In September 2006, college student Philip DeFranco set up a YouTube channel to share his thoughts on news and show-business.
Five years on, the Philip DeFranco Show has more than 1.5m subscribers and costs, by his own estimate, $25,000 a month to run.
Philip’s business now employs 10 staff, five of whom work on his YouTube account.
And though he is not willing to discuss exact figures, he pays himself a salary of between $60,000 and $100,000 (£35,000 to £60,000) and he says “certain people have been able to make [$100,000] a month a regular thing”.
So much has changed for YouTube since the days where it seemed to be known solely for videos of cats playing the piano and people falling down holes. Now, users are more likely to be found watching a Channel 4 programme or Justin Bieber music video than its more traditional output.
Indeed, half of the top 10 most viewed clips of all time are by Bieber or rap star Eminem.
YouTube’s owners are keen to establish the site amongst major broadcasters. The transition began with special events as far back as 2009. More recently, its live streaming services have been substantially expanded – including coverage of the royal wedding.
The company is reported to be investing $100m (£60m) to commission original content and roll out around 20 hours of live programming per week.
The site, once believed to be changing the way television works, is now looking to borrow ideas from TV’s established revenue models.
And budding internet stars are being offered a piece of the pie.
YouTube has spent another large sum of money acquiring Next New Networks, a company “championing the next generation of show creators, helping build their audiences, capabilities and paths to revenue”. It is now known as YouTube Next.
The company will “focus on supercharging content creator development on YouTube”, said its CEO Fred Seibert in a statement. What this means is that YouTube wants video makers to progress and increase their audience which, in turn, will increase advertising revenue. And the site is keen to stress the importance of viewing clips and streams away from the PC screen.
YouTube accounts for one in five visits to a social network from UK users
“The way in which people watch videos on YouTube is transforming as technology changes”, says Patrick Walker, European director of partnerships at YouTube.
“We see people watching in great numbers on the PC – 2bn views per day – and now we have over 200m views a day on mobile handsets. We think more and more people will also watch on television as more of these are connected to the Internet.”
These figures make YouTube the third most visited site in the UK,according to analysts Hitwise.
And more visits mean more revenue – the business is expected to make $1.3bn (£800m) in 2011 and $1.7bn (£1bn) in 2012, according to Citi analyst Mark Mahaney.
YouTube shares its revenue in a partner scheme, where around 20,000 original content producers earn a percentage of the advertising revenue. With an amount believed to be over $400m (£250m) distributed to them each year, it can be a lucrative business.
“We don’t say publicly what the revenue share is, but the majority of the money that comes in from the advertisers goes to the partner,” says Walker.
“We have a standard revenue share but our business is only successful if our partners are successful so it’s very important for us that they’re happy with how their content is presented and with the business terms.
“When we sign up a partner, it’s just the beginning of the work, it’s making them successful that is our core objective.”
But YouTube’s presentation is less like traditional TV where production values are held in high esteem.
Online, clips are often clicked on and then shared because of interest and enjoyment rather than quality of recording or editing. This is something that many believe should not be lost.
“Their whole model is based originally on people submitting their own videos – that is what’s established,” says Mark Smith, director of digital media at Conrad Advertising.
“They certainly wouldn’t want, in my opinion, to entirely shift that model into only pristine and polished videos. What they want to do is get a balance between the two.”
And this is a sentiment that YouTube itself believes in. “Everything we do is really adding to the experience, we’re not replacing anything,” says Walker.
“Because we have every programme produced by Channel 4 and on 4oD also on YouTube does not mean that it’s less of a great experience for amateurs who want to share their skills. Our job is to try and make the biggest possible array of content available and let the users decide what they want to watch.
“Some people want to watch Olympic highlights, some people want to watch a beatboxer, some people want to see a skateboarding cat so we just want to create the biggest opportunity so that everybody finds value in both uploading
and watching.”
