YouTube is fighting back against TikTok

Owned by Google, YouTube is fighting back against TikTok using the video giant’s key advantage: money.

YouTube to add advertisements to Shorts in order to share advertising sales with creators. (YouTube)

Owned by Google, YouTube is fighting back against TikTok using the video giant's key advantage: money. On Tuesday, YouTube announced plans to share advertising sales with creators of Shorts, its bite-sized video feature. Unlike on YouTube's main site, the new program will compensate creators using a pool from ads that run in Shorts. That's similar to the way that TikTok pays its popular stars, although TikTok has used a fixed fund that's been criticized for meager payouts.

But YouTube sees its effort as more ambitious than what TikTok has done. Neal Mohan, the company's chief product officer, described the plan as the first to fund short-form online video “at scale.”

Creators can join “whether they want to be the next big thing or just need help paying the bills,” Mohan said at the company's Los Angeles production space. “We want YouTube to be the place that gives them the greatest support in the digital landscape.”

YouTube, part of Alphabet Inc.'s Google, is facing competition from TikTok for both young viewers and the online stars that made the video platform a commercial success.

Like Instagram, YouTube has responded to TikTok with mimicry. In 2020, YouTube introduced Shorts, a format for vertical videos that it has increasingly promoted in the company's app. Earlier this year, YouTube disclosed that Shorts had over 1.5 billion monthly viewers and told investors that it would bring ads to the format.

YouTube began sharing ad sales with producers in 2007 and now has more than 2 million creators in its program. Last year, YouTube reported more than $28 billion in ad sales, before creator payouts. Yet growth has slowed this year, which analysts attribute to Apple Inc.'s restriction on ad targeting and TikTok's rise.

Mohan said that creators can join YouTube's partner program if they have more than 10 million views on Shorts and over 1,000 subscribers. Historically, YouTube has given 55% of its ad sales to creators and kept the remainder. With Shorts, YouTube will only share 45% of its ads program.

Tara Walpert Levy, a YouTube vice president, said the company changed its commission because it was better for building “a long-term business. ”

YouTube also introduced a new feature called Creator Music that allows creators to license popular songs in videos easily and still make money. Previously, music rights holders took the entire cut of revenue from songs that played in videos. Popular music in clips has been a big driver of TikTok's popularity.

To announce the feature, YouTube brought on stage Jason Derulo, a musician with a huge following on TikTok.

“To me, this announcement is going to shake the world,” he said about YouTube's new feature.