"South Park" recently aired an episode showcasing a bunch of YouTube celebrities and how they were all theoretical multi-millionaires. I think the guy who sang "Chocolate Rain" is supposed to be $100,000,000 richer, at least according to the show. So how does that work?
In the old days, you'd be in the real, physical world, and set up a stage. Then you'd get on that stage and perform. And people would pay to see you do it. So if everybody pays $1, and you have an audience of 100, you just made $100.
Now, with the internet, we can all show our performance to many, many more people with incredible ease. So, if 100 million people see your $1 show, then you are theoretically $100 million richer!
But this is where the problem is. (From here on might be excruciating because I guess I'm spelling out what many consider to be common sense.)
You perform for a camera. Save your video. Upload it to YouTube. It becomes Google's property. Google shows advertisements. Every time a viewer of your video clicks an ad, Google makes money.
Google is stealing our Theoretical Dollars!
It gets interesting though. The $1 show is now free for the audience. Whoever clicks an ad generates revenue, but one click is usually worth less than a dollar. Say 20 cents.
So 100 million people watch your video. One million (one in a hundred) click. Twenty cents per click times 1 million clicks = 20 million cents, = $200,000.
100 million viewers = $200,000, for Google not you.
If you set up your own site, then you could collect. For every hundred viewers (audience members), you get 20 cents. (Or $2 if you're on the ball.)
You don't have to pay to see all the other shows…
So it's like you're a Rock God, and in your contract it stipulates that you'll receive only 1/500 of your normal salary, because the rest covers lavish "complimentary" trips to all the other rock concerts in the world, ever. Sweet…