Using YouTube’s Weakness to Grow Your Fanbase

What up Smart Rapper! I’m Rob Level, and today we are getting into YOUTUBE! The mammoth streaming platform that makes all of this possible. 

YouTube is crazy influential on our culture and the way we consume videos, songs, and other media. 

With this video I want to get into how YouTube was created and why their policies have become what they are today, plus a lot of insights for content creators and people trying to monetize their content on YouTube. 

I also made this video to show lessons you can learn from YouTube’s success. Let’s get into it!

It’s hard to remember a time when YouTube didn’t exist, isn’t it? But it’s actually not that old at all. YouTube was first launched in 2005. It was created by three guys who worked for Paypal. 

Now, they got the idea when realized there wasn’t one location where videos could be shared. 

The YouTube domain name was registered from a little spot above a pizza place in California, but they didn’t have to struggle for long. 

Later that year, they received an angel donation from Sequoia Capital, the hedge fund responsible for launching Google, Instagram, Yahoo, Apple, PayPal, and WhatsApp. 

Now right off the bat this is a good lesson for you guys, because the guys from PayPal used their connections with PayPal to get in touch with their investors. They didn’t quit PayPal to start their business and burn all their bridges! They kept in touch and on good terms and that worked to their advantage when the time came.

You always have to use your current network, if you can, to expand your future network. Don’t disregard connections from your past that maybe helpful while you’re building bridges in your future.

A year later, Google bought YouTube for – wait for it – 1.65 BILLION DOLLARS. That’s billion with a b, and the site wasn’t even in England yet, plus many other countries. At the time of this sale, YouTube only had 68 employees. 

Another good lesson here – build businesses and income streams for yourself. 

You never know which one will take off and give you the opportunity for a nice big check once you sell it. You can literally create value with your own work and consistency. 

So do it. It only took the YouTube guys a year to make a billion dollars, so consider what you can do too.

At the time of this billion dollar sale, YouTube was only generating $15 million a month through ads and revenue. Here’s a third lesson for you guys okay?

They sold for over a billion dollars even though what they were making at the time wasn’t anywhere near that. But you know what? YouTube today is worth about 86 billion dollars.

Looking at it like that, they would have been crazy to accept less than what they did. 

So don’t sell yourself short or be shortsighted in business. It could cause you to accept much less than what you ultimately deserve.

By 2007, YouTube was worldwide, and it is estimated that their site alone used as much bandwidth as the entire internet did in the year 2000. 

In 2008 YouTube won the Peabody Award for its contribution to democracy. YouTube is a democratic platform because it is hosting content created by the people, for the people, available for free. 

By 2009, only four years after it was created, YouTube had one billion video views per day. 

Now, here’s something I found in my research for this video I didn’t expect at all: YouTube has a tricky business model. Stay with me.

It is enormously expensive to maintain and host millions of hours of content and costs millions of dollars per month to keep everything running.

The ad dollars it generates barely make a dent in the costs it takes to run it as a platform. I’m gonna show you an example.

At the time YouTube was bought by google, as I told you before, it was making around $15 mil a month from ad revenue. Two years later, it was only making in the 16 million a month range, meaning the growth wasn’t taking off the way it usually does as companies grow and expand.

What’s MORE – YouTube actually lost $470 million in 2009 and Google was on the hook for it.

This might be why to this day, Google refuses to reveal YouTube’s profits publicly.

If you’ve ever grown a small business (or watched Shark Tank) or even that episode of the The Office where they try to do the Michael Scott Paper Company you know that as your customers go up, so do your costs. You might be getting business, but you’re going into debt to keep your customers.

You can undercut competitors for a while, but eventually you will literally not be able to afford to keep running if you are undercutting so bad you don’t earn a profit. 

By hosting content for free, or available after watching ads, YouTube is undercutting other content hosting providers – to their own financial loss.

YouTube is making more money with more users creating content they can sell ads on every day, this is totally true, you can’t deny that.

BUT, those extra people mean extra hosting budgets to make sure the site is strong enough to hold all that content and all the user activity without crashing. 

YouTube has pay out to content royalty costs, massive bandwidth costs, storage costs, processing costs – not to mention, their site can’t crash, ever, which means they have programmers standing by at all hours of the day and night. 

They attract more people with their ad money affiliate system for content creators, like myself, but they also have to split their profits from that monetization 50-50 with us, meaning they are paying out even more than they originally planned for with their first business model.

That’s why some economists have actually said that YouTube’s profits could be break even or as low as double digit profit. WHAT??? THINK ABOUT THAT. That’s insane to me. 

The Shark Tank would NOT LIKE those profit margins.

Why did I bring this stuff up? Because while YouTube is a hugely successful, it has issues and weaknesses like any other company. 

As I’ve described, YouTube faces two big problems: MONEY and CONTENT. They need more money, and will do anything to earn it. They also want content that won’t get in the way of that. 

As an independent artist today, you HAVE to understand their system – so you can understand how to WORK it for yourself, and work it for your music. I learned this lesson big time on my lyric video.

For my single “Spray.” 

Get in the way of the YouTube money machine, and they’ll do everything they can to get in yours. Don’t give them the chance. Be creative and smart with your content and the way you deliver it. 

Knowing YouTube’s priorities help you navigate their platform more effectively. In the industry today, you gotta know how to work YouTube for your career. 

 I’m Rob Level, and this has been Understanding YouTube As a Business – hit me with a like, hit me with a subscribe, and write a crazy youtube fact in the comments for me. Keep hustling Smart Rapper! I’ll see you at the top.