soon be able to give tips to their favorite YouTube stars and personalities, changing how profit-making on the site operates.

Many, Many Commercial Breaks

John Green, PewDiePie, Lacy Green, and Lil Bub all made highly profitable names for themselves on YouTube over the years. A YouTube user does not make money per the number of views their videos receive, but rather, according to the views of their videos’ ads. According to Video Power’s analytics, “You don’t make money based on the amount of views you have.  You make money based on people’s engagement with the ad. Engagement here means clicking or watching an ad for more than 30 seconds.”

YouTube logo

There are various types of advertising on YouTube: cost per click, or CPC; cost per view, CPV; pre-roll, in-search, in-display—the list goes on. In any of these cases, there are various strategies and criteria for where the cost to the advertising comes in and how the video’s creator makes a profit.

YouTube’s new tipping program is a way to take the profit-making mechanism out of the hands of advertisers and put it into the hands of the YouTubers’ fans. In fact, many sources are calling the program “fan funding,” a method for allowing YouTubers to profit from their dedication to the fans, even if the creators don’t use advertising on their videos.

Tipping is also, unofficially, a way to minimize the role of advertising in the site’s content.  According to Video Power, there are a variety of ways that YouTubers can think about attracting advertisers by cultivating and targeting the specific demographic of their videos. This consideration might—fingers crossed—be minimized if YouTubers could make a few dollars with their videos without bringing ads into the equation. This shift implies a lack of hassle for both the video creators and, significantly, for viewers, who save time and only see the video they click to see.

One Economy, under Google

Google will enable this feature using its online payment option, Google Wallet. With the popularity of digital payment programs like Wallet—including Venmo and Paypal—the ease and trust in digital money exchanges means that YouTube’s new tip jars likely much more popular than they would have been even a year ago. Then, the trust in—or at least the familiarity with—quickly, casually sending digital money would not have been as strong.

Engadget wrote that a Google Wallet or a linked credit card can be used to contribute to YouTube’s virtual tip jars.  It’s an easy scheme with a high potential to be habit forming. Contribute a few dollars here or there, a tiny amount at a time, and YouTube—with its legions of followers, viewers, posters, commenters, and fans—has the potential to become a thriving fan-based commercial system.

Fan Approval, not Ad Approval

The system would reap the benefits of fan-approval ratings in more ways than one. A vlogger who relies on the support of their audience, rather than on maintaining a demographic for the purposes of an advertiser supporter, would also be more likely to be able to cater to the vlog community’s desires. The viewers’ experience would, then, be that much more likely to be satisfying for the viewer. It’s true that under the current system, pleasing and thus maintaining an audience is key to advertising revenue. However, the new method implies a much greater reliance on direct feedback in the form of fan tips.

YouTube, as an approval-based system, would work much more closely and purely along the lines of approval-for-success. The YouTube community has been shaken in the past year by the revelation that a number of extremely popular YouTube stars had been implicated or accused of abusive behavior and offenses. Leaning toward a tip-based system would be a much more powerful voice for viewers than a thumbs up or a thumbs down. Viewers would have the ability to tangibly affect the thriving or the boycotting of YouTubers’ channels in a way that now rely on advertisers.

YouTube is demonstrating the ability to become more and more a popularly-driven service. It’s more user-based, less corporate, and more dependent on the satisfaction of the viewers.  YouTube CEO Susan Wojcicki announced the tip jar alongside many other new “goodies.” “Tip jar would support contributions up to $500, a significant contribution in terms of YouTube profits for most users,” according to Mashable at VidCon in June.

Alongside the tip jar, Wojcicki announced that, “Our goal is to make it that every video uploaded to YouTube will be available in every language” using a service called “Fan Subtitles,” a crowd-sourced translation effort.  YouTube is looking toward viewer engagement in a refreshingly user-centered shift away from making the site reliant on corporate advertising.

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