How Content Creators Influence Social Media Sites’ Bottom Lines

The role of content creators on social media sites such as YouTube and TikTok goes beyond hooking viewers. They influence the platforms’ bottom lines and are integral to an industry worth hundreds of billions of dollars, according to a recent study led by a University of Texas at Dallas professor.

Dr. Bin Hu, professor of operations management in the Naveen Jindal School of Management, analyzed how platforms evolve into profitable businesses and how content creators contribute to their success. Hu is the senior author of the study published in the July-August print issue of the journal Manufacturing & Service Operations Management.

“By watching these videos, who you are – your information – is being sold as the product to advertisers,” Hu said. “If you don’t pay for the product, you are the product.”

The study looked at the relationship between platforms, content creators and viewers, and how money is generated through paid advertisements and sponsored content, among other factors. Researchers concluded that creators make content for viewers, who generate advertising revenue for platforms, which provide income for content creators.

“We set out to identify how their interactions are intertwined,” Hu said. “We realized this cyclical structure of incentives.”

YouTube made about $29 billion in ad revenue in 2022, according to the study, and had more than 2.3 billion monthly active users who watched more than 250 million hours a day. TikTok had 1 billion monthly active users watching 167 million videos every minute as of January 2023, the researchers noted.

The popularity of various platforms has led to the proliferation of professional content creators – around 2 million people, less than a quarter of whom made about $50,000 annually.

“This industry is really cutthroat,” Hu said. “To break out of the initial stages, you have to work really hard. You have to keep uploading content.”

For both content creators and social media platforms, profitability takes persistence and relies on increasing the number of viewers.

“In marketing these are called ‘eyeballs,’” Hu said.

The researchers determined that a growing number of viewers on platforms such as YouTube contribute to higher advertising revenue, which in turn helps content creators, who get a cut when a video goes viral or reaches a certain number of views. Creators can also feature sponsored products to earn money from advertisers directly.

“Sponsored content creates revenue or income in a different way,” Hu said.

Platforms can grow through word of mouth or by promoting themselves and limiting advertisements to improve a viewer’s experience, Hu said. They can also incentivize content creators to improve the quality of their material to draw viewers.

Researchers discovered a peculiar parallel trend between a platform’s earliest stage and its most mature stage. At both stages, content creators received minimal advertising revenue even though viewers saw more ads.

As platforms gained momentum, they shared more ad revenue with creators while viewers were exposed to fewer ads, thereby enhancing viewers’ experiences.

“In the early stages, there is a period where platforms don’t share revenue with creators,” Hu said. “They start to do it more after the platform has grown to some extent.”

Researchers determined that platforms would benefit from sharing ad revenue with content creators earlier in order to drive growth.

One of the study’s limitations was that it did not delve into how competition would affect platforms, Hu said.

“There is room to study competition in this industry,” he said, adding that similar platforms would likely “compete for experience and content.”

Ruize Ma from the Dalian University of Technology in China is corresponding author of the study; Dr. Yunke Mai from the University of Kentucky also contributed to the work.