Who Wants to Be a YouTube Billionaire?

Who Wants to Be a YouTube Billionaire?

Photographer and YouTuber Yukiko Hasada cooking a tiny dish on a miniature stove on April 29, 2017 in Okazaki, Aichi.

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Why you should care

A new generation of career vloggers is using YouTube to earn millions of dollars. 

When Marcus Butler told his parents of his plan to devote himself to his YouTube channel, he was earning just “tens of pounds.” That was eight years ago, when the excited 18-year-old had just returned from VidCon, the annual online video extravaganza in Los Angeles, where he met vloggers who had bought houses with their earnings.

“There was something material that showed there was potential in it,” he says. Having traveled to L.A. as a “weird kid who liked YouTube,” he came back a wannabe entrepreneur. “I never had the vision when I started that it would be a business,” he says.

Butler became part of the “British invasion of YouTube,” one of a group of friends including Alfie Deyes, Zoella and Caspar Lee, who have boosted each other’s profiles. His biggest hit was rapping on helium with U.S. vlogger Tyler Oakley, which received more than 8 million views.

Now, Butler has bought rental properties in his hometown of Brighton, set up a subscription healthy snacks box and a music management company. He started generating income from his share of YouTube ads that ran next to his videos. Like other successful vloggers, he also promotes brands, products and services. Other revenue streams include tours, book deals and merchandise. In short, he has become a role model for a new generation of YouTube wannabes.

You can make an exceptional living having a large audience on YouTube.

Greg Goodfried, United Talent Agency

Those budding YouTube vloggers face an uphill struggle as they try to break through. They now have to compete on a crowded platform where it would take eight years to watch the content uploaded in 24 hours — including that produced by stars from film, music and other areas of entertainment. YouTube itself is wary of competition in video content from Facebook on one side and in streaming music from Spotify on the other. Before the careers of their peers have even started, younger vloggers have the strain of running a complex business in full view of their followers.

Nevertheless, the opportunity is huge: Anyone with a smartphone can try to reach YouTube’s audience of 1.9 billion signed-up users. The size of the YouTube creator economy is hard to estimate. Alphabet, Google’s parent company, does not even break out YouTube’s revenue. But the number of channels making more than $100,000 a year has increased by 40 percent year-on-year, according to the company.

For YouTube and its parent, Google, which bought the channel for $1.7 billion in 2006, this world of content is a key way of keeping users on its website rather than its rivals’. Rich Greenfield, an analyst at BTIG, estimates YouTube revenues to be in the high teens of billions of dollars.

Of the 1.7 billion views YouTube received in the first quarter, 84 percent were for the self-created content of so-called influencers. While that category includes the channels of major artists, the best-known vloggers rival them in reach: Logan Paul, who created a storm of controversy this year by showing an apparent suicide victim in one of his videos, has 18 million subscribers for his channel, more than Adele (17.8 million) or Beyoncé (17.1 million).

“The vlogging landscape has grown tremendously over the past 10 years,” says Greg Goodfried at United Talent Agency. “You can make an exceptional living having a large audience on YouTube.”

Creators can quickly reach audiences in other countries: 48 percent of European vloggers export outside their home country, with three-quarters of U.K. creators’ audiences outside the U.K., according to research from the video analytics company Tubular Labs.

“The growth and scale have created a really wonderful opportunity for creators being able to reach a global audience and build a real business,” says Kelly Merryman, vice president of content partnerships at YouTube.

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Vloggers have been a key part of the YouTube model since its early days. In May 2007, just over two years after the platform was launched, it brought in the ruling where creators receive 55 percent of the revenue their videos generate — which has since expanded to 97 countries.

Now advertising is not the only option — or even the majority of incomes — for vloggers. As larger creators started making the most of their money from partnerships with brands, YouTube bought FameBit, a marketplace to connect creators with marketers, in 2016. At this year’s VidCon, YouTube announced that vloggers can now sell memberships to their channels that give fans exclusive content and create their own merchandise through the platform.

“When creators start on YouTube, they are telling their story. Over time, they create a brand, a community, a fanship. It reminds me of what Oprah Winfrey did with syndication at 4 p.m. in the afternoon when I was growing up,” says Merryman. “She reached out to us in our households and told us about life: Oprah’s book club, recommendations of movies to see, household goods to buy, because we trusted her.”

Some of the top brands partnering with YouTubers include Epic Games, maker of the hugely popular online game Fortnite; Old Spice, the consumer label; and Kay Jewelers, according to Tubular Labs.

Many creators secure external representation with an agency or manager. Scott Fisher, a founder of Select, a management company for digital creators, has done deals for his clients with brands including Starbucks and Revlon. Making “seven figures” is now commonplace on YouTube, he says.

Creators with large followings often have even more employees — from video production help to lawyers, accountants and sometimes stylists — than traditional celebrities. “The world is now much more favorable to an independent creator than to be on a show for five years,” Fisher says.

Only a select few, however, can become the next mini-Oprah, even on the internet. Unjaded Jade, an 18-year-old from Berkshire in the U.K., has more than 200,000 followers of her channel, with more than a million views for her 5 a.m. school morning routine video. She says advertising revenue is a lot lower than people assume. “I couldn’t live on it. It’s pocket money,” she says, although she makes more through brand deals on the video platform and through her Instagram account.

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The hardest part is getting noticed. Mathias Bärtl, a professor at Offenburg University of Applied Sciences in Germany, found that the top 3 percent of YouTube channels received 90 percent of the site’s views in 2016, up from about two-thirds in 2006, shortly after YouTube started. If your children want to become YouTube stars, you should “do them a favor and crush their ambition now,” he says.

Jonathan Saccone Joly, who started his channel in 2010 when he was already at the ripe old age of 30, is aghast at the idea of school-leavers aspiring to be professional YouTubers. “It is a massively saturated audience. People are trying to do more extreme things to get recognized,” he says. “It’s like playing the lottery, being an actor or a musician.”

Myles Dyer, who has 48,000 subscribers to the channel he uses to promote social change, says people were doing provocative things to get clicks but insists it is important to not be a “slave to the algorithm.”

“People are now doing more subscriber and sponsored content. I’ve never made enough out of YouTube to pay the bills,” he says. Dyer is now using Patreon, an online subscription service, to receive donations from fans.

Allison Stern, co-founder of Tubular Labs, says the YouTube ecosystem has changed “pretty dramatically” in the past five years. She says that “to cut through the noise,” vloggers have to be doing something “really unique and niche” — starting trends such as slime, pancake art or lip art — or build an audience on another platform and then transfer it over to YouTube. One example is Nash Grier, who became a star on the now-defunct Vine, a six-second video platform owned by Twitter. His YouTube channel was the fastest growing ever, Stern says.

Before the explosion of user-generated content, people used to build a business, then turn to social media as part of a marketing strategy. Now, some YouTubers are creating an online brand and then starting a business.

Cassey Ho, based in Los Angeles, put up her first YouTube video of her doing Pilates in 2009. She was in her first job after graduation and not thinking about a business. But when she quit to teach Pilates full time, she spent more time on her channel and eventually launched a merchandise range selling “blogilates” fitness wear and accessories. She now has revenue in the “multimillions of dollars,” 80 percent of which is from merchandise. Of the rest, about 70 percent comes from sponsorship and 30 percent from advertising revenue. She employs 12 people, has a production studio and a warehouse.

“I always knew creators should get into selling merchandise. I think that’s definitely where it’s going,” Ho says. “That’s where people are going to create a lasting brand for themselves — not based solely on face and celebrity.”

The most popular YouTubers can now enjoy money and fame like conventional celebrities — but also the stress that comes with such a high profile. Ruben “Elrubius” Gundersen, a Spanish vlogger famous for filming himself playing video games, told his 30 million subscribers in May that he was going to take a break because of anxiety. “I had to go to the doctor, because the last few days I felt that it couldn’t breathe and I slept worse,” he says.

Stress has become such a problem that YouTube has uploaded a video on the problems of burnout to its online Creator Academy, where it sits next to classes on navigating copyright and what to charge for brand deals.

Fisher says the biggest risk of YouTube is to the creator’s mental health. “Everything rides on the talents’ shoulders. The pressure to keep up the daily content, Instagram and Snapchat get into someone’s head, especially when you go from making minimum wage to the next year sometimes having a seven-figure tax return,” he says.

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Online commenters can be hateful. Unjaded Jade said it was “demoralizing” when people would insult her, saying she sounded like a man. Then she had to cope with fake Twitter accounts putting out racist quotes, and her personal details and school information were leaked online.

Vloggers have also been caught up in the dispute last year which saw brands such as McDonald’s, Volkswagen and L’Oreal pull ads from YouTube after investigations showed their marketing appearing next to extremist or inappropriate content.

New rules to try to protect advertisers from appearing next to inappropriate content have inadvertently hit some channels’ ability to monetize. Creators used to be able to start monetizing their channel when it hit 10,000 views. But since January, vloggers have had to build a base of 1,000 subscribers and 4,000 hours of watch time in the past 12 months before they receive advertising dollars. Merryman says 99 percent of the channels affected were making less than $100 a year.

Just over a year ago, Butler started to feel jaded by YouTube. “I lost my passion for what I was doing,” he says. But when he invited comedian Jack Whitehall on to his podcast in October, he realized the potential for using the platform to test material for comedy shows he is developing for broadcasters.

“The thought of abandoning it completely doesn’t feel right,” he says. “If I were to start now — it’s harder. More people want to do it than ever.”

The ultimate reality TV: Escapism by watching day-to-day lives

In 2010, Jonathan Saccone Joly, then a freelance Irish digital animator in Dublin, started to play around on YouTube, hoping the video platform might provide a path to finding animation work. One day he filmed himself and his partner, Anna, having lunch on the beach and walking the dog. “A thousand people watched it and said it was good,” he says. “I was shocked.”

So he decided to record himself for seven days, cooking, shopping, humdrum everyday stuff, or, as the 38-year-old puts it: the “ultimate human interest story.” It was different from reality TV, which is heavily scripted, he says. “After a week, I got addicted. A week turned into a month. I didn’t stop. After a year I had 6,000 people watching a day.”

Today, his wife and three (soon to be four) children are an online business. The Saccone Jolys (a combination of the couple’s surnames, Saccone and Joly) post a daily video of their family lives, featuring dramas such as the birth of their children (their first, Emilia, is their most watched video, with 5 million views) and dealing with Anna’s miscarriage (3.2 million views) as well as the more prosaic school run.

Critics charge that the parents have exploited their kids by putting them in front of the video camera. Saccone Joly says their appearances are carefully managed and that they are allowed to be normal kids. Plus, he argues that the family business allows him to be part of the children’s day-to-day lives in a way that a conventional job would not. “The cost of that is they participate in this circus,” he says.

But he accepts that he does not know the long-term effect on his kids. “We will have to wait till the first generation of YouTube kids has grown up.” In his favor, he says, is an internet savviness. “We are more strict about the internet than their friends’ parents. If I didn’t work in this space, I wouldn’t be aware of what is on YouTube.”

His wife feels the wrath of the web the hardest, he says. “The internet is harder on Anna than it is to me. It is more of a sport to critique her as a mother.”

The target audience is families, 25- to 40-year-olds going through similar life events. “We live different lives, but it’s the same thing,” he says. “People are watching our videos for escapism.”

Saccone Joly will not disclose the family’s earnings, aside from saying that the majority is from brand sponsorship. “The money varies. It’s good. I have kids who are in private school. It’s hard work though. I work seven days a week, 24 hours a day.”

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By Hannah Kuchler & Emma Jacobs

OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2018.

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