Keeping YouTube stars happy: Good news for marketers or an admission of ad failure?

Thanks to "Kids React to Nirvana" and other titles, TheFineBros are among YouTube's top-grossing media makers.
Thanks to "Kids React to Nirvana" and other titles, TheFineBros are among YouTube's top-grossing media makers.

YouTube's relationship with its star video talent is changing as rival websites gain ground. The change will likely affect ad buyers, too.

Google's YouTube should be a marketer's dream come true. Its massive audience is accessible, and the online video powerhouse is able to consistently deliver the highly sought youth demographic, with PayPal accounts at the ready. Plus, the huge number of different videos on the site permits extreme customization.

But YouTube has found challenges with the care and feeding of its most popular talent, something that worries Google greatly as rival video services threaten to emerge and lure away those performers. Alex Carloss, the head of YouTube Originals, has blogged that the time has come to increase the cash payments to those folks.

"We feel the time is right to make another important investment in our creators," Carloss wrote. "That’s why we’ve decided to fund new content from some of our top creators, helping them not only fulfill their creative ambitions but also deliver new material to their millions of fans on YouTube."

That may or may not eventually work for Google and for those YouTube stars, but what are the advertising implications?

It's important to note that one of the key reasons that Google is preparing to make these investments is that its earlier model, in which ads played a major role, didn't work well.

As Re/code reported, "YouTube stars currently make money via advertising Google runs on the site; video makers have complained for a while that YouTube ad dollars aren’t high enough, and that the site takes too much of the revenue it does generate. Popular YouTubers also make money by selling integrated sponsorships in their own videos, and don’t have to share that money with YouTube."

That last line, regarding the integrated sponsorships, was supposed to be the magic that would make the YouTube stars happy. Google saw it as millions of dollars that would go to its stars that it didn't have to pay for. Win/win, right?

Not quite. Many of those stars have little experience with selling and structuring such deals, and YouTube’s ad model is still in its infancy. On top of that, the time/effort required is stressful.

In effect, for all its talk of it being a radically new media with new rules, YouTube is returning to the old studio and early television network approach of paying stars and then handling the sale of all ads and sponsorships.

The most immediate impact is that ad buyers will be negotiating more with a $15.7 billion media corporation rather than with YouTube stars — some of whom are teenagers, or close to it.

There will still be plenty of opportunities for direct deals, but the most prominent slots will now be turned over to corporate players.

Then there's the potential upside: Google is promising to bring in top names among Hollywood producers to boost show quality. Carloss spoke of some early efforts to improve production services.

"To ensure our creators had the production support they needed, we created the YouTube Spaces in L.A., Tokyo, London and soon New York," he wrote. "The Spaces offer creators free access to the latest and greatest equipment, sets, and support to facilitate creativity and content innovation."

Even more critically, YouTube will be leveraging its own marketing talent to drive much larger audiences to those YouTube performers. The question is: Will those larger audiences prompt YouTube to demand SuperBowl-level price tags that might play into the hands of the new rivals that this plan was supposed to thwart?

Ah, the dramas surrounding YouTube marketing efforts. Come to think of it, that might make a good YouTube series.


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