Providing a new monetization strategy for video content providers, Google has added ‘Fan Funding’ to YouTube. Utilizing Google wallet, fans of videos will be able to tip content creators who opt in to the program. On its inception, Fan Funding is targeting small tip like payments, of which Google collects a 5% fee and small fixed fee ($0.21).
The Fan Funding launch coincidentally is taking place shortly after DogeTipBot which has become a popular micro-tipping product on the Reddit dogecoin community made its live appearance on gaming video streaming site Twitch. Twitch itself was nearly acquired by Google, but the search giant backed away after allegedly running into disagreements about a breakup fee if anti-trust issues arose. Before ultimately being acquired by Amazon, Twitch was viewed as a natural fit for Google’s YouTube business.
Although the timing of Fan Funding’s launch coincides with that of DogeTipBot on Twitch, most probable is that it is a coincidence. While Google may have had knowledge of DogeTipBot being slated to appear on Twitch, the tipping product wasn’t a Twitch offering but part a third party app being integrated to work on the platform. In addition, YouTube has in the past been involved with providing content creators monetization methods such as revenue splits on advertisements that appear during videos. As such, Fan Funding can be considered an extension of their existing model to provide monetization options for creators. However, one opportunity that YouTube doesn’t offer to the chagrin of creators is the ability to sell their own ads and not rely on adsense.
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Two Business Models
What DogeTipBot and Fan Funding do provide are two distinct views of tipping. Allowing for free micro-payments of dogecoins, DogeTipBot’s average tip size has been reported to be around $0.02. On the other hand, taking into account both the fixed and variable fee, a $1 tip would only provide the video creator with $0.74, with $0.26 eaten up in fees. A larger $10 tip would amount to $9.29 for the creator. Due to the large percentage of fees, viewers may decide to be more hesitant about tipping small increments and focus on larger one-time payments to content producers they enjoy and follow, in contrast to DogeTipBot or other cryptcurrency platforms of which sub one dollar payments remain economical.
An example of where the economics of Fan Funding could possibly make sense would be private showings where content creators open their videos or live performances to subscribers while also promoting that further shows will be based on receiving funding. Overall, the idea would be to provide exclusivity and value to Fan Funders.
This contrasts with DogeTipBit and other similar digital currency tipping platforms, of which their success is based on being inclusive instead of exclusive. The result of this model is that it has shown that micro-payments can scale when it combines both an active community and is easily implemented.