There are two important acronyms that you might hear in relation to YouTube advertising - CPM and CPC.
CPM stands for Cost Per Mille, which is Latin for 1,000. CPM advertising refers to the cost per 1,000 impressions. In the case of YouTube, this means views, so an advertising rate quoted in CPM is a rate for 1,000 views (of greater than 30 seconds) of an advertising video. An advertiser who chooses to have their ad play at the start of a video will pay at a rate expressed in CPM.
CPC stands for Cost per Click. This is a more traditional way of charging for advertising. YouTube ads that are placed around the videos, but not in the actual videos themselves, are usually charged on a CPC basis.
Although you can choose both types of ad on your YouTube channel, the most visible are embedded videos.
Our YouTube Money Calculator focuses on those videos that you embed at the start of your video. It can give an estimated range of earnings for a selected number of views. The actual amount paid varies, depending on a number of factors, including the popularity of your channel and the actual income that Google receives from specific advertisers.
Although advertising rates vary, the average advertiser pays $7.60 gross per 1,000 views. Most advertisers pay a CPM of between $4 and $10. In some cases, the CPM can be as low as $0.10.
Some of the reasons for this variation include the category your video falls into, the season (for example, Christmas ad rates are high) your language, country, competition for advertising spots and various other factors.
Little known fact: The ads on YouTube videos sell on an auction basis. The highest bidder gets the best video spots. That is why CPM increases at Christmas as advertisers fight for quality video spots. As a comparison, in the United States, television advertising averages out at $19 CPM.
Although YouTube traditionally kept its share of advertising income secret, it is now common knowledge that Google keeps 45% of YouTube advertising revenue. So you receive 55% of every dollar paid by advertisers (which is less than the 68% that website owners receive for most other types of Google Adsense advertising).
The estimated earnings that the average YouTube creator could expect to receive from ads on a new video on their channel if EVERYBODY watched the ad on their video and the advertiser paid the average $7.60 CPM is 55% x $7.60, equaling $4.18 per 1,000 views. Of course, success breeds success. Once a channel is recognized as being worth watching, its subscription numbers are likely to rise rapidly. It is likely that at least 10% of a channel’s subscribers will want to view any new videos it uploads. A channel with only 1,000 subscribers will only have a base of 100 people likely to return to look at their new videos. However, once the channel raises its subscription numbers to 1,000,000, they will probably receive views from 100,000 subscribers shortly after uploading any new video.
Also, YouTube favors the most popular channels when it comes to serving ads with high CPM rates. As your subscriber base rises, so should your average CPM.
However, there is one major limiting factor that severely limits the income a video creator can receive from the ads served on its YouTube channel. Human nature! In reality, most people who watch videos skip past the ads. If they do that, they are not considered by YouTube or Google to be viewers for payment purposes. In practice, only 15% of video watchers on average watch at least 30 seconds of an advertising video, which officially counts as being a view. This percentage undoubtedly depends on the subject matter of your channel and the nature of your subscriber base. Thus, for every 1,000 views of an average video, 150 people on average watch enough of the embedded ad to earn you advertising revenue.
This means that the average YouTube site generates $7.60 x 0.15 = $1.14 revenue, less YouTube’s 55% take, leaves the channel owner with $0.63 net income from 1,000 views of a video. You can certainly see why YouTube’s superstars work so hard to build subscriber bases and add additional forms of income.
If you can educate or encourage a higher percentage of your subscribers to sit through the ads at the start of your videos, it will have a huge impact on the amount of money you receive. It helps immensely if your videos and the ads on them target the same demographic.