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YouTube Monetization and GSP

As the largest video hosting website in the world, YouTube is no doubt an essential part in the daily lives of many people, especially younger generations who rely on the Internet when it comes to news and entertainment. It was once a platform where everybody can freely express their opinions and even earn a bit of extra cash if their videos are popular enough to fetch many views; the community has been diverse and interesting. But as of late, it has become increasingly difficult for most people to continue their YouTube career.

Demonetization has been the biggest topic among YouTubers when some creators first saw a dip in their revenue as early as 2016, which eventually evolved into today’s concept of demonetization, that is, if YouTube’s algorithm deems your video non-advertiser-friendly, there will be no earnings whatsoever regardless of how much time and money you have put in the production effort of the video or how much traction it gains. Granted, there are ways to appeal YouTube’s decision, but it is a lengthy and tedious process. This situation has been met with outrage by content creators and fans alike, but YouTube never ceased to add to the list of restrictions on monetized videos in recent years. What gives?

As it turns out, like other businesses, YouTube may care more about its revenue than its users. This situation is very similar to general second-price auctions since as a Google company, YouTube inserts ads as sponsored search results at the beginning of each video. Here, each video can be viewed as a product or a seller in a matching market situation. YouTube gains profit by driving up the valuations as much as possible, so each advertiser can be charged with a higher second-highest bid as indicated in general second-price auctions. Generally, advertisers prefer videos that will reach a wider audience within their target demographics. On top of that, they want the videos associated with their advertisements to be representative of their brand, and the most rational strategy for YouTube to maximize the valuation of each “product” is to selectively offer a portion of its videos, i.e., the ones that are advertiser-friendly. Therefore, YouTube suppresses videos that are not “aligned with their (the advertisers’) values” (Alexander) and encourage mild, generic content that is family-friendly and free of controversy. By doing so, YouTube makes these advertisement slots more desirable and valuable, which in turn yields a higher profit.

It is relevant to mention that the top-earning channels on YouTube are mostly gaming and makeup/beauty channels that don’t dabble in anything that steps outside of YouTube’s numerous lines, which means that the creation of advertiser-friendly content is positively reinforced by YouTube and the opposite is punished. Small content creators will be silenced by its algorithm, while big-name YouTube stars are chained by their business relationships with YouTube, who will continuously reap a hefty profit while yanking their leashes in whichever direction that results in the highest payoff.


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October 2019