Note: These are my personal views and not of the Channel I work at.

Web-content production houses have sprouted up everywhere. Every one wants to create web content, of course because it is the next big thing! But why hasn’t anyone made it really big till now – at least in India?

The math is quite simple.

Imagine I am a content producer. I create a video and upload it on YouTube . This video, in-turn, manages to get 1M video views (completely organically).

Now assume that YouTube manages to monetize this ‘entire’ piece for me at a eCPM (Effective CPM) of Rs 200. This assumption itself is being highly optimistic because the eCPM usually hovers around the $2 (around Rs 134) mark and that it is extremely unlikely that every view will end up getting monetized.

Eklavya-Bhattacharya-Digital-Head-MTV-India

YouTube, as the platform owner, keeps 45% of it. i.e. Rs 90,000 of the total earnings of Rs 2 lakhs. So I as the content producer end up getting Rs 1.1 Lakh.

To be profitable, I need to ensure that my content production was at a cost below Rs 1.1 Lakhs, and also that my marketing cost was 0. When I say content production I’m talking about the costs of people, cost for the idea, talent, script, edit and of course the whole shoot.

Let us look at that 1 Million number with a realistic point of view:

Imagine you have a video on YouTube and want 1M video views on it. 1M video views via a successful YouTube campaign will cost Rs 2.5 – 3 / click (minimum). Often clicks do not even translate to views. But let us assume that you are a brilliant media planner and know every trick in the book. You use your video as a pre-roll ad and also end up paying YouTube only when at least 30 seconds of your video is watched.

You will still be looking at a spend of Rs 10-20 Lakhs. This usually ends up being far more.

Organic viewing? We were initially working on the assumption that the entire 100% was organic, but let us assume 50% of views come in organically (Virally!). What you have to keep in mind is that you will not be earning any money on the video views you manage to get by running your video as a pre-roll Ad!

At the end of the day, you are still looking at making a decent amount of loss, which needs to be bank-rolled by your VC who believes that you are on to the next big thing!

The other option of course is branded content. i.e. Get into creating content specifically for brand. But in this number obsessed world, you will have to play your cards very very smartly.

Why is YouTube still gung-ho?

Think about it. We’ll reserve that for another day.

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Ekalavya Bhattacharya is the Head of Digital for MTV India. The views expressed here are personal. This post is crossposted with permission from Ekalavya’s blog.