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It’s a complicated situation with no easy answers

It started on March 25. I was on vacation with my wife, our first brief time away from our two kids. Besides setting context, the preceding sentence also exists to prove to the Internet that I had sex. Twice.

Take that, high school!

Anyway, I have two YouTube gaming channels (which really invalidates the sex thing). The bigger one, retsupurae (we sort of riff on things MST3K style) was having issues. Specifically, revenue just tanked out of nowhere. As you know from reading my previous Polygon article over and over again, CPM/ad revenue tends to be pretty volatile. I figured it would come back in a couple of days.

It didn’t. My smaller channel, slowbeef, which is more like a typical stream VOD/Let’s Play channel was totally fine … until April 7, when that channel’s revenue tanked as well. I started asking around and it seemed like people were either not affected, or affected in no pattern I could figure out. More and more people started to report a drop in revenue as time went on.

But this wasn’t the real beginning of this situation. Very large channels like h3h3productions tweeted that ads weren’t playing at all and even though they were still getting a ridiculously large number of views (like 700,000 daily), that would mean very little revenue. That happened as early as February.

That might have been ground zero.

YouTube started rolling out “ad-friendly” changes in February. Your videos could suddenly get flagged as “not friendly to advertisers” if they contained content deemed too offensive. But that was from YouTube’s side, it was only applied to individual videos and you could actually file a process that manually reviewed it if you felt like that was in error.

YouTube started giving advertisers themselves the options to opt out of videos with content that was “sensational or shocking” or had “profanity or rough language.”

Worryingly, these options had the parenthetical “(Beta)” next to them, meaning YouTube was using an algorithm for this, which is great. That never goes wrong. It also seemed like particular channels were getting blacklisted from ads entirely, but that seemed to be something behind-the-scenes and separate.

 

That’s half the story, and it’s a part that came from YouTube itself. In March or April, reportedly, advertisers started leaving the platform altogether. Ads weren’t showing up on even non-controversial channels and videos, and people were starting to note the dip. Now, for the part of an article everyone loves and absolutely increases the odds that you won’t get bored … graphs! Note that actual values were obscured, just to show trends.

The CPM stays the same
Michael Sawyer
While the amount of advertising goes down
Michael Sawyer

The first chart is CPM — the price the ad is sold for, and the second is “number of monetized playbacks” — how many video views had ads on them. If you multiply both numbers, you get how much revenue you make. I explain this in a bit more detail in another story I wrote about how our stuff is monetized.

The interesting thing was that CPM never went down. Ads remained just as lucrative as they were before all this — it’s the number of monetized playbacks that dropped. Confusingly, it shows that as advertisers were pulling out of YouTube, YouTube wasn’t lowering the prices of ad slots like you’d expect when demand goes down; they were just not running ads altogether!

Now for some sensationalist language: With the whole ecosystem in danger, could this be the end of one of the largest sources of online gaming media content?!

Pewdiepie may have thought so when he gave this event the very annoying term “The Adpocalypse.” Oof, I hate that name. Thanks for nothing, Kjellberg.

A Primer on Advertising

I’d like to explain how advertising on YouTube works as briefly as I can, before we get into this particular situation.

Suppose a company wants to sell a product and advertise on TV. They meet with a TV network ad salesperson and say, “We want to sell [product] to [demographic].” You know, Colgate toothpaste to men, aged 18 to 35, with a salary between $20,000 to $40,000 or some such. The network ad sales exec says “I have a show that matches that demographic, I have slots available on an upcoming episode and here’s the price for that slot.”

So maybe the Colgate exec buys a commercial on Jimmy Kimmel Live! after some negotiation. Everyone knows what that show is like, and it’s relatively easy to find out about how many people watch it per night. Both sides have the information they need to make a deal that helps everyone, at least in the broad strokes.

Here’s the issue, though. Most ad sales people have heard of Jimmy Kimmel Live!, or most TV shows in general, so TV advertising is easy in that regard. You know the tone of each show, and the vibe that’s going to be around your product’s ads. This is pretty important, no one wants to go from a segment about killing kittens to a jumpcut about how your toothpaste is the best.

But YouTube is a young person’s game and even hip ad execs are going to have trouble pitching some of the talent.

Pewdiepie. Smosh. Rooster Teeth. Markiplier. Chuggaconroy. Phil Kollar. These might as well have been nonsense words if you’re over the age of 40. You’re trying to convince an old person scratching their head over video interstitials that these are actually celebrities with audiences. Especially Phil Kollar.

So YouTube does “portfolio” ad sales. They don’t bother the product ad exec with specific shows or talent. They have a “portfolio.” They start with categories (called verticals), so if you want to appeal to a particular demographic, YouTube ad sales might recommend “someone in the gaming vertical” or “the comedy vertical,” etc. From there, it’s tiered-based on … well, something. Most likely views, the more audience reach and the higher it costs to advertise with them.

TotalBiscuit goes over this in his usual over-detailed nearly-an-hour long Soundcloud which is, kidding aside, pretty informative.

The point I’m trying to make is this: Advertisers don’t necessarily know where their ads will appear on YouTube. They’re being bundled together because no one goes over everyone’s channels to see the tone of their show or what they can expect to see right before or after an ad that features their product. And how could they possibly? There are hours and hours of video uploaded to YouTube every minute!

Advertisers pick a category (vertical) and a pricing tier, and let YouTube do the rest in terms of actually placing the ad with a video.

This is part of the problem. When someone catches a big corporation’s brand on something “advertiser unfriendly,” all the advertisers freak out because they can’t be totally assured that their ads won’t appear on one of those videos. And without a “channel” or “network” (like NBC or ABC or Fox) to keep a close eye on what’s being produced, advertisers can get even skittish about stuff that YouTubers could potentially make. Meaning: Things are okay today, but what of tomorrow?

YouTubers used to say the best thing about the platform was that they could say whatever they wanted, and no one could say no. They weren’t held back due to their bosses or editors or advertising pressure. Now the other shoe has dropped. That all may still be true, but there is now advertising pressure. You suddenly won’t get advertisers anymore if you fall into the wrong category.

I do want to mention one last thing before we move on, regarding an opinion I’ve seen in social media: “Who cares about controversy and ad unfriendliness? If someone is controversial, but they get views, isn’t that all advertisers should care about? The raw numbers? Or shouldn’t it be?”

No.

At its most basic level, advertising sows familiarity. I inadvertently advertised Colgate in this article by mentioning it earlier. The next time you’re looking for toothpaste, Colgate might stand out. You won’t think about it, you won’t go “oh that’s the toothpaste that the guy writing the article mentioned,” but you might actually buy it without consciously knowing why. That’s like the basest thing an ad can do. And I do want to say no money has been passed between me and Colgate, although if Polygon runs Colgate ads on this story that’s on them.

Okay, now what if you’re going to buy car insurance? Did you think of Geico first? Is it because they have funny commercials? I mean, it’s ridiculous, and that should never sway you to buy auto insurance over say, Allstate or Farmer’s. But positive associations sell products. It’s why Coke and McDonald’s spend millions on commercials where people are just generally happy. They want you to have a good feeling in the back of your mind when you think of their brand. That way, if you’re at a store, even if you have no intention of buying Coke, you see it, and you buy it. Who doesn’t want to be happy?

I’m sure some of you reading this are saying, “Not me. Brands and ads don’t work on me. This is all hokum!” Kids say hokum, right? It’s coming back. Sure, it’s possible ads actually don’t work on you, but you’re in a very small segment of the population. Decades of studies and data bear it out; this psychological stuff works and companies pay a lot of money to get their advertising right. And they are very particular about their brands and reputations and commercials, because it influences sales. There are missteps, like Pepsi’s recent debacle, which actually led to protesters throwing cans of Pepsi at police.

If you show a Coca-Cola ad executive a YouTube video with their commercial in front of content with racial epithets or something, they will make it their primary mission that day to see those ads yanked. To get that brand away from that video.

And that’s what’s happening, and that’s what’s got YouTube scrambling to be “more ad-friendly.” The people bankrolling a lot of this have shown up, and they’re closing their wallets when they find out what some of us have been up to.

Whose Fault is This?

Let’s get it out of the way. Pewdiepie was involved in a controversy awhile back (and strangely, it wasn’t coming up with that name, Adpocalypse, sheesh). I don’t think this is his fault, and to very unsubtly move past other elephants in the room, I don’t think any single YouTuber or media outlet did it. It’s not like when Bill O’Reilly became toxic, advertisers said, “Forget it, we’re done with this whole television thing.”

If individual, high profile YouTubers get in trouble, YouTube does have an answer — they can cut that particular channel from a specific tier or vertical. And while it does hurt the site’s reputation when multiple events like this occur, they can still deal with it. But if you want to blame an individual, we can all agree that Eric Feinberg is a good villain here.

Wait, who?

Feinberg is an ad executive who has claimed to develop software to identify problematic content on YouTube, and he’s trying to strongarm Google into buying his solution. To that end, he’s been contacting advertisers whenever he identifies their ads played on videos they wouldn’t want their ads played against.

It’s unlikely, at least to me, that Google — a Silicon Valley giant whose portfolio includes the world’s most utilized search engine, a major email client developed by one of their developers on a whim, and of course the world’s largest video hosting service — is going to go for this. So I think Feinberg is in a stalemate that he isn’t willing to see, and individual folks on the YouTube platform get hurt by his actions.

But even if he hadn’t shown up, at some point, someone would’ve noticed all this. It’s something the platform would have to deal with at some point as it grew up. There is no one person acting in bad faith that brought the whole mess down on top of the rest of us who just want to play video games while talking for money and maybe a smidge of fame.

It’s also easy to blame YouTube itself for a lot of this. The fact that this stuff isn’t communicated to YouTubers until after the fact is a long-standing issue with the platform. But ask anyone who’s been doing Let’s Play videos for years about cost. They’ve probably looked into hosting the videos themselves only to balk at the price.

Video bandwidth isn’t cheap, and when you look at everything YouTube does — transcoding videos, indexing them for search, streaming in ads, and more — especially at the scale of hundreds of videos uploaded per day, and the cost gets stratospherically high. Many of us are stuck because there’s no low-cost solution that would provide the same level of service, nor the same number of viewers who may stumble onto our channel.

In that sense, it’s not a surprise that when the ad revenue gets threatened, YouTube is quick to roll out changes and try to fix it quickly without apprising the users of their platform. We’re relatively disposable, and in most cases completely reliant on YouTube for revenue.

Surviving the Adpocalypse (I hate that name so much)

This is all fine and well and good, but if you want to play games for a living or currently do, how do you make rent with all this going on?

Diversify!

What, I have to write more?

For starters, if you’ve got a gaming channel on YouTube, you should be supplementing revenue with a streaming site. Either a full partnership on Hitbox so you can get subscribers, or that new affiliate program on Twitch which lets you get bits. Or, um, just take donations on whatever streaming service.

Consider Patreon and figure out what you can do to incentivize people to support you on that platform. Network a bit and get a paid brand deal where you directly sponsor a game/product. This usually goes “if you can get X amount of views in Y amount of videos that feature our product, we’ll give you a lump sum.” Unlike ads which are volatile, with direct sponsorship/brand deals you know exactly how much money you’re getting. Provided you can get the requisite number of views.

You can merchandise through a service like Teespring, Zazzle or RedBubble. Get that funny meme printed on a coffee mug. Partner with that extremely gifted fan who is wasting their talent drawing stuff for you for some damn reason and split the money on t-shirt sales. Get in the game, here!

These changes could happen to any of the major players. Maybe there’s some court ruling that says broadcasting game footage violates the developer’s copyright and there’s a major blow to the whole ecosystem in whatever country you live in. Or technical difficulties start becoming rampant for whatever site you’re dependent on.

You could sit here and come up with scenarios all day if you really think about it. My point is just that major systemic shifts do happen beyond our control. Good, solid businesses have multiple revenue streams, assets on hand for difficult times. You also need a Plan B. And if you’re in business for yourself, a Plan C, D and E. Go through the alphabet. You’ll be happy you did.

When Does It End?

If you’re a YouTuber and you just want to know when your money will come back … jeez, read that previous section of the article I just wrote! The one above this one! Get that Plan B so you don’t have to wait on a third party to get back up and running.

But if you’re wondering: Is this the new normal or what? No one can predict the future, but here are my guesses.

It’s likely something will get better in the next couple of months. In fact with my luck, everything will revert back to normal the day after this article publishes, invalidating the whole thing and making me look like an idiot. If that happens, you’re welcome.

YouTube is working hard to fix this situation, since it’s losing a lot of money, too. If it’s not already addressed, it’s hard to imagine this going beyond November/December. That’s primo advertising season, right before the holidays. Even if the bigger corporations are still skittish about getting back in the water, this is a time of high demand and someone will pay the higher tier prices.

The only scenario in which this goes longer is if advertisers decide they’re not getting a good return on investment for online video advertisement in general. I don’t really think that’s a realistic scenario, as the future tends to move in one direction only.

The storm is here, we’re weathering it, it’s probably going to end at some point but we don’t know when for sure and regardless, if you’ve any interest in gaming for an audience full-time, you should probably be ready with a backup plan in case something like it happens again.

Speaking of which, I just checked my revenue for both channels. Hey Kuchera, can I get paid early for this? [Editor’s note: Payroll is handled at the same time for everyone.]


 

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Michael Sawyer goes by the alias “slowbeef” and has been doing Let’s Plays since 2005, despite being incredibly unsuccessful at them. He is a self-described video game humorist and is officially way too old to being doing that. You can find him on Twitter, Twitch or YouTube.  

Sourced from Polygon

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