We are an investment website. As part of our website strategy, we create content around digital asset investments. We especially like content as an investment asset. Content keeps generating an incredible return on investment over the long term. Read: How to buy a website as an investment? for more details. However, the type of content that people tend to consume is changing. Increasingly video & audio content has become more important to capture and engage our audience. Youtube being the biggest video host, Youtube channels are the logical content assets to invest in. But is YouTube a good source of income? What’s the return on investment from creating a Youtube channel? How to earn money from Youtube views? How many subscribers do you need, and how long does it take? Especially compared to completely passive investments.
Is Youtube a good source of income?
As we launched AlternaInvest, the idea of launching a YouTube channel came soon after. At the time of writing this, we haven’t posted a single video yet but have done extensive research on what is required to launch and grow a channel. I wanted to make sure the math checked out, and the investment generated a good enough ROI before proceeding. Here is the math.
YouTube Viewer Potential
Various YouTubers share the following stats on how many videos it takes to achieve a certain number of subscribers.
The average ratio of views to subscribers is around 14%, which means that with 10,000 subscribers, we can expect 1400 views per video. Source: Tubular Labs
Assuming it takes the maximum number of videos to achieve these results (worst case scenario), that’s 500 videos for 10,000 subscribers and 1400 views per video.
500 videos * 1400 views = 700,000 views.
Five hundred videos is a lot. In the beginning, I expect each video will take 8-10 hours of work, so a max of two videos per week.
So roughly, it requires a 5 year commitment to producing 500 videos. That is assuming we can continuously produce two videos a week over the next five years.
The hope, of course, is that it will take much fewer videos to achieve the results, but it is much easier to manage expectations if we assume 0 results for at least three years. Anything better than that would be a bonus.
YouTube Revenue Potential
To understand the revenue potential after three years, I will resort to the averages again.
YouTube’s average RPM (Revenue Per Mile or 1,000 views) for finance-related content, I estimate to be around $30. That is from all types of monetization.
- YouTube Partner Program
Running YouTube ads on videos generates roughly $4 in revenue per 1,000 views.
- Affiliate Programs
The other $26 I estimate would come from referring various high-quality, related financial products.
I can’t expect any Sponsorships, so those two are the most reliable income sources with that number of subscribers.
Thus after five years and 700,000 views that is revenue of 700,000/1000 * $30 = $21,000.
Okay, so at 10,000 subscribers, the math doesn’t make for a good investment case.
Eight hours of work per video * 500 videos = 4,000 work hours.
$21,000 / 4,000 hours = $5.25/hour. That is not worth it at this level.
100,000 YouTube Subscribers Revenue
At 100,000 subscribers, 14% views to subscriber ratio and $30 combined RPM. With 500 videos, the revenue comes out to $210,000.
From the investment perspective, it is an investment of time more than money. So it is not a pure calculation like calculating ROI on an investment portfolio. However, knowing the time it takes to create 500 videos we can do make assumptions and calculate ROI from there.
We concluded that at 10,000 subscribers after 500 videos, launching a channel is not worth it. What if we can achieve 100,000 subscribers with 500 videos?
With 100k subscribers, we can multiply everything by 10.
So the revenue after five years = $210,000 assuming all other variables stay the same.
That brings hourly earnings to $52.5/hour assuming each video continues to take roughly 8 hours of work to create.
Obviously, if we can successfully create videos on top of everything else then that is an additional $52 per hour of work. But it rarely works out that way in real life. In reality, the time spent will be taken away from other activities. Those activities must produce less than $52.5/hour for the return to be positive.
If you are able to work more hours at your current business or employer that generates you $40/hour, then working on the channel instead of the five-year period should generate a positive return. Here is how that would work out.
4,000 hours of work at $40/hour = $160,000. That is what we pay in opportunity cost by investing that time in YouTube instead.
$210,000/$160,000 = 1.31x our hypothetical investment.
If there are no other activities that can add as much value to your business or job then creating a YouTube channel absolutely makes sense.
Long term benefits of a YouTube channel
Calculating ROI this way is necessary but is short-sighted, I have to admit. There are long-term benefits of having a YouTube channel for your business that go beyond monetization potential—looking at our site again as an example.
A Few Caveats
I have to mention a few caveats here. $30 RPM is estimated for this website’s niche, and your niche could generate much higher or much lower RPMs. These are also estimates based on research and are not actual results. The goal is to explain the math and approach we took before launching our channel to see if it makes financial sense prior to launch.
Better than average YouTube results
This doesn’t require much analysis, go to your favorite YouTuber’s channel and see how many subscribers they have and how many videos they have. Most of the channels I follow have less than 400 videos and have way more than 100k subscribers. These are above-average results, but they also produce above-average quality content.
Here are an example from a YouTuber Ali Abdaal, and how many videos it took him to achieve 100k subscribers. Numbers in black are Youtube averages, and blue are his:
There are over 37 million YouTube channels, but how many of those are just a single Google account with one uploaded video? Or some corporation with generic corporate videos. Therefore, these average numbers are misleading. Now imagine how many channels have absolutely lowest quality videos; they will also dilute the results.
The question is, can we produce better than average quality content? Obviously, quality can be subjective, but we should get better over time, and quality should improve. So through many iterations, if the quality rises to the level that we can say is above average, thus we can expect above average results.