Wayne Product Placement

A recurring theme around the YouTube ecosystem is the difficulty of monetizing content. It’s no secret that online video CPMs (impression-based ad rates) have yet to catch up to those on TV. As a result anyone looking to build a meaningful business on the platform is forced to look for other revenue opportunities. For some, that may mean driving traffic elsewhere and selling premium content behind a paywall. For others, it means brand and product integrations.

Los Angeles-based YouTube monetization startup Subblime has combined the above two strategies and added in a dash of “Oprah’s Favorite Things,” effectively turning video creators into paid product endorsers.

The strategy got a major boost a few weeks ago, when the company was whitelisted by YouTube under the video platform’s “Merch Annotations” program. This means that Subblime-powered videos can now link out to third-party websites, including those for products promoted on screen. Previously, content creators were limited to linking out to their own sites, despite the fact that many of these sites lacked any ecommerce functionality. Now Subblime, and approximately 60 other digital companies, have gotten the green light to get their product promotion on.

The early results suggest this could be a big winner. Subblime founder and CEO Adam Winnick indicates that the company’s annotations have generated 20 to 50 percent click through rates in preliminary testing. The company currently has 40 creators on its platform, and has doubled this figure monthly for the last four months.

Surprisingly, Subblime is not using an affiliate commerce model, where the company and its video partners get paid a percentage of every product sale they generate. Rather, the company is utilizing a performance advertising model, where brands pay the company for customer acquisitions — which could mean anything from signing up for a mailing list to completing a transaction. Subblime and their content creator partners share all the revenue generated.

“We’re helping YouTube influencers move from a CPM [cost per thousand impressions] to a CPA [cost per customer acquisition] model,” Winnick says. “Better yet, we’re doing so in a way that’s highly contextual around commerce.”

Subblime’s YouTube stars each have their own page on Subblime.com which offers a list of their favorite things, Pinterest-style. Fans can follow stars on the platform, “Fav” the things that they like, and click through to purchase them from a brand or retailer.

For creators, Subblime is not just a way to generate revenue. It also serves as a fan management and engagement platform. The more “touches” an influencer can achieve with their audience, the more their influence grows. The platform also allows creators to collect demographic and contact information from their fans, as well as learn more about their tastes — all big wins in the battle to deliver content and products that will resonate.

As Subblime writes on its site, “At Subblime, we find that we often discover the coolest things through people we admire.”

Celebrities driving audience is nothing new and neither is product endorsements. But both concepts have seen their fair share of failures. Celebrity subscription commerce startup 12Society may be the most analogous to Subblime’s situation, as it failed despite having multiple celebrities from a wide range demographics all pimping their favorite products to a membership of adoring fans. The big takeaway from 12Society’s failure was that the product recommendations need to be authentic and well thought out.

As Mitch Lowe, CEO of 12Society acquirer Quarterly Co., says about his company’s similar offering, “The reason consumers sign up is not simply to get interesting items in the mail, but to feel like they are a part of something intimate and exclusive. But without a proper system…and storytelling, much of this [gets] lost between concept and execution.”

Winnick co-founded Subblime with YouTube star WhatsUpElle. Together, the pair graduated from Santa Monica’s MuckerLab accelerator in January. Subblime has since raise $500,000 in Seed funding from investors including Great Oaks Venture Capital, LegalZoom/ShoeDazzle/Honest founder Brian Lee, StubHub/SpreeCast founder Jeff Fluhr, and others.

YouTube’s decision to whitelist Subblime and others for its Merch annotations suggests a recognition that creators need additional revenue streams. The company now has an opportunity to leverage one of the largest and most highly-engaged communities on the Internet to build an influencer-driven commerce platform. There are a lot of things Subblime will need to do right if it is to deliver on this goal. But there’s little doubt that the opportunity is there.

[Image via Wayne's World]

  1. Subblime
    Communities that monetize, for content creators
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    Subblime is an online community for independent content creators to develop and monetize their audience.

    1. Jeff Fluhr
      Past Investor
    2. Erik Rannala
      Past Investor