In the early days of the internet, multimedia was sparse. You were lucky if you could stream highly compressed, low quality audio, images where small and of low quality, and don't even think about video. But in the past few years the internet has began to mature, its become ubiquitous with the current generation and all forms of media have now gone digital. Thanks to the growth of mobile computing, more people not only have access to the internet but with increasingly faster speeds that are capable of consuming all types of content more conveniently then ever before. As more people gained access, the tools to create digital content became cheaper and more accessible. These tools made it possible for even more content to be produced at higher quality with minimal expertise. Lowering the barrier of entry opened the flood gates for everyday people to become content creators, and better yet, entrepreneurs.
Like in the physical world, text was one of the first ways the web was used to express ideas or opinions. From forums, chatrooms to eventually blogs the written word was used as a way to create content for whoever was willing to read it. Again, mirroring the path of the physical world, audio became the next big way to share ideas and opinions with Podcasts. While Podcast hasn't exactly crossover to mainstream, the medium is very popular among Techies, D.I.Y.'ers and more recently, the TV show obsessed. Some audio Podcasters are now starting to convert to video, turning what was something you listened to in the car on your way to work into something you may watch on your TV after work. Video content is of course the latest step for independent content creators on the internet. From video Podcast to Youtube, internet video content has exploded in the past few years and has turned some into semi-celebrities among their niche audiences. Companies like Twit.tv and Revision3 are paving the way to establishing what are essentially internet networks that brandcast highly niche shows over the internet.
With the recent influx of people with access to the web and the increasing amount of quality content being produced by major corporations as well as independents the question is, where is the money? That's the question everyone wants to know the answer to, how do I make money from my content. As with every new medium, the money is usually slow to transition from the old ways of doing things to the new. This happened with TV in the 50's-60's. As television ownership grew from a few million households in the early 1950's to 44 Million by the late 1960's advertising dollars drastically shifted from print and radio to the more immersive television. Companies today have slowly flirted with investing ad dollars in the internet with varying degrees of success.
The web is still such a new and evolving medium the way companies advertise is changing almost as rapidly as the medium itself. In Q4 2012 digital ad revenues crossed $10 Billion for the first time ever, a 15% rise to $36.6 Billion for the year in the U.S. alone. This is 2nd only to Broadcast Television revenues ($39.6 Billion) and more than Cable Television, which was passed in 2011. The growth of internet advertising has out paced other forms of media every year since 2005. This is promising as it shows that not only as the quality of the content but the distribution of content improves, more ad dollars are coming.
So what are some of the way companies and individuals are earning money for their content?
It's not hard to figure out that Youtube is the dominant player in online video today. With Billions of views per day and an advertising system in place its the easier most friction free place an independent content creator can began to earn money based on views. There are two main ways Youtube integrates advertising into it's videos. The clickable overlays that appear when the video begins to play on the bottom 1/3rd of the video or the pre-roll video that plays before the actual video plays. Each pays a different amount per 1,000 views, which can also vary depending on how much clout you have with Google. The average rate seems to be about $2.50 per 1,000 views ($2,500 per Million views) while AllThingsD mentions some larger publishers are fetching up to $10 per 1,000 views. Youtube was supposed to improve those rates this year but supposedly they over sold on ads and viewership didn't grow as fast as they expected. Youtube has invested hundreds of millions of dollars in "premium channels" and multiple improvements to YouTube's interface to make it more like a TV viewing experience rather than place to watch dumb cat videos. For the most part I think they're moving in the right direction.
YouTube isn't the only game in town when it comes to video ads, unfortunately for small independent operations it's the easiest and most convenient. So taking your ball and going home really isn't an option. Companies are however finding other ways to generate revenue to help offset the lack of revenue currently being generated on Youtube.
eMarketer expects U.S. advertisers will spend $4.14 Billion on internet video ads in 2013, twice the amount that was spent in 2011. A large portion of the future growth of online video is expected to come from mobile (including tablets). Mobile ad spending was at 12.6% this year and eMarketer expects that number to increase to 29.7% by 2017.
The irony is that the top 50 subscribed channels on YouTube average just under 1 Million views per day, which is higher than a majority of shows on cable TV. The shows on cable TV are also only available once at a specific time of day/night while the Youtube video is always on demand indefinitely, potentially to a worldwide audience. It's an incredible advantage that advertisers haven't seemed to grasp or take real advantage of yet.
For a lot of small to medium sized content creators, sponsorships have been a way for them to earn money, particularly with audio and video podcast. Companies like Netflix, Citrix, Audible, and Squarespace have made a name for themselves by sponsoring tech-centric users who typically listen or watch Podcast. Some bloggers are forgoing tradition web ads and are using the sponsorship method as well. Well known Apple blogger, John Gruber at Daring Fireball sells weekly slots on his blog, podcast and twitter for $8,500, that are constantly sold out. It's a more focused, intimate approach to advertising compared to the banner and skinning of other sites. Of course most independent bloggers can't demand those types of rates, but with 4-5 million page views per month of a very targeted audience, those prices don't seem too bad, especially when compared to other mediums.
Traditional bloggers aren't the only ones cashing in on their audience. While micro-blogging site Twitter tries to find ways to monetize itself, some users have already begun to find ways to bring in some cash. Dozens of celebrities, and quasi-celebrities sell spots on their timeline in the form of Sponsored Tweets. They are done outside of Twitters advertising structure, usually with a 3rd party facilitating the transaction. A company called Sponsored Tweets will connect you with Twitter users with high follower counts willing to sell you a spot on their timeline. You may have noticed some of these tweets as they are labeled with a sp before the link or have the word #Ad or Sponsored Tweet before or after the post. There is no telling exactly how much money is being made of the actual effectiveness of these ads, but it's happening.
Sponsorships are a way to embed advertising into your content that caters directly to your audience and can be very effective if properly used.
TRADITIONAL ADS (BANNERS/ADSENSE)
Everyone is still trying to figure out the best approach to advertising online. Banner ads where the dominant form of ads for a long time but can be an eye sore and typically offer poor results. Google turned the online advertising business on it's head when it started it's Advertising business using keywords via search combined with Adsense. Adsense allowed for more targeted advertising using keywords while providing content creators, large and small a way to generate income through their website and audience. Both banner ads and Adsense are somewhat controversial because of their ineffectiveness of engagement with users and the relatively low rates they generate. Some sites make lots of revenue using these strategies while others despise them.
There are a handful of people/companies with enough of a following that can get buy using a subscription model. Companies like the Wall Street Journal and the New York Times have the clout and content to create pay walls online and stay in business. Smaller outfits like The Magazine or Andrew Sullivan's The Dish have had success but others haven't been so lucky. It's incredibly hard to sustain a subscription model online without an incredibly loyal following and amazing content. Make sure you have both before thinking of using this strategy.