In October 2016 Google acquired another startup, Santa Monica based FameBit. The tech company has always been closely tied to Google-owned Youtube through its network of content creators and brands looking to market their products and services on the popular website. The terms of the deal haven’t been disclosed, but this is a major change that will ultimately affect how a large number of YouTube creators and small and medium sized brands connect.
What is FameBit?
FameBit was founded just three years ago by Agnes Kozera and Dave Kierzkowski, and up until now it’s been a five person company running out of Science, Inc.’s tech studio in Santa Monica. Along with 500Startups, Machinima’s Allen DeBevoise, DeNA, and other tech investors, Science Inc. contributed $1.5 million in seed money to FameBit when the company was a year old.
As a data driven marketing company, FameBit aims to make connecting brands and digital content creators easier through the use of automation and data science. Essentially, FameBit has served as a marketplace where those who create videos, especially on sites such as YouTube, can pitch their channels and talent to brands looking to sponsor content.
Once video creators have a profile on FameBit, companies can search through them with things like their demographics, subscriber count, and specific audience in mind. For instance, instead of spending tons of time combing the web looking for a YouTube creator with at least 75,000 subscribers who specializes in knitting tutorials, a yarn brand could jump on FameBit to find a good sponsoring match. Once the creators and brands connect and an agreement is reached, videos are made either featuring specific products or mentioning certain brands.
How It Works
Much like everything else in the world, there are those creators on YouTube who have tons of sponsorship opportunities, views, and subscribers and those who don’t. Digital influencers who happen to have millions of subscribers gain the opportunity to join a multi-channel network — commonly referred to as an MCN. Working with MCNs is significant for content creators, because it gives them the chance to earn ad revenue from their sponsored videos without paying a commission to YouTube. This system works well for super popular creators and large brands with millions to spare in their marketing budgets.
However, the whole dynamic leaves out both smaller creators with devoted audiences and great content and smaller companies that can’t toss out hundreds of thousands of dollars per video to work with YouTube’s biggest stars. In comes the beauty of FameBit: with the cost and exclusivity of MCNs out of the way, brands and content creators can cut out the middle man, contact each other directly, and set up the terms of their agreements.
Making itself a marketplace that’s self-serve has boosted FameBit’s appeal with small and mid-size companies and creators on YouTube with engaged audiences. The ideal content creator for FameBit has at least 50,000 subscribers and makes videos in a niche demographic, such as candle reviews, sneaker collecting, urban homesteading, and the like — things that don’t have mass appeal but do have a devoted base of people who will regularly watch videos, leave comments, try recommended products, and share content. Because these types of creators doesn’t have the astronomical fame reserved for a select few YouTubers, the price to sponsor them via FameBit is more reasonable.
The cost to work with a creator through the FameBit platform typically ranges between several hundred and a few thousand dollars per video. The top creators on the site can pull in tens of thousands of dollars per piece of sponsored content, and with FameBit taking a 20 percent cut of each deal they’ve been able to generate a few million dollars per year in revenue.
Thus far, FameBit’s system has worked beautifully for creators, which is why Google buying the startup caused some concern among both YouTubers on the platform and the companies who sponsored videos. In a post on the company’s blog, FameBit founders Kozera and Kierzkowski were notably excited with the deal and confident that things will only get better as a result of it.
Because FameBit was intertwined with YouTube anyhow, the company now believes it will be able to present even more opportunities for creators and sponsors to reach audiences and make more money all around.
Reasons for the Deal
The primary motive behind the deal from FameBit’s perspective was to give YouTube creators more opportunities to earn from branded content and increase the authenticity and creativity in sponsored campaigns. However, Google obviously has different motives. The company doesn’t make revenue on YouTube’s branded content deals, although in theory those deals bring Google increased ad dollars.
Because sponsored videos side step the typical 45 percent commission paid to YouTube, the site’s biggest stars clamored for the opportunity. Again, though, these opportunities were reserved just for those who had huge subscriber numbers and views.
When FameBit came along, it evened the playing field a bit and brought some of those sponsorship deals to smaller YouTube channels. Since Google now owns FameBit, the company can guard against monetization on YouTube becoming a bigger problem in the future. In addition, YouTube will be able to not only capture more dollars from sponsored deals, but it stands to compete against the MCNs.
Now that Google has FameBit under its wing, YouTube will have yet another tool to offer its content creators. Before now there was the Google Preferred Program, but that was still limited to the very top content creators on YouTube and large TV networks and brands.
One thing that won’t change is FameBit operating as a separate, independent entity. Both Google and FameBit have stated that as far as either is concerned, the company will continue to do its thing as usual. That’s definitely a smart move — tinkering around with the model that made FameBit a success in the first place would not only alienate the creators and sponsors who have make the marketplace what it is, but destroy any potential benefits of the buyout.