How Social Media Platforms Actually Pay Creators

Their Success Depends on Yours

In this episode I want to talk about social media companies and how they make money. Here's the thing most creators never stop to think about: their success is entirely dependent on your success. The more that you win, the more they win.

That's not a slogan. It's the actual business model. And if you understand how they work, your possibilities of success are higher. You can pretty much summarize how these companies make money in five different levels: ad revenue, sponsored content, subscriptions, and e-commerce. Let me walk you through each one.

Ad Revenue: 60 Percent of Every Dollar

Check this out. Ad revenue is about 60 percent of social media revenue. Sixty percent of every dollar these companies make, and we're talking billions of dollars. Facebook and Instagram, which are one company called Meta. YouTube, which is a company called Google. Snapchat, TikTok, Pinterest, you name it. All these platforms, 60 percent of their money is ad revenue.

So how does it work? YouTube has something called a YouTube revenue split, in which they actually give the creators 55 percent and they keep 45 percent. Meta copied the same formula: 55 percent goes to the creator, 45 percent goes to Meta. TikTok has a 50/50 split. It's going to vary from platform to platform, but the structure is the same everywhere.

There are a lot of influencers out there that don't know how to make money. Well, all they've got to do is get attention, because when they get attention they can be part of the ad revenue share. On YouTube, all you've got to do is get somewhere around 4,000 hours of watch time and then you can become a partner. On Meta, it's also pretty easy to get approved to be a partner so they can share that revenue with you. On TikTok, they have some rules about having a certain amount of followers and attention, and then they'll start splitting that ad revenue with you as a creator too.

This is the bulk of how they make money. That's why they're always pushing people to create more content. That's why on Instagram you'll see things like bonuses for creators, or gifts for creators to make more money as they put content out there. Because the game for them is simple: put a lot of content out there so brands can go advertise before, during, or after that content.

Sponsored Content: When Brands Boost You

The second level is sponsored content. When you go on Instagram, there are brands out there that create collaborations with influencers. The influencer posts on their social media and tags the brand. Then the brand takes that content, advertises it, and pushes it out.

That's brands boosting creator content, and the platform makes money on every one of those sponsored posts. It's the same mechanic: they take that content and push it out to even more people, and the ad dollars flow through the platform.

Subscriptions: The Model That's Growing Right Now

Subscriptions is a model that is growing right now on all these platforms. YouTube has something called YouTube Premium. What happens when you have YouTube Premium? No ads. What happens when you have Spotify Premium? No ads. Same thing with LinkedIn Premium and so on. They give you the content and they don't push ads on you, because you're already paying $10 a month, $15 a month, whatever that membership is. On LinkedIn, premium gives you extra tools: message individual people, send them emails, get more contact information. More access for a person trying to generate business.

One of the cool things right now is Instagram subscriber content. You as an influencer can have a sort of membership from within your Instagram profile. You can create a membership program for $5 a month, and when you post content you can tell Instagram: only show it to the people that are subscribed to my content. That's an additional way for the platforms to split revenue with creators and also make money themselves.

But just look at this one: Meta Verified. In 2023 this program got launched and Meta Verified became a big deal. They are estimated to have 12 million members. Twelve million times, let's say, $15, and you're looking at $180 million a month. That tells you how much of a business these companies are, because they are constantly finding ways to monetize their existing audiences. And a lot of people bought into it because they wanted that little blue check mark.

E-commerce: The Platforms Take a Cut of Every Sale

The other one is e-commerce, and some of you have seen the evolution of this very recently. Facebook Shops was one of the first ones to come out. Instagram Shops is a very important platform right now, and people sell a lot of stuff on Facebook and Instagram shops. A lot of those shops are connected with Shopify. TikTok Shops are taking off in a big way.

What happens with these shops? The platform makes a cut from all the sales that are happening on their platform. Google has Google Shopping, and they also have shoppable ads. On a YouTube video, when a creator is talking about a product, they can actually have that product tagged in there and it becomes a shoppable ad too.

Play the Game They Want You to Win

So those are the ways social media makes money: ad revenue, sponsored content, subscriptions, and e-commerce. Hopefully that helps you understand a little bit more how these companies work and what they depend on.

Because here's the takeaway. If you win, they will win. These platforms are literally built to reward the people who bring them attention. And if you understand how they work, your possibilities of success are higher. Get attention, become a partner, and let the machine pay you for it.