When it comes to monetizing your YouTube channel, sponsorships are one of the best ways to bring in some extra cash. Before you can start landing those sweet sponsorship deals, you need to know how to price and negotiate them.=
The Ultimate Guide To Pricing & Negotiating YOUTUBE Sponsorships
SEPTEMBER 15, 2022
by Brooke Elverston Jordan
If you’re a YouTube content creator, it’s critical that you know how to spot or create good deals with brands. A recent study from Influencer Marketing Hub found that YouTubers make, on average, 71% of their income from brand deals, but whether you’re above or below that average depends on how you price and negotiate for your channel.
In this guide, we’ll teach you how to price and negotiate YouTube sponsorships like a pro. We'll cover topics such as how to recognize different types of pricing models and the pros and cons of each, factors to consider when pricing sponsorships, and how to create win-win agreements that benefit you, your sponsors, and your audience. So whether you're just starting out or you've been in the game for a while, this guide will show you how to up your sponsorship game and take your content to the next level.
Sponsorships, Defined
When a brand reaches out to ask if you’d like to promote their product on your channel, they’re asking if you’re interested in a sponsorship. A sponsorship is an agreement between a creator and a brand, in which the creator agrees to promote the brand's product or service in exchange for some form of compensation. The compensation could be money, a free product or–—if they’re trying to take advantage of you–— “exposure.” Some deals and compensation structures are more favorable than others, and it is important to know how to identify a good deal when you see one.
Before the Outreach: Media Kits & Numbers
There’s a piece of advice carved into the Temple of Apollo that’s *almost* applicable to sponsorships. The advice is “Know thyself,” but I think in this case it would be more apt to say, “Know thy numbers.” Which numbers? You’ll need your audience demographics, your channel’s average viewership, your other social channels, and more. Once you’ve gathered those, you compile them into one document, called a media kit, that you can send to any brand who asks to see your information. You need to know about the brands too. Specifically, what are their campaign goals, and how you fit into them. For instance, are they trying to raise awareness of an existing product, or launch a new item into the market? The approach for each type of ad is different. Finally, help brands understand you, your relationship with your audience, and how it fits into their campaign. For a full guide to building your media kit, check our guide: How To Create An Influencer Media Kit That Converts
Pricing Models
There is no one golden rule or standard for sponsorship pricing. Pricing can be complicated and is impacted by your alignment with the brand, average viewership, engagement, and a multitude of other factors, some more measurable than others. Just as there are different ways to advertise a product, there are a variety of ways to price and structure your services. Three of the most common pricing models are affiliate, product, and paid. Each of these models has its own benefits and drawbacks, and ultimately, the pricing structure is often up to the sponsor's discretion. However, pricing is often negotiable, so it's important to have a clear understanding of what structure is right for you.
1. Affiliate
Affiliate marketing is a type of performance-based marketing in which an affiliate - that's you - promotes a product or service in exchange for a commission on sales for each visitor or customer brought by your marketing efforts. An affiliate sponsorship typically consists of two components: a verbal shoutout and a trackable action. Most commonly, you'll include a verbal shout-out in your video prompting your viewers to click on a link in your description or visit a brand’s website and enter a discount code linked to your channel. Your affiliate link is assigned by the brand and contains a unique tracking code that measures how many viewers click on your link and whether or not they make a purchase. Each time your link or code is used to make a purchase, you earn a commission. Commission rates vary greatly among affiliate programs, and can range anywhere from 1% to 75%, with the most common commission rates hovering around 5-15%.
There are many different affiliate sponsorships that YouTubers can participate in. Some of the most popular ones include:
Amazon
Skillshare
Shopify
Honey
Movavi
Affiliate marketing can be a great way to generate extra income from your YouTube channel, but in order to generate a significant amount of income, you'll have to make significant sales. As affiliate marketing conversion rates average between 0.5% to 1%, you'll need to sell high-ticket items or encourage a large number of people to purchase to make the sponsorship worthwhile. However, if the brand has a quality product that aligns with your viewers' interests, affiliate deals can be a great fit for your sponsorship portfolio.
2. Product
Product sponsorships take place when a brand offers to send you a product in exchange for a promotion. This can be a great way to get some goodies and build up your partnership portfolio, but it's important to ensure that you're getting something that you actually want and will use. The value of the product should be equal to or greater than your rate for a paid partnership. Creators often accept deals for much less than they're worth because, well, who doesn't want a 'free' backpack or wallet? Remember, the products are not free; the brands are simply paying you in products in lieu of cash.
3. Paid
The holy grail of YouTube monetization: Paid Sponsorships. If you land a paid sponsorship, you'll promote a product or service in exchange for cold, hard cash. Paid sponsorships are harder to come by than product or affiliate sponsorships, but they have the highest payout potential.
Most advertisers will use one of the following pricing models for a paid sponsorship:
Cost per Mille (CPM)
Cost per mille—or cost per thousand views —is a common way for brands to pay for sponsorships. In CPM-based deals, you earn a certain amount based on the views received on your sponsorship within an agreed time period (e.g., 30 or 45 days). CPM and time period are negotiated with the brand prior to the sponsorship going live, and your payment is received after the viewership attribution period. CPM rates vary by factors that include, but are not limited to: you and your audience’s location, (the average CPM for an audience in the US is $10–30 while in Turkey it’s $5–10), category of sponsor (mobile game developers tend to pay higher than blue chip companies), and the brand’s perception of *your* channel’s alignment in relation to theirs (advertisers pay a higher CPM for channels that they feel is well aligned). Lastly, it’s important to understand most CPM-based deals come with a compensation cap. A compensation cap sets a barrier to how much a company is willing to spend on the campaign, even if viewership rates continue to surge. This is done to protect the brand if your video does extraordinarily well and drastically exceeds anticipated viewership. A cap that exceeds your desired flat rate by ~25-50% is generally accepted in the industry. (i.g., if you typically charge $1,000 per sponsorship and average 50,000 views/video and the CPM rate is $20CPM, a fair cap might be ~$1,500 (75,000 views)).
CPM Creator Rate = (Views received in time period / 1000) X CPM
Cost per Action (CPA)
If you opt for CPA pricing, you’ll make money every time one of your viewers performs a predetermined action within an agreed time period. The action typically occurs when a viewer completes a pre-set conversion goal on a website or landing page, such as signing up for a newsletter to making a purchase, from your post. This is less common than the other compensation models.
CPA Creator Rate = Quantity of Actions X CPA
Cost per Click (CPC)
In CPC advertising, advertisers pay a certain amount each time a user clicks on the tracking link. Unlike CPA advertising, the viewer does not have to perform a second action, like signing up for a newsletter. This type of advertising is growing in popularity because it allows advertisers to target their audience more effectively and measure the results of their campaign more accurately.
CPC Creator Rate = Quantity of Clicks X CPC
Cost per Install (CPI)
The CPI model is a type of pricing designed to compensate creators promoting mobile apps and other digital products. Under this model, the creator is paid a fixed amount for each product install that they drive. This is tracked via a custom link in your video’s description, and your total earnings are calculated after a predetermined time period. This type of pricing is common in the mobile app space, as it provides a clear way to measure the value that the creator is bringing to the product. This model is most commonly paired with a flat, base rate. (i.g., a sponsor may offer you a base rate of $x and a bonus of $y per install)
CPI Creator Rate = Installs X CPI
Flat-Rate
If you opt for flat-rate pricing, you and your sponsor will agree on a price prior to the campaign. You can calculate your flat-rate fee by analyzing the performance of your past videos and using them to predict, on average, how many views you will get on your upcoming sponsorship. This prediction along with your desired CPM can be used to negotiate your flat-rate fee.
The most common way to calculate a flat-rate fee is similar to that of CPM-based deals, whereby you earn a certain amount based on the views received within an agreed time period. In this case, it is typically determined by the average views per video over the past 30-60 days.
Creator Flat Rate = (Views received in the past 30 days / 1000) X CPM
Charging a flat rate can help you create a predictable revenue stream; whether your video performs above or below your historical average, you'll know exactly how much income you’ll generate in advance. Flat rates are often beneficial for advertisers, as they can measure and allocate the exact campaign spend into their budget prior to launch. This pricing model tends to be the easiest to facilitate and is generally considered to be the most advantageous for creators.
How Do I Price My Sponsorship?
You may be thinking, "Sounds great! But how do I know how much to charge?” That’s a tricky question. Pricing is one of the most important aspects of any business, yet it is often one of the most difficult to calculate and control. The reality is that pricing is affected by a myriad of factors, some more measurable than others. By understanding the factors that can impact pricing, you can be better prepared to make decisions about how to price your endorsements:
Audience
An influencer's relationship with their audience—and the fit of that audience with a brand—is an influencer’s most valuable asset. The best way to develop this relationship is by knowing your audience and working with brands whose products might genuinely be of interest to you and your fans.
Say you accept a contract to promote a brand that your audience knows you don’t really like. You’ve damaged your relationship with your viewers, who now see you as less authentic, and you’ve damaged your relationship with the brand, who won’t respond well when none of your fans buy their product. On the other hand, if you believe in a product and it’s a great match with your audience—like a cybersecurity YouTuber promoting VPNs—everyone stands to gain. Your audience sees a relevant product that might genuinely benefit them, the brand gets more sales, and you can command higher rates because of the success rate.
So when you’re approaching brands, think long-term. Don’t accept sponsorships that offer a quick paycheck but might not appeal to your audience, and don’t explain your audience in an untruthful way just because it might convince a brand to hire you. Focus on telling them exactly who your followers are and what your relationship with them is, and if they match the marketer’s target market.
Additionally, your audience location also helps determine your baseline price. Most channels use CPM to set prices, and base their rate on where the majority of their audience is located. Once you know your CPM, you have a bedrock to build on in negotiations.
Views
The best way to understand your channel’s performance is to calculate your average views per video over the past thirty days. You can do this manually, but we recommend using HypeAuditor to track your metrics.
Format
Different sponsorship formats command different rates. If you’re adding a 30-second shoutout to the beginning of your video (pre-roll), that’s one rate. If you’re doing a 60-second ad in the middle (mid-roll), that’s another. What about a dedicated video? A product placement? A pinned comment? A tattoo of the brand on your right shoulder? The options are endless. However you decide to structure your sponsorship, you should take the format into account when setting your rate.
The Art of Negotiation
Prepare
Negotiations start long before you sit down at the metaphorical table with a brand; it’s in your best interests to research your potential business partners beforehand, so you know what they’re likely to offer and what it’s like to work with them. This might involve reaching out to influencers who’ve worked with the brand in the past and asking how they were compensated, or what their experience with the brand was like.
Once you’ve determined your rates, prepare to negotiate. There is no one-size-fits-all approach to pricing, and partnerships can take many forms. It’s common to provide à la carte services for the perfect custom campaign; think multi-month integrations, tweets, and feed posts. As you’ll need to tailor your services to specific campaigns, you’ll want to tailor your prices to match.Despite preparing yourself with background research and a rate card (or at least having a rate in mind), you need to determine how much you’re willing to negotiate. It’s almost always advantageous to price yourself above your price floor (which is the lowest acceptable rate you’d accept) so it allows for room to negotiate down, if necessary. However, it’s important to understand your price floor must be equal to or less than the brand’s price ceiling, which is the highest amount they’re willing to pay. Otherwise, you’ll be overpriced and deadlocked. In other words, a deal won’t come to fruition.
Considerations
If you price yourself too low, you’re leaving value on the table, but if you price yourself too high, the sponsor could walk away because your rate and their expectations were too far apart to reach an agreement.
Experienced negotiators can predict where their counterpart’s price ceiling may be in order to maximize their earnings, while simultaneously remaining within the brand’s budget.
The best negotiators are able to improvise and think quickly on their feet, but lucky for you, the vast majority of your negotiations will likely occur via email, which allows you to take a deep breath and carefully consider your counterpart’s response before pressing send. It is recommended to do exactly that. While you should always respond in a timely manner (even if you decline the solicitation), it’s best practice to proofread your correspondence. In a negotiation, every period, comma, and word truly matters as it could change the context of your message and alter the course of the negotiation.Be flexible. Not every brand will perceive your value the same way you do and that is OK. Compromising, within reason, should not be considered a loss. In many instances, reaching a compromise is a better alternative than deadlocking a deal. Expect some back-and-forth with your counterpart, after all, it is a negotiation and deals are seldom agreeable by all parties during the first go-around.
Contracts
If all goes well with your negotiations and you reach an agreement, you’ll need to solidify it with a contract, sometimes referred to as an insertion order (IO). It’s standard practice for the brand to provide you, the creator, with a drafted contract. It is critical to have a contract in place to mitigate a potentially costly conflict. To state the obvious: you shouldn’t take a stranger from the internet’s word without robust, written assurances by way of a contract. Contracts should always be reviewed by a legal professional or an agent if you’re not privy to contract law. If obtaining advice from a legal professional is off the table due to your personal circumstances, rest assured most YouTube media contracts are relatively short and easy to digest for those with some legal or business background. When in doubt, ask for clarification. Sometimes predatory brands will intentionally make important details (such as the payment or cancellation terms) opaque and in their favor. While most brands want a mutually advantageous relationship, others will take every opportunity to exploit you and your audience. Stay vigilant.
Enlist help
If you’re thinking “Hey, article, I didn’t sign up to be a negotiator.” That’s fair. Brand deals can be complicated and demanding. You could dedicate an entire career to navigating them. In fact, people do.
Influencer talent management agencies specialize in securing brand deals for content creators. They’re run by industry specialists who have a wealth of knowledge and experience when it comes to sourcing, negotiating, and securing sponsorships. A good agent or manager will proactively find sponsors that align with your specific interests and expectations, and work to negotiate the most lucrative deals for your channel as well as field the inbound inquiries from brands. Additionally, agencies often have established relationships with brands, which gives them an advantage when it comes to securing sponsorships for your channel.
If you’ve reached the stage in your career that involves negotiating brand deals, we suggest hiring an agent with a vast amount of experience in bridging the gap between brands and influencers. Once your channel is growing fast enough to attract sponsors, you’ll need to dedicate more time than ever to creating content and cultivating your audience. An agent can help you focus on your work while they handle the brand deals and negotiations. Having a staff dedicated to handling things that would otherwise drain your time and resources is a great way to help avoid burnout and side-step unscrupulous brands looking to take advantage of creators.Most agencies charge between 15-25% for their services and generally only get paid when they’re successful in helping you make money. A good agent will more than pay for themselves by maximizing the value of the deal beyond what they charge. This could also save you massively on legal fees if you have been or intend on paying an attorney to review each contract, all while saving you time from having to do it yourself.Not all agencies are equal. Carefully vet your prospective agent and ensure they have a solid reputation and track record of success. Just as there are good and bad doctors, there are good and bad agents. Be confident in your decision before making any commitments.
Once you’ve got the deal
In order for you to build trust with your audience, you have to be transparent about your relationships with the brands you promote. Let your followers know when you’re being paid to promote a product or service and be up-front about any potential conflicts of interest. This will help retain your followers’ trust, and keep you in good standing with the Federal Trade Commission (FTC) which mandates ad disclosure requirements.
When you sign a contract with a brand you also—by extension—make an agreement with YouTube that you’ll uphold their Ad Policies and Promotional Guidelines for paid product placements, sponsorships & endorsements. In practice, that means you’re obligated to declare if your content is sponsored, and who that sponsor is.
An Important Reminder
Pressing upload isn’t the end of your business transaction, it’s the beginning. Your sponsors are investing in you for a reason. They see something in you that they believe is worth backing, whether it is your talent in-game or your popularity with fans. It is up to you to make sure that you are meeting their expectations and delivering on what they are counting on you to do. It is always gratifying to know that your work is appreciated and that your efforts are valued by your sponsors. A successful campaign is often rewarded with renewals and long-term brand partnerships. These relationships are a testament to your talent and commitment, and they provide a sense of stability and security in an ever-changing industry.
Now that you know how to price and negotiate your YouTube sponsorships like a pro, go land that sweet sponsorship deal!