Advertising revenue

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YouTube's monetization system (logo pictured) is one of the most prominent sources of advertising revenue online. YouTube monetization.png
YouTube's monetization system (logo pictured) is one of the most prominent sources of advertising revenue online.

Advertising revenue is the monetary income that individuals and businesses earn from displaying paid advertisements on their websites, social media channels, or other platforms surrounding their internet-based content. In September 2018, the U.S Internet advertising market was estimated to be worth $111 billion, with market share being held mostly between Google, Facebook, Amazon, and Microsoft. [1] These companies earn revenue through online advertising but also have initiated pathways for individual users and social media influencers to earn an income. Individuals and businesses can earn advertising revenue through advertising networks such as Google AdSense, YouTube monetization, or Outbrain.

Contents

Overview

There are a variety of methods and providers which individuals and online organizations can use in order to earn monetary income in the form of advertisements accompanying their website or digital media content. Digital technology giants such as Google, Facebook, YouTube, Amazon, and Microsoft allow website owners and content creators to engage in partnerships and display advertisements with their online media; these owners and creators can subsequently receive a share of the advertising revenue. [2] Individuals and organizations can earn significant income through advertising revenue. In 2018, it was reported that major YouTube content creators such as Jake Paul and PewDiePie each earned more than $15 million through monetizing their online video content. [3]

Revenue earned by individuals and organizations from online advertisement sources is considered taxable in multiple countries. In 2015, the Australian Taxation Office confirmed questions regarding the tax status of online Ad Revenue stating that it was taxable and content creators should be considered "performing artists". [4] Also, in the United States, the Internal Revenue Service deems online ad revenue to be taxable. For those earning income from technology platforms controlled by Alphabet Inc., which includes Google and YouTube, a Form 1099 will be issued by the company if an individual or group earns more than $600 per year. [2] The advertising industry is not without controversy. Ad blocking technology is problematic for companies and individuals looking to earn money by displaying advertisements alongside their content. Ad blocking software is reportedly used by 17% of people aged 18–34 and allows users to block advertisements while visiting a given website, thus removing the possibility that a user will click on a given advertisement. [5]

Notable platforms

Google

Google AdSense logo AdSense Logo.svg
Google AdSense logo

Google is one of the largest online advertising platforms in the world. As of March 2019, Google is estimated to facilitate more than 90% of global searches. [6] Since October 2015, Google and its online advertising branches have existed under the structure of an American multinational holding company, Alphabet Inc. Google co-founder Larry Page has stated that this move allows Google and other Alphabet Inc. subsidiaries to operate more independently and efficiently. [7] The company's digital advertising revenue figures were approximated at around $39.92 billion U.S. in 2018. Google and Facebook are reported to control just under 60% of the U.S. online marketing space. [8]

A significant part of Google's online advertising platform is Google AdSense, which allows websites to display Google-driven advertisements. As customers click on the advertisements, Google earns revenue from the advertising company, keeping 32% of the revenue while passing on 68% to the participating website.[ citation needed ] As of January 2018, online advertising accounted for 84% of Alphabet Inc.'s revenue.[ citation needed ] Google's advertising system provides significant revenue both for itself and for individuals and smaller companies who are actively participating as partners in Google's network.

YouTube

YouTube logo YouTube Logo 2017.svg
YouTube logo

Another online advertising giant owned by Alphabet Inc. is video sharing website YouTube. In 2006, Google bought YouTube for $1.65 billion. [9] In 2015, Bloomberg estimated YouTube to be worth approximately $70 billion, with over 30 million average daily visitors. [10] YouTube content creators who publish and share their own videos can monetize them. [11] In certain cases, YouTube will pay creators a percentage of the advertising revenue for advertisements that are placed within and before or after videos. The approximate share of advertising revenue paid to the creators of monetized videos is reported to be 55%; in 2013, the average creator's income was estimated to be $7.60 per thousand views. [2]

Facebook

Facebook logo Facebook logo (2023).svg
Facebook logo

As of March 2018, Facebook and Google were estimated to hold a combined market share of just under 60% of the U.S. online marketing space. [8] In the last quarter of 2018, Facebook reported an online advertising revenue of $16.9 billion. Facebook allows businesses to advertise throughout its website, using its in-depth knowledge of user demographics and interests to ensure that any given advertisement has a good chance of reaching its specific target audience. Facebook charges a fee for every advertisement click, known as cost per click. Facebook also allows businesses to increase the visibility of their advertisements beyond users who follow or like them; Facebook charges a fee based on the number of people a given advertisement reaches. [12]

Facebook grants businesses and individual users the ability to earn money through advertising initiatives. For example, "Facebook Ad Breaks" allows users to earn revenue from advertisements that play during their own videos. The videos must be at least three minutes long, with the advertisement not showing until at least the end of the first minute. [13] Early testing of this platform by some users indicates that not all viewers are watching the videos long enough to become monetized viewers; as such, the potential revenue has been deemed low. [14]

In 2012, Facebook purchased the image-sharing application Instagram for $1 billion. At the time of purchase, Instagram had more than 30 million downloads. [15] As of 2019, Instagram has over 1 billion monthly active users and is estimated to be worth more than $100 billion. [16] Instagram allows individuals (known as influencers) and businesses to advertise images and video content to followers and potential customers. Instagram allows advertisers to redirect potential customers to external websites, where they can shop within online stores and download third-party content.[ citation needed ] [17] Instagram influencers are paid several dollars for every thousand advertisement views. It is predicted that Instagram will earn more than $10 billion from this service annually as it moves through to the end of 2019. [16] This revenue figure suggests Instagram comprises approximately 17% of the total online advertising revenue of its parent company, Facebook.

Amazon

Amazon logo Amazon logo.svg
Amazon logo

As of 2018, Amazon was reported to be the third largest online advertising platform and saw predicted advertising revenues sit at above $4 billion. [18] With a reported 197 million unique online visitors per month, Amazon has a wide customer outreach similar to Google and Facebook. [19] Amazon currently allows its users to pay to have their products made more visible on target customer's screens and also allows sellers to act as affiliates, being paid a referral commission of up to 15%.[ citation needed ] As of May 2019, Amazon is attempting to expand its affiliate advertising program by partnering with other large online media agencies and heavily trafficked websites. Amazon has reportedly reached out to online media giants Buzzfeed and The New York Times with an offer that would see them being paid in order to recommend or advertise products on their site. [20] Such advertisements would include a link to the Amazon page where a potential customer could buy the product and in return, the media agencies would receive a percentage commission of the purchase. [20]

On August 25, 2014, Amazon acquired Twitch Interactive for $970 million. [21] [22] On Twitch's live stream platform, advertisements are regularly played on Twitch live streams. Twitch streamers who grow their channels sufficiently can become Twitch Affiliates and Twitch Partners, thereby expanding their revenue avenues. [23] [24] Twitch Partners can earn a share of the revenue from advertisements played to their live audiences and are allowed to "determine the length and frequency of mid-roll advertisements." [24]

Microsoft

Microsoft logo Microsoft logo (2012).svg
Microsoft logo

In 2018, Microsoft represented approximately 4% of the estimated $111 billion of the U.S. online advertising market. [18] Microsoft owns the search engine Bing, which constitutes over 6% of Internet searches, [18] and the social media site LinkedIn. Microsoft earns advertising revenue through programs such as Bing Ads. [25] Businesses and individuals can pay to have their advertisements displayed to customers on each platform. Bing's web publishers program allows website owners to earn advertising revenue by displaying Bing advertisements on their sites. [26] Microsoft also earns ad revenue through its sites. LinkedIn allows individuals and businesses to pay in order to have image and video ads displayed to the demographics they wish to target. [27] Each time a LinkedIn user clicks on one of these advertisements, the company is paid between $2–5.[ citation needed ] LinkedIn has more than 500 million users; in 2018, it was announced that LinkedIn expected to earn approximately $2 billion annually from ads on the platform. [28]

Issues

Tax implications

Revenue earned by individuals and organisations as a result of participating in online advertising programs such as Google AdSense and YouTube monetization may face different income tax requirements based on location. In 2015, the Australian Taxation Office outlined that anybody earning income from online advertising would be classed as a performing artist and be required to pay income tax. [4] Under the Australian Taxation Office guidelines, performing artists include professionals such as singers, dancers, or anyone who relies on intellectual or entertainment-related skills. [29] Specifically related to online advertising income, the Australian Taxation Office stated that any income that an individual receives from online advertising is a reward for providing services based on their activities as a special professional and therefore can form part of the taxpayer's assessable income. [4] In the United States, the Internal Revenue Service also deems online advertising income to be taxable for individuals. [30] For example, those in the United States earning ad revenue from technology platforms controlled by Alphabet Inc. will be issued a 1099 tax form directly by the company if the income is more than $600 per year. [2]

Ad blocking

Adblock logo and wordmark Adblock logo & wordmark.svg
Adblock logo and wordmark

Ad blocking refers to the use of various computer applications or programs to remove all online advertisements. [31] This technology can prevent content creators and website owners from earning revenue from those customers who use ad blocking software. One Wall Street Journal survey found that 17% of users aged 18–34 used ad blocking technology and thus prevented any "pay-per-click" advertising, as used by the major platforms, from being fully used. [5] There has been support for ad blocking software from major technology companies such as Google. In 2018, Google announced that it would be launching ad blocking type software within its Chrome web browser aimed at targeting websites or advertisements that are designed to disrupt user experience and do not allow users to dismiss them before a certain time has elapsed. [32] After Google notified potentially impacted websites of the changes, approximately 42% made preemptive changes to ensure that they were compliant with the new advertising user guidelines. Under the current protocol, any site that does not comply with Google's user guidelines will be contacted and given 30 days to resolve the advertising issues before further action is taken. Google has announced that its ad blocking technology will be available to users of their search engine without downloading third-party applications or installing any external software. [32]

See also

Related Research Articles

Adware, often called advertising-supported software by its developers, is software that generates revenue for its developer by automatically generating online advertisements in the user interface of the software or on a screen presented to the user during the installation process. The software may generate two types of revenue: one is for the display of the advertisement and another on a "pay-per-click" basis, if the user clicks on the advertisement. Some advertisements also act as spyware, collecting and reporting data about the user, to be sold or used for targeted advertising or user profiling. The software may implement advertisements in a variety of ways, including a static box display, a banner display, a full screen, a video, a pop-up ad or in some other form. All forms of advertising carry health, ethical, privacy and security risks for users.

Google AdSense is a program run by Google through which website publishers in the Google Network of content sites serve text, images, video, or interactive media advertisements that are targeted to the site content and audience. These advertisements are administered, sorted, and maintained by Google. They can generate revenue on either a per-click or per-impression basis. Google beta-tested a cost-per-action service, but discontinued it in October 2008 in favor of a DoubleClick offering. In Q1 2014, Google earned US$3.4 billion, or 22% of total revenue, through Google AdSense. AdSense is a participant in the AdChoices program, so AdSense ads typically include the triangle-shaped AdChoices icon. This program also operates on HTTP cookies. In 2021, over 38.3 million websites use AdSense.

Pay-per-click (PPC) is an internet advertising model used to drive traffic to websites, in which an advertiser pays a publisher when the ad is clicked.

Ad blocking or ad filtering is a software capability for blocking or altering online advertising in a web browser, an application or a network. This may be done using browser extensions or other methods.

Online advertising, also known as online marketing, Internet advertising, digital advertising or web advertising, is a form of marketing and advertising that uses the Internet to promote products and services to audiences and platform users. Online advertising includes email marketing, search engine marketing (SEM), social media marketing, many types of display advertising, and mobile advertising. Advertisements are increasingly being delivered via automated software systems operating across multiple websites, media services and platforms, known as programmatic advertising.

<span class="mw-page-title-main">YouTube</span> Video-sharing platform owned by Google

YouTube is an American online video sharing and social media platform owned by Google. Accessible worldwide, it was launched on February 14, 2005, by Steve Chen, Chad Hurley, and Jawed Karim, three former employees of PayPal. Headquartered in San Bruno, California, United States, it is the second most visited website in the world, after Google Search. YouTube has more than 2.5 billion monthly users, who collectively watch more than one billion hours of videos every day. As of May 2019, videos were being uploaded to the platform at a rate of more than 500 hours of content per minute, and as of 2023, there were approximately 14 billion videos in total.

Microsoft Advertising is an online advertising platform developed by Microsoft, where advertisers bid to display brief ads, service offers, product listings and videos to web users. It provides pay per click advertising on search engines Bing, Yahoo! and DuckDuckGo, as well as on other websites, mobile apps, and videos.

Criticism of Google includes concern for tax avoidance, misuse and manipulation of search results, its use of others' intellectual property, concerns that its compilation of data may violate people's privacy and collaboration with the US military on Google Earth to spy on users, censorship of search results and content, and the energy consumption of its servers as well as concerns over traditional business issues such as monopoly, restraint of trade, antitrust, patent infringement, indexing and presenting false information and propaganda in search results, and being an "Ideological Echo Chamber".

Website monetization is the process of converting existing traffic being sent to a particular website into revenue. The most popular ways of monetizing a website are by implementing pay per click (PPC) and cost per impression (CPI/CPM) advertising. Various ad networks facilitate a webmaster in placing advertisements on pages of the website to benefit from the traffic the site is experiencing.

<span class="mw-page-title-main">Targeted advertising</span> Form of advertising

Targeted advertising is a form of advertising, including online advertising, that is directed towards an audience with certain traits, based on the product or person the advertiser is promoting.

Social network advertising, also known as social media targeting, is a group of terms used to describe forms of online advertising and digital marketing focusing on social networking services. A significant aspect of this type of advertising is that advertisers can take advantage of users' demographic information, psychographics, and other data points to target their ads.

<span class="mw-page-title-main">Live streaming</span> Live broadcasting via the Internet

Livestreaming, live-streaming, or live streaming is the streaming of video or audio in real time or near real time. While often referred to simply as streaming, the real time nature of livestreaming differentiates it from other forms of streamed media, such as video-on-demand, vlogs, and YouTube videos.

<span class="mw-page-title-main">Internet celebrity</span> Someone famous because of the Internet

An internet celebrity is an individual who has acquired or developed their fame and notability on the Internet. The growing popularity of social media provides a means for people to reach a large, global audience. Internet celebrities are often found on large online platforms such as YouTube, Instagram, and TikTok, which primarily rely on user-generated content.

<span class="mw-page-title-main">Social media marketing</span> Promotion of products or services on social media

Social media marketing is the use of social media platforms and websites to promote a product or service. Although the terms e-marketing and digital marketing are still dominant in academia, social media marketing is becoming more popular for both practitioners and researchers.

A music streaming service is a type of streaming media service that focuses primarily on music, and sometimes other forms of digital audio content such as podcasts. These services are usually subscription-based services allowing users to stream digital copyright restricted songs on-demand from a centralized library provided by the service. Some services may offer free tiers with limitations, such as advertising and limits on use. They typically incorporate a recommender system to help users discover other songs they may enjoy based on their listening history and other factors, as well as the ability to create and share public playlists with other users.

A click farm is a form of click fraud where a large group of low-paid workers are hired to click on links or buttons for the click fraudster. The workers click the links, surf the target website for a period of time, and possibly sign up for newsletters prior to clicking another link. For many of these workers, clicking on enough ads per day may increase their revenue substantially and may also be an alternative to other types of work. It is extremely difficult for an automated filter to detect this simulated traffic as fake because the visitor behavior appears exactly the same as that of an actual legitimate visitor.

<span class="mw-page-title-main">Twitch (service)</span> American live-streaming platform

Twitch is an American video live-streaming service that focuses on video game live streaming, including broadcasts of esports competitions, in addition to offering music broadcasts, creative content, and "in real life" streams. Twitch is operated by Twitch Interactive, a subsidiary of Amazon.com, Inc. It was introduced in June 2011 as a spin-off of the general-interest streaming platform Justin.tv. Content on the site can be viewed either live or via video on demand. The games shown on Twitch's current homepage are listed according to audience preference and include genres such as real-time strategy games (RTS), fighting games, racing games, and first-person shooters.

<span class="mw-page-title-main">Digital content</span> Content that exists in digital data form

Digital content is any content that exists in the form of digital data. Digital content is stored on digital media or analog storage in specific formats. Forms of digital content include information that is digitally broadcast, streamed, or contained in computer files. Viewed narrowly, digital content includes popular media types, while a broader approach considers any type of digital information as digital content.

The creator economy or also known as influencer economy, is a software-facilitated economy that allows content creators and influencers to earn revenue from their creations. According to Goldman Sachs Research, the ongoing growth of the creator economy will likely benefit companies that possess a combination of factors, including a large global user base, access to substantial capital, robust AI-powered recommendation engines, versatile monetization tools, comprehensive data analytics, and integrated e-commerce options. Examples of creator economy software platforms include YouTube, TikTok, Instagram, Facebook, Twitch, Spotify, Substack, OnlyFans and Patreon.

<span class="mw-page-title-main">YouTube Shorts</span> Short video clip sharing service

YouTube Shorts is the short-form section of the American video-sharing app YouTube. Shorts focuses on vertical videos at a maximum length of 60 seconds and various features for user interaction. As of March 2024, Shorts have collectively earned over 5 trillion views since the platform was made available to the public on July 13, 2021, which include video views that pre-date the YouTube Shorts feature. Creators earn money based on the amount of views they receive, or through ad revenue. The increased popularity of YouTube Shorts has led to concerns about addiction for teenagers.

References

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  2. 1 2 3 4 Rosenberg, Eric (October 7, 2018). "How YouTube Ad Revenue Works". Investopedia.
  3. ↑ O'Kane, Caitlin (December 4, 2018). "Top 10 Highest Paid YouTube Stars of 2018". CBS News. Retrieved 24 May 2019.
  4. 1 2 3 Papadakis, Marianna (20 January 2015). "Tax Office determines YouTube income as taxable". Australian Financial Review.
  5. 1 2 Stewart, Duncan (3 April 2018). "Are Consumers 'Adlergic'? A Look at Ad-Blocking Habits". The Wall Street Journal.
  6. ↑ Capala, Matthew (27 August 2018). "Global Search Engine Market Share for 2018 in the top 15 GDP Nations". Alphametic.
  7. ↑ Hartmans, Avery (12 July 2018). "The company formerly known as Google is far bigger than most people realise". Business Insider. Retrieved 24 May 2019.
  8. 1 2 Bruell, Alexandra (19 March 2018). "Rivals Chip Away at Google's and Facebook's U.S. Digital Ad Dominance, Data Show". The Wall Street Journal.
  9. ↑ "Google Buys YouTube for 1.65 Billion". NBC News. 10 October 2006. Retrieved 23 May 2019.
  10. ↑ Geier, Ben (27 May 2015). "YouTube Worth $70 billion for Google, Bank of America Analyst Says". Fortune Magazine. Retrieved 22 May 2019.
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  13. ↑ Patel, Sahil (13 July 2018). "Facebook's Video Ad Program is Showing Signs of Life". Digiday UK.
  14. ↑ Patel, Sahil (2 October 2017). "Facebook's Key Video Ad Program Isn't Delivering Much Money to Publishers". Digiday UK.
  15. ↑ Rush, Dominic (10 April 2012). "$1b deal: Facebook buys Instagram mobile photo-sharing app". Sydney Morning Herald. Retrieved 23 May 2019.
  16. 1 2 McCormick, Emily (26 June 2018). "Instagram is Estimated to Be Worth More Than $100 Billion". Bloomberg. Retrieved 24 May 2019.
  17. ↑ Johnson, Bradley (30 April 2018). "Facebook agency account rent". Agency Report 2018: Digital rules, growth slows, consultancies surge– via Advertising Age.
  18. 1 2 3 Catalano, Frank (19 September 2018). "Amazon to Move Past Microsoft for No. 3 Spot in Advertising Revenue, New Study Finds". Geek Wire.
  19. ↑ "3 Reasons to Sell Amazon". American Marketing Association - University of Wisconsin Whitewater. 1 December 2018.
  20. 1 2 Kafka, Peter (6 May 2019). "Amazon wants to pay the New York Times and Buzzfeed to expand so it can reach more shoppers outside the US". Vox. Retrieved 24 May 2019.
  21. ↑ "A Letter from the CEO, August 25, 2014". Twitch Blog. Twitch Interactive. August 25, 2014. Archived from the original on August 25, 2014. Retrieved August 25, 2014.
  22. ↑ Kim, Eugene (August 26, 2014). "Amazon Buys Twitch For $US970 Million In Cash". Business Insider Australia. Business Insider. Retrieved November 16, 2018.
  23. ↑ "Twitch Affiliate Program". Twitch. Retrieved 2019-06-27.
  24. 1 2 "Twitch - Partners". Twitch. Retrieved 2019-06-27.
  25. ↑ "Microsoft Advertising". Bing Ads Microsoft. 2018. Retrieved 27 May 2019.
  26. ↑ "Web Publishers: Contextual Ads". Media.net. 2019.
  27. ↑ Ward, Ashley (7 February 2019). "How to Advertise on Linkedin in 2019: A Beginner's Guide". Search Engine Journal. Retrieved 24 May 2019.
  28. ↑ Johnson, Lauren (13 November 2018). "Linkedin hits $2 billion in Ad Revenue, best on video". Business Insider. Retrieved 24 May 2019.
  29. ↑ "Performing Artists". Australian Taxation Office. 14 March 2018. Retrieved 28 May 2019.
  30. ↑ Edwards, Jim (4 August 2015). "The Biggest Stars on YouTube Make Huge Incomes Yet They Can't Keep the Vast Majority of it". Business Insider.
  31. ↑ Zajechowski, Matthew (November 2016). "Ad Blocking and Its Effects on Advertisers and Publishers". Relevance.
  32. 1 2 Finley, Klint (16 February 2018). "Google's New Ad Blocker Changed the Web Before It Even Switched On". Wired.
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