YouTube Shorts could steal TikTok's buzz with a better deal for creators

The largest open short form secret video has nothing to do with the algorithm. The secret is that you can’t get rich on TikTok because even the most viral creators earn a tiny fraction of their revenue from the platform itself.

TikTok remains overwhelmingly dominant over the copycat short-form video feeds that rival social media giants have created in recent years, such as Instagram Reels and Snapchat Spotlight. But according to reports from New York TimesYouTube Shorts is Preparation to announce an ad revenue sharing model that could revolutionize short-form video and give TikTok a run for its money—literally.

Revenue sharing is in place, creator funds are depleted

YouTube was perhaps the first platform that allowed creative people to make a living by posting interesting content to the internet. In 2007, just three years after YouTube was founded, the platform unveiled its Affiliate Program, offering creators 55% of revenue earned from ads that appear before or during their videos.

But TikTok pays creators through its Creator Fund, a $200 million pool unveiled in the summer of 2020. At the time, TikTok said it planned to expand that pool to 1 billion dollars in the US over the next three years and double that internationally.

That might sound like a lot of money, but in comparison YouTube pays creators over $30 billion ad revenue over the past three years.

A big reason TikTok and other short-form video apps haven’t unveiled a similar revenue-sharing program yet is that it’s harder to figure out how to fairly split ad revenue over an algorithmically generated feed of short videos. You can’t embed an ad in the middle of a video — imagine watching a 30-second video with an 8-second ad in the middle — but if you put ads between two videos, who gets a share of the revenue? The creator whose video appeared immediately before or after it? Or does a creator whose video you watched earlier in the feed also deserve a cut because their content encouraged you to keep scrolling?

“We’re still at the beginning of how we monetize these things, but I’m optimistic and I think the industry will figure it out,” Jim Louderback, former CEO of VidCon, told TechCrunch this summer. “They will have to, because otherwise the creatives will go where the money is.”

But YouTube might just have figured it out. The company is reportedly set to announce an affiliate program-like ad revenue sharing model on Tuesday at its Made on YouTube event. If the rumors are true, YouTube Shorts creators will get 45% of ad revenue — a smaller cut than YouTube videos, but a significant upgrade from the paltry Creator Fund payout. As Louderback said, creators will follow the money.

The problem with making money on TikTok

Can’t get rich on TikTok? How about Charlie D’Amelio, who started posting dance videos from her high school bedroom and then made $17.5 million in 2021? But that money doesn’t come from TikTok itself. Rather, she and her sister Dixie D’Amelio made their fortune through huge brand deals, a reality show, and venture capital investments. Even a YouTuber MrBeast (Jimmy Donaldson) who outdid any other creator by making 54 million dollars last year, i can’t seem to make good money on TikTok.

That’s because TikTok’s Creator Fund model just doesn’t work. The Creator Fund is a static pool of money that is split daily between users in the TikTok Creator Program based on how many views they get – but because the fund doesn’t grow, it means that as TikTok grows, creators earn less money.

Longtime Internet creator Hank Green said in a Creator Fund video that it initially made about 5 cents per thousand views, but the number of creators on the program outpaced the growth of the program itself. So over time, his payout dropped to about 2 cents per thousand views. At that rate, a very impressive 10 million views per month will only net you $200, which won’t exactly pay your rent.

Of course, TikTok can change the lives of creators who build an audience on the platform. Charlie and Dixie D’Amelio may not be making their millions from the TikTok app itself, but they wouldn’t have gotten the opportunity to work on their own fashion line and reality show if it weren’t for their TikTok stardom.

The father of these TikTok stars, Mark D’Amelio is the CEO of the family’s ventures, such as D’Amelio Brands.

“I read how TikTok works on ad sharing model and that would be great for the creative economy,” Mark D’Amelio told TechCrunch via email. “TikTok has built an incredible platform and changed the lives of tens of thousands of creators by giving them a platform to share their creativity with the world. It would be an amazing next step if so many of these artists were able to turn their creativity into a full-time job.”

D’Amelio means TikTok Pulse, a program introduced in May that allows brands to pay to place their ads in the top 4% of videos on the platform. For the first time, this allows creators to earn 50% of the ad revenue generated through this particular program. For now, this program is only available to creators with over 100,000 followers who also create the top 4% of videos on the platform. But YouTube Shorts’ potential ad revenue sharing program could further democratize access to this kind of revenue.

“I think TikTok is great in terms of awareness. Whether you’re a brand or a creator, it’s a great place for people to understand you,” Louderback said. “But when it comes to conversion, whether you’re a brand that wants to sell a product or a creator that wants to sell a Patreon [subscription] or merchandise, YouTube in many ways could be a better platform.”

When creators build their audience on TikTok, the platform doesn’t stay their bread and butter for long.

“I’ll say I’m not counting on it anymore,” Tyler Gakka (ghosthoney) told TechCrunch in June. “When [the Creator Fund] it first came out and it was first established, I was in that period where I was making seven videos a week and it really helped cover some of my bills.

But as payouts from the Creator Fund became less reliable, Gaca turned to podcasting and other writing projects for a more sustainable income.

“The Creators Fund doesn’t help as much anymore,” he said. “But that’s because I’m not that active, I think.”

Some creators can successfully use their TikTok followers to sell products or join them on other, more lucrative platforms, but this is not a guarantee.

“With my funk band Scary Pockets, we spun off a TikTok presence pretty quickly and got to 100,000 TikTok followers within three to six months,” Patreon CEO and co-founder Jack Conte, who also plays in several bands, said TechCrunch. “We were excited about it until we realized, wait, it doesn’t really mean much to us. For example, we can’t send these people to Spotify. It’s hard to get them to buy merchandise or join a membership.”

Conte believes this is because TikTok’s algorithm is so difficult to understand.

“Sometimes you post a video and it gets a million views, and sometimes you post a video and it gets 100 views,” Conte told TechCrunch. “That’s the essence of this algorithmically driven ecosystem. What this essentially does is it reduces the creator’s ability to build relationships with their followers.

With these challenges, running a creator business can feel unsustainable – but with the amount of value creators are generating for these platforms, it shouldn’t be.

“It seems like every content creator friend I’ve talked to, we all share the same fear that everything is just going to crumble under your feet one day,” Gakka told TechCrunch. “So I ended up at the beginning [on TikTok] I definitely get overwhelmed doing full, one-minute comedy skits with costume and background changes, seven days a week. It was great for building an audience, but then I had a huge crash and burn.”

Image Credits: TechCrunch

This is YouTube Shorts’ best chance to surpass TikTok

Over the past few years, the attempts of major social platforms to cope with TikTok’s exploding popularity have felt laughable.

To lure creators to its platform, Instagram even offered to pay huge bonuses for posting viral reels — in November, one creator told TechCrunch that they were offered $8,500 for 9.28 million views of Instagram reels. But users still don’t seem to want a TikTok-like experience from Instagram. Instagram even had to come back a bit TikTok-like changes to its app after users (including Kylie Jenner and Kim Kardashian) expressed such deep disgust for them. That’s what Instagram boss Adam Mosseri said Instagram lags behind behind YouTube and TikTok in metrics important to creator satisfaction, a recent report from The Information showed.

Although Instagram’s parent company Meta has put a lot of resources into building Reels, internal documents leaked to the Wall Street Journal revealed that Instagram users spend a total of 17.6 million hours per day with the product. That’s less than ten percent of the time TikTok users spend on the platform, a total of 197.8 million hours per day.

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

If it can use this ad revenue sharing model, YouTube Shorts now has a chance to prove itself as the best way for short video creators to make a living. Even better, we know that social apps they like to copy each other. If YouTube Shorts’ new monetization structure can entice other platforms to come up with their own revenue-sharing models ASAP, then we’re in for another boom in the creator economy.

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