YouTube Shorts might overtake TikTok by offering creators a better deal

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You can’t become wealthy on TikTok since even the most viral creators receive just a small fraction of their money from the platform.

TikTok continues to dominate the imitation short form video feeds that rival social media companies have spun up in recent years, such as Instagram Reels and Snapchat Spotlight. According to the New York Times, YouTube Shorts is about to launch an ad revenue sharing arrangement that may revolutionize short form video and give TikTok a run for its money – literally.

Revenue sharing is in, but Creator Funds are out.

YouTube was perhaps the first platform that allowed creative individuals to make a career by sharing intriguing material on the internet. Only three years after YouTube’s inception, the platform launched its Partner Program, which offered creators 55% of the revenue gained from adverts broadcast before or during their videos.

TikTok, on the other hand, compensates creators via its Creator Fund, a $200 million pool that will be announced in the summer of 2020. TikTok announced at the time that it wanted to increase the pool to $1 billion in the United States over the following three years, and double it abroad. That may seem like a lot of money, but over the previous three years, YouTube paid creators over $30 billion in ad revenue.

One of the main reasons TikTok and other short-form video apps haven’t launched a similar revenue sharing program yet is that it’s more difficult to figure out how to fairly split ad revenue on an algorithmically-generated feed of short videos. You can’t insert an ad in the center of a video – picture viewing a 30 second video with an 8 second ad in the middle — but if you place advertising between two videos, who gets the revenue share? Who made the video that came before or after it? Or, would a creator whose video you saw earlier in the stream get a cut as well, since their content encouraged you to keep scrolling?

But YouTube could have figured it out. The firm is expected to introduce a Partner Program-style ad revenue sharing plan at its Made on YouTube event on Tuesday. If the allegations are accurate, YouTube Shorts creators would get 45% of ad revenue – a lesser proportion than they do on YouTube videos, but a significant increase over the current Creator Fund payment.

The issue with making money on TikTok

You can’t become money on TikTok? What about Charli D’Amelio, who began posting dance videos from her bedroom in high school and went on to earn $17.5 million in 2021? But the money isn’t coming from TikTok. Rather, she and her sister Dixie D’Amelio became wealthy through massive brand deals, a reality show, and venture capital investments. Even MrBeast (Jimmy Donaldson) of YouTube, who earned $54 million last year, can’t seem to make a living on TikTok.

Because TikTok’s Creator Fund model simply does not work. The Creator Fund is a fixed pool of money that is divided daily among users in TikTok’s creator program based on how many views they receive — but because the pool does not grow, creators earn less money as TikTok grows in popularity.

Longtime internet creator Hank Green stated in a video about the Creator Fund that he initially made about 5 cents per thousand views, but the number of creators in the program outpaced the program’s growth. As a result, his payout gradually decreased to about 2 cents per thousand views. At that rate, a very impressive 10 million views per month would net you only $200, which isn’t going to pay the rent.

Of course, for creators who build an audience on TikTok, the platform can be life-changing. Charli and Dixie D’Amelio may not have made millions from the TikTok app, but they would not have gotten the chance to work on their own fashion line and reality show if it hadn’t been for their TikTok fame.

“I’ve read about TikTok working on an ad sharing model, which would be great for the creator economy,” Marc D’Amelio told TechCrunch. “TikTok has created an amazing platform and changed the lives of tens of thousands of creators by providing a platform for them to share their creativity with the world.” It would be an incredible next step if so many of these creators could turn their creativity into full-time jobs.”

D’Amelio is referring to TikTok Pulse, a program launched in May that allows brands to pay to have their ads appear next to the top 4% of videos on the platform. For the first time, creators could earn 50% of ad revenue generated by that program. For the time being, this program is only available to creators with over 100,000 followers who also happen to make the top 4% of videos on the platform. However, YouTube Shorts’ potential ad revenue sharing program could further democratize access to such earnings.

When creators build their audience on TikTok, the platform does not last long. Some creators can successfully use their TikTok followings to sell products or join them on other, more lucrative platforms, but this is not a guarantee.

With these challenges, running a creator business can feel unsustainable — but with the amount of value creators generate for these platforms, it shouldn’t be that way.

This is YouTube Shorts’ best chance to surpass TikTok.

For the past few years, major social platforms’ attempts to keep up with TikTok’s exploding popularity have felt laughable.

Instagram even offered huge bonuses for posting viral Reels to entice creators to use its platform — in November, one creator told TechCrunch that they had been offered $8,500 for 9.28 million Reels views on Instagram. However, Instagram users do not appear to want a TikTok-like experience. Instagram had to reverse some TikTok-like changes to its app after users (including Kylie Jenner and Kim Kardashian) expressed strong opposition to them.

Despite the fact that Instagram’s parent company Meta has invested heavily in developing Reels, internal documents obtained by the Wall Street Journal revealed that Instagram users only spend 17.6 million hours per day with the product. That’s less than ten percent of the time TikTok users spend on the platform, which totals 197.8 million hours per day.

Meanwhile, over 1.5 billion logged-in users watch YouTube Shorts each month, but the company hasn’t shared metrics on how engaged these users are. TikTok passed 1 billion monthly active users about a year ago.

If it can pull off this ad revenue share model, YouTube Shorts will have a chance to prove itself as the best way for short form video creators to make a living. Even better, we know that social apps love to imitate one another. If YouTube Shorts’ new monetization structure can persuade other platforms to develop their own revenue sharing models as soon as possible, the creator economy will experience yet another boom.

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