Earn more without ads: the math behind Vimeo On Demand

Just before the holidays, the Internet was a-buzz again with conversations about how much money a creator can actually make on YouTube, thanks to an insightful piece by Gaby Dunn, one of the creators of the popular channel Just Between Us. She reveals all the troubles and tribulations of trying to earn money through vlogging, basically telling the world not to believe the hype. I posted her article on my Facebook page and friends quickly commented, “How about Vimeo users?”

Even though it’s no walk in the park to earn a living through video making of any kind, online video has opened up some great new opportunities. But with all the various business models out there (ad-supported, direct video on demand, licensing to subscription video on demand (SVOD), etc.), it can be hard for creators and sellers to navigate what’s best for them. Below, we’ve compared the options, crunched the numbers, and shown you why Vimeo On Demand (VOD) is the most empowering model for most creators.

The Ad Model

Vimeo has always shunned pre-roll ads for two reasons: viewers don’t want that kind of interference, and we don’t think the pre-roll business model is a good way for most creators to earn money.

Gaby’s experience demonstrates just how hard it is to make real money from ad-supported videos. While getting an accurate picture of the average CPM (how much it costs to buy a thousand ad impressions) on YouTube is difficult in and of itself, it’s nearly impossible to understand the average amount a YouTuber earns per thousand views since ads are not shown on every play. Hank Green, known for the uber-successful channel VlogBrothers, has claimed that most people earn $2 per thousand views on YouTube, which is probably a reasonable estimate. If most of your views are outside the U.S. or Europe, you’ll earn even less, since most advertisers are not targeting internationally.

Assuming that $2 CPM, you need to rack up 2.2 million views per month to earn an average family income (just under $54K per year, according to the U.S. Census Bureau). And as creators know all too well, making good videos is not free: after paying your crew, covering legal costs, and giving a hefty percentage (typically 30% or more) to your MCN (Multi-Channel Networks, or organizations that affiliate with YouTube channels to manage ad sales and more) — you’d actually need to be garnering many millions more views to have a viable business.

According to Tubular Labs data, Just Between Us had 3.5 million views in November, so we could guess that Gaby and Allison earned $7,000 total from pre-rolls, before paying their MCN and their crew. They made 10 videos this past November, and if we assume they spend $500 or more making each video, there would be no money left to pay themselves. No wonder Gaby paints such a dire picture of being a YouTuber.

Transactional VOD

Vimeo On Demand provides the best tools for creators to earn money through transactional and subscription video sales. Most of the filmmakers, artists, and businesses using Vimeo On Demand sell their premium videos or series as rentals and/or purchases, with an average purchase price of $10. Unlike with advertising, there are no geographic limitations to VOD — you can sell in any country you want, in any language you prefer (with subtitle support), and at any price you choose. Plus, with Vimeo On Demand, you can sell in more than a dozen different currencies, so you can rake in the dollars (or pounds, yen, etc.).

While it’s unlikely for someone to want to pay to watch a vlog, we have seen many vloggers produce special premium videos (e.g., longer episodes, feature films, stand-up specials, high-quality series, etc.) that they’ve asked their fans to pay for on Vimeo On Demand. And creators outside the vlogging sphere are most certainly investing a lot more in production and post-production, making the ad-model even less viable. Premium videos that will sell well on VOD cost more to make than vlogs, but as we’ll see, the returns can be many times greater.

The closest way to compare transactional VOD with YouTube is to look at how much revenue is earned per thousand trailer views, and then see how that stacks up next to the $2 CPM from above.

Here are a few examples of creators making the leap from ad-supported video to premium VOD:

• KickThePJ worked with New Form Digital and Vimeo to produce Oscar’s Hotel for Fantastical Creatures. The series takes the style he is known for on YouTube, and brings it to the next level. Because of the elevated production quality, his fans were more than happy to pay $10 for the season pass. The show is earning $389 per thousand trailer plays.
• Elliott Morgan, known for his comedic vlogging, recently worked with Supergravity Pictures to release a $6 comedy special on Vimeo that is earning $346 per thousand trailer plays.
• The Vimeo Original Rolodex of Hate is Bianca Del Rio’s first stand-up special, and it’s currently earning $581 per thousand views.

Comparing apples and oranges? Let’s do the math.

Imagine you make a vlog, and you’ve shot the latest video in one day with a two-person crew. You’ll probably have to pay the crew a minimum of $600, and maybe another $100 for equipment rentals. Let’s say this is a simple vlog and doesn’t need props, and let’s assume you edit it yourself and that you don’t license any music. It’s a pretty basic video, but you’ve still got to earn back $700 before you see any income. That’s 350K YouTube views that you’d need before earning a penny. But if you have an MCN taking 30%, you’ll need to speed past half a million views before you see profits. And if your viewers are outside the U.S., the money you’re earning will be a lot less.

If you can drive 500K viewers to look at your video, let’s assume you can get those same 500K people to look at a trailer for a more premium video on Vimeo On Demand. Using a wider sample of Vimeo data, we know that on average people earn $276 per thousand trailer views. So on Vimeo On Demand, those 500K views would have translated into 16K purchases, earning you $138,240 in revenue.

You could spend $84K making that video, and still take home an average family salary ($54K) in profit.

By no means am I saying that getting 500K people to watch your trailer is easy, but it is possible — and if you can get that many people to look at a vlog, it’s a reasonable bet that you can achieve the same with your trailer. To plug in your own numbers, take our calculator for a spin, and you can start comparing your own CPM with the revenue potential on Vimeo.

If you’re already selling on Vimeo On Demand and want to learn how to increase your views and sales, pop over to our collection of helpful tips and case studies.

Originally published on the Vimeo Blog. Follow Vimeo on Twitter or Facebook to stay informed about future case studies. You can also follow me on Twitter or Tumblr.