As instagram starts to test revenue share against advertising sold, we have to ask, how much? The social media companies have aggregated the eyeballs and as Instagram has demonstrated time and again, the desire to control the advertisers too. But as we touched on before, audiences are fickle, algorithms are imperfect, and creators can burn out. Is there a way we can split revenue in an equitable way that ensures that creators can keep creating without having to worry about paying the bills?
Since 2007, YouTube has given a portion of its advertising revenue back to content creators. Creators eligible for payouts need to have at least 1000 subscribers and 4000 views in the past year. Via AdSense, Google says that they pay out nearly 68% to publishers! However, other types of ads, like the high paying pre-roll ads, YouTube pays 55% out. Some basic math and assumptions (i.e. $0.18 per ad view on average) shows that a creator can earn a rate between $3 and $5 per thousand views of their video. At the maximum rate, a creator can earn $5,000 per million views! That’s a lot of views for a sum that equates to about two months of rent in a place like New York City ($2,500 per month for a studio).
Facebook is not much different. The eligibility requirements are a bit higher, whereby one must have 10,000 fans and hit one of the following criteria in the past 60 days: 15,000 engagements, 180,000 minutes viewed across your video library, or 30,000 1 minute views on videos that are 3 minutes or longer. Rates on Facebook are also a bit lower with CPMs ranging from $2 – $3 for audiences residing in the United States and $1 or less for other audiences including Asia. While the revenue splits are identical to YouTube (55/45), creators might not receive the full amount. If only one ad is shown amongst three different videos, the 55% is split amongst the three creators, as reported by re/code. Similar to YouTube and Facebook, Instagram also gives 55% to the creator although it most likely falls under the same schemes as Facebook. (Facebook owns Instagram).
On the other hand, subscription tools charge much less. For example, OnlyFans takes 20% of total earnings for giving you the ability to collect subscriptions, tips, and other paid activities. Patreon is a bit cheaper, where they charge between 5-12% of total earnings, but separately break out the payment processing fee, which effectively comes out to 8% – 15% plus $0.30 per transaction. Substack, a quickly growing newsletter management software, takes 10% plus payment processing fees, thus effectively turning their fees to about 13%.
It’s clear from the percentages shown that the tools take much less than the social networks. However, tools do not sell advertising or drive audiences. Even though many complain about the high cost of the social networks, these additional activities drive much added value that would cost any individual influencer an enormous amount of time, money, and effort. (Even the former US President is suing the companies over his banning from the platforms where most of his audience resides.)
While many influencers start at social networks to build their audiences, many of them are taking them to the subscription tools to make “real” money from them. The top of the funnel, the social networks, continues to act as “lead generation”, while at some point the conversion to a paying subscriber happens via one of the tools.
Regardless of how audiences are monetized, the question still remains as to whether 55% is a fair split given the economies of scale the social networks enjoy, the high cost of content creation, and the variability and fickle nature of audiences. On the other hand, is 45% fair given that the social networks aggregate the audience and have a dedicated sales team to sell advertising? We’d love to hear your thoughts on what you think would be a fair split!