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< News & Insights

YouTube is a cultural hit. But how successful is it as a business?

YouTube was the pioneer of influencer culture and key to the creator economy that has become extraordinarily successful. 

By Prandhana Naidu
Director | Senior Equity Research Analyst

Pran is a Senior Equity Research Analyst within the Equity Management team, specialising in in-depth, bottom up company research. She covers multiple companies across all sectors under the single global quality equity mandate.

YouTube is a cultural hit. But how successful is it as a business?

YouTube was the pioneer of influencer culture and key to the creator economy that has become extraordinarily successful. 

Historically it's been very difficult to know exactly how much money YouTube was making overall. But in Alphabet's latest earnings it disclosed that YouTube's total annual revenue has surpassed $60bn.This is more than Warner Brothers, Paramount Skydance and even Netflix. 

Alphabet paid $1.65bn for YouTube in 2006 and the consensus was that it overpaid. That one-off price is now more than 35 times covered by its annual revenue. 

We often talk about the visionary management of Alphabet with strategic long-term acquisitions like DeepMind, the AI research lab that founded Gemini. YouTube fits into that bracket. 

 

What makes YouTube different from other platforms?

YouTube is a triple threat.  

First, it's a search engine in its own right. You need to know how to fix something, you search on YouTube. And that's a major platform for advertising. Ads brought in $40bn of YouTube’s revenue last year1.

Second, it's a huge social network. While primarily a video platform, it is also an online community where its 2.7 billion2 monthly active users connect, share and engage with content. 

Third, it’s a premier streaming service. YouTube has been number one in streaming watchtime in the US for nearly three years, according to Neilsen3. Users are no longer just watching YouTube content on their mobile or PC; they are watching it on the TV in their living rooms. So fundamentally it is changing the way people spend their evenings in that YouTube’s viewership peaks during TV primetime hours.4

It has now won the rights to broadcast prestige live shows including the Oscars in an exclusive deal starting in 2029. It is already broadcasting major sporting events: its first-ever exclusive global broadcast of an NFL game last year, between the Kansas City Chiefs and LA Chargers, was watched by close to 20m viewers from over 230 countries5. 

Not only are these flagship events a key way to win customers and lock-in paying subscribers, they allow YouTube to showcase technology like multiview, which permits users to watch several channels on a single screen. They also attract high-spending TV advertisers migrating their ad dollars from broadcasting networks to YouTube. 

How does YouTube’s model work?

Once content creators hit certain milestones - be it number of subscribers or hours watched - they become eligible to share in the revenue from those ads along with other benefits. This profit-sharing model is structured so that YouTube keeps 45% of ad revenue while paying 55% to creators for long form videos. This is a generous split that incentivises top YouTubers like MrBeast, whose videos are reported to generate three billion views per month on average6.

Over the past four years, YouTube has paid more than $100 billion to creators, artists and media companies. This level of success has a material economic impact: in 2024 it supported more than 490,000 full-time jobs7. 

YouTube has a self-sustaining ecosystem given its unique interplay between content creators and viewers. As content is user-generated, YouTube has a low-cost business model and because there is something for everyone on YouTube, its subscriber churn is low. 

Much of YouTube’s content has longevity – it continues to generate views, engagement and ad revenue long after it was initially produced. 

Importantly, YouTube manages to combine all forms of video (long-form, short-form, livestreams and podcasts) in a single app. YouTube Shorts, which allow creators to make videos up to three minutes long, now average 200bn daily views8. 

Today, YouTube is a multi-format platform able to capture audiences across whatever type of show or format consumers want. 

 

How does Alphabet contribute to YouTube’s success?

Alphabet is crucial in providing best-in-class technology and decades of expertise in successfully monetising digital advertising.

YouTube has access to Alphabet’s leading cloud infrastructure to seamlessly host and stream videos with zero latency. Content creators can access in-house world class AI tools including Gemini, Nano Banana and Veo 3 to reduce the costs of production while enhancing the effectiveness of the content they make.

 

YouTube further benefits by leveraging decades of Google Search expertise in successfully delivering profitable ads, thereby broadening advertisers’ reach across both platforms to convert attention into profitable dollars.

 

What does the future hold for YouTube?

The reach of YouTube’s social network combined with its growing share of TV viewing hours gives it a powerful moat. YouTube has transformed itself into a frictionless, cross-device platform that captures our/human attention throughout the day. 

We can expect more innovation and, with it, more revenue. YouTube plans to keep expanding monetisation tools, including shopping and brand deals. With unique, broad and engaging content, it has the potential to charge users for quality engaging shows, a lever it has yet to pull. 

Last year YouTube brought in $20bn from subscriptions to YouTube Premium, YouTube Music and YouTube TV, a live broadcast service offering cable-like content including news and sport. But it still only has 125 million Premium (paying) users9. Growing its non-ad revenue streams will enable YouTube to be increasingly resilient to any downturn.

Finally, with its leadership position in a world of fast-changing audience needs and preferences, YouTube is in a prime position to benefit from best-in-class tools to capitalise on AI and keep top creators on the platform generating more content. YouTube has evolved into a self-reinforcing ecosystem with multiple revenue opportunities for both the company and the creator economy it has built.

 

Disclaimer

This communication has been prepared for information only and is not intended for onward distribution. It is neither an offer to sell, nor a solicitation to buy, any investments or services.

Issued by Stonehage Fleming Investment Management Limited, authorised and regulated by the Financial Conduct Authority (FRN. 194382).

[1] Bloomberg, Company Data 2025

[2] https://globalmediainsight.co/blog/youtube-users-statistics/

[3] https://blog.youtube/press/. Nielsen, January 2026.

[4] https://jacobsmedia.com/youtube-turns-21-and-it-just-became-prime-time/?utm_source=chatgpt.com

[5] https://blog.youtube/news-and-events/chiefs-vs-chargers-recap/                                                                                      

[6] https://www.businessinsider.com/mrbeast-jimmy-donaldson-net-worth

[7] https://blog.youtube/inside-youtube/the-future-of-youtube-2026/

[8] https://blog.youtube/press/

[9] https://www.youtube.com/premium

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