In today's Finshots we see how YouTube impacts the country's GDP.

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The Story

What do you imagine when you hear the word “startup”?

You probably conjure up images of snazzy offices, the latest Macbooks, techies coding on comfortable bean bags, free-flowing caffeine, and money. Lots and lots of VC money.

Now, what comes to your mind when I say “YouTube creator”?

Maybe you picture people doing things they love, being their own boss, interacting with their community and travelling the world. It looks sweet.

But rarely do we conflate the two things. We somehow think YouTube creators are pursuing a side hustle while startup founders are trying to change the world. But it’s time we start changing this line of thinking because the creator economy is throwing itself into the startup domain as creators morph into founders.

And the perfect example here is Physics Wallah (PW) — a YouTube channel that’s possibly going to be India’s shiny new ed-tech unicorn. This bootstrapped YouTube channel is all set to raise money for the first time ever. At a sky-high valuation of $1bn.

Now if you haven’t heard of PW, it’s probably because you don’t know anyone trying to crack India’s engineering entrance exams. But since 2016, Alakh Pandey, who founded PW, has been the go-to guy for entrance coaching. He started off just like anyone else — coaching at a popular offline coaching centre. And then he figured, “Hey, I’m pretty good at my job. Maybe I can reach more people digitally.” So he turned to YouTube and began to do just that.

Remember this was at a time when Reliance Jio flooded the telecom market with cheap data plans. So with the extra tailwind, PW’s subscribers skyrocketed. And soon they were capitalising on their brand by setting up offline centres too. Through it all, a Youtube channel turned into a unicorn.

It’s a fascinating story!

But PW is not just about cracking entrance exams. Well, that’s the actual business model, but, as a YouTube channel, PW delivers a lot of second-order benefits. Like jobs!

Over the years, PW has gone on and hired a bunch of people — at least 460 according to a LinkedIn search — to teach, build apps, market its products. They lease office space, then rent and buy equipment, spend on IT services, you get the drift. Obviously, PW paid all those folks. And what do you think these other people did with the money? Well, they probably saved some and spent the rest — perhaps bought a new phone, spent it on a nice meal, watched a movie. This is a trickle-down effect. Their spending in turn creates more jobs and aids economic activity.

Or at least, that’s how YouTube sees it. And to prove their point they hired a research firm Oxford Economics to crunch the numbers. So here are the headline figures.

  1. YouTube’s creator ecosystem contributed ₹6,800 crores to India’s GDP in 2020
  2. All this supported nearly 684,000 full-time equivalent jobs

For context, India’s GDP is estimated to be worth ₹135.6 lakh cores in 2020–21. And while ₹6,800 crores may not seem like a lot, when you tally it up with the total GDP, it isn’t entirely inconsequential either. More importantly, there may be more to this calculation than meets the eye. GDP measures can’t capture the “free” value created by many companies in the digital age. Like YouTube which gives its services for free (in exchange for your data, of course).

So do these “free” digital services create a bump up in GDP?

Kevin Fox, an Australian economist, thinks it does. Working with four other economists, including Erik Brynjolfsson, a professor at MIT, he recently surveyed consumers to see what they would “pay” for Facebook [another “free” service] in monetary terms, concluding conservatively that this was about $42 a month. Extrapolating this to the wider economy, he then calculated that the “value” the social media platform would have created after adding the extra charge —0.11 per cent of US GDP.

So maybe YouTube contributes far more to India’s “GDP” than what those calculations show. But even if you discount this, the creator economy is only going to explode from here on in and they may add considerable value to the country as a whole over the next few years.

Until then…

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