Some famous kids you've probably never heard of are raking in big bucks from brands in return for delivering millions of their fans. These social media stars, known as Creators, Influencers or Makers, belong to multichannel networks (MCNs) – the hot native-advertising play you may not have heard of either.
Equal parts talent management, production studio and branding agency, MCNs exist to hook up advertisers with rising and established stars on YouTube and other social media content platforms.
Case in point: Zoe Sugg. In one of her YouTube videos, the 24-year-old beauty blogger holds up cosmetics she bought at the drugstore and says things like, "It's really pretty." This may seem dumb to grownups, but the 13-minute ‘haul’ video garnered more than 2 million views. Her video blog, Zoella, is featured on the YouTube channel StyleHaul. The more than 6 million subscribers to Zoella means that Sugg can deliver an audience far beyond what brands can hope to expect from their own viral videos.
"Brands are getting tremendous value by working with MCNs," says Eric Johnson, founder and president of Ignited. "This is an important, new kind of way of us getting in front of consumers."
New media for old
Established media conglomerates are avidly shopping for MCNs. In December, Hearst bought a 25 percent stake in AwesomenessTV, the MCN acquired for $33 million by Disney in 2013. Earlier this year, Disney also acquired Maker Studios, while Warner Bros. made a strategic investment in Machinima. In September, Otter Media, a joint venture between AT&T and the Chernin Group, took majority stake in Fullscreen.
What the heck are these old-media conglomerates buying? Entrée to young audiences who are mobile-first and prefer over-the-top video to regular television.
"It's a cult of personality," says Karl Dunn, senior vice president and group creative director for FCB West. "You're buying that person's fame and their audience."
Each MCN represents a roster of talent, from megastars like Machinima's Hundar and Shibby to up-and-comers who may have only a few thousand subscribers. Most MCNs actively cultivate new talent, providing them with insights into where their traffic is coming from and how to build more. As an Influencer's fans increase, the MCN may begin promoting his or her channel by displaying it next to the videos of more popular stars or on the MCN's home screen.
Many of these Creators are quite picky about working with brands, although, according to Johnson from Ignited, there's a new generation of talent that understands the game and is eager to partner. MCNs carefully match brands and talent to make sure there's a fit for both sides. Hispanic-oriented MiTú provides a private site, MiTú Vero.com, where Influencers working with it can search for advertising and brand opportunities.
For the most part, says Charlie Echeverry, MiTú's chief revenue officer, "We'll come up with a strategic plan for a brand. You want 'X,' here's how we think we can get it. Next, we look at the Influencers and the kind of content that can execute on 'X.' We think of marketing before we start attaching particular Influencers to it."
Vanessa DelMuro, senior vice president of talent and channel development at StyleHaul, says, "we are very familiar with what an Influencer is posting, so we know what their brand affinities are." StyleHaul also uses data analytics from providers like Tubular Labs to track postings about brands. "At the end of the day," she says, "if it [doesn't feel] organic, it's not going to work."
In addition to brokering deals, MCNs manage the relationships and content creation to make sure both sides get what they need. As social media stars get more sophisticated, their ability to serve brands as well as their audiences improves. Agencies find that working this way can streamline what's usually a lengthy and convoluted process. Ignited matched Rhett and Link, creators of Good Mythical Morning, with audiotech company DTS to showcase the sound quality of its headphones. "They came up with one idea, they shot it in a couple of days, it went online and got more than a million views," says Johnson.
MCNs increasingly have their own production studios and can take the lead in creating brand content that may live on Creator's channels as well as other places.
MiTú divides its business into four segments: providing services and resources for Creators; finding and building audiences through Influencers; providing solutions to agencies; and a studio to create original programming using Influencers that may be "upstreamed" to cable and broadcast. MiTú has produced some 15 original series over the past year, and recently ran Holiday House, a 14-part video series, produced in collaboration with Microsoft.
Holiday House aims to take audiences inside the lives of some of its popular YouTube and social Latino influencers as they create holiday-themed, co-branded videos and social content across Instagram, Twitter, Vine and Facebook. Influencers have cameos in the trailers and their YouTube handles appear frequently, in case fans want to follow their individual channels.
StyleHaul also offers production services, with three video packages: For premium videos, it uses its own studios to fully create and produce commercial-quality content with brands. Custom videos are created by Influencers themselves and run on their channels. "But we walk them through and manage it," DelMuro says.
There's also a hybrid model, in which StyleHaul studios produce a piece of branded content that's made to look as though it was created by an Influencer in his or her own environment. Explains DelMuro, "A brand that might not be as comfortable taking the full leap into Influencer." In this model, brand representatives can be on set and make comments, while the resulting video is a little more professional in quality.
Closing the loop
MCNs also can serve as a content pipeline for old media. In September, Lionsgate acquired distribution rights to The SMOSH Movie, starring the eponymous YouTube creators otherwise known as Anthony Padilla and Ian Hecox. The movie was jointly financed by AwesomenessTv and DEFY Media, a digital content production company in which Lionsgate has an equity interest. It has another film deal with Awesomeness TV and YouTube stars The Janoskians.
MCNs and their Creators could change the Hollywood model completely. Instead of spending millions to finance a pilot in the hope that people will watch it, Creators come with a built-in audience. Whether mobile-first youngsters will move with their idols to movies or linear TV is an open question. But, as Echeverry points out, linear channels are increasingly going to digital distribution anyway.
"This sector is totally maturing right before our eyes. It's blurring the lines between entertainment and commercials," says Johnson.