FameBit gets $1.5M to democratize sponsored content on YouTube, connecting long-tail brands and creators

By Michael Carney , written on June 24, 2014

From The News Desk

YouTube is a world of haves and have nots. The most successful creators, often working with MCNs (multi-channel networks), have millions of subscribers and are routinely paid to create content featuring brands or products, in addition to earning a cut of standard ads served against that content. For large brands looking to get in front of mass audiences in a more authentic way, this is often a marriage made in heaven.

But what about the long tail of brands and creators, which respectively can’t afford to make the content required to amass a seven-figure subscribership or pay the several hundred thousand dollars it costs to work with a YouTube star?

FameBit is a self-serve marketplace designed to match small and mid-sized brands with long-tail YouTube stars – those with 50,000 to 500,000 subscribers, often in highly targeted niche demographics. These companies pay more approachable sums, ranging from a few hundred to tens of thousands of dollars to commission ads, viral videos, and product placement within adjacent content. FameBit takes a 20 percent commission on each transaction and expects to generate $3 million in billings this year.

The one-year-old company has just closed $1.5 million in seed funding from Science Inc., 500Startups, DeNA, Machinima founder Allen DeBevoise, and other investors. The five person company, which was founded by Agnes Kozera and Dave Kierzkowski, has begun working out of Science’s Santa Monica tech studio, where it will co-exist alongside similar data-driven marketing platforms focused on Pinterest (HelloSociety), Instagram and Vine (ReFame), and Facebook, search, and email (Science Growth Labs).

“Sure MCNs can offer you one creator with 2 million subscribers, but we can deliver a more highly targeted and more influential reach by serving up 20 creators with 100,000 subscribers each,” says Science’s Peter Pham. “A good example is in the automotive space. A general car channel may have 2 million loosely affiliated subscribers, but a Porsche channel’s 100,000 subscribers are fanatics.”

For a brand looking to commission content through FameBit, the process looks as follows. A brand first submits a proposal to the marketplace outlining the desired content and the price it’s willing to pay. Within 24 to 48 hours, creators submit their responses including details about follower counts, historical engagement rates, and a pitch on how they’d execute the piece. Brands then accept or request changes to the pieces they want to see, while rejecting those they don’t, then wait a few more days to receive finished videos. Unlike working with MCNs, the process is fully automated and self-serve, making it more efficient and keeping the costs down for all sides.

Since launching in January, FameBit has brokered 1,200 video campaigns in total for some 200 brands, according to Pham. The company, which is currently working with 3,000 up-and-coming YouTube stars, expects to see 500 videos commissioned this month and is targeting a 5,000 video per month run rate in the near future. That would make it a far more prolific content house than most big MCNs, albeit at a lower production value and a lower per video reach. While each of those characteristics may sound like negatives, in fact they mean that brands can dabble and test various strategies without committing huge sums of cash. The end result should be a win-win of more effective YouTube advertising and more creators able to fund their nascent operations.

“Startups like Urban Remedy, Club W, the Bouqs can’t call Maker [Studios] up and work with a YouTuber – not unless they want to spend $1 million of their venture funding to do so,” Pham says. “Even big brands are hesitant to write checks of that size without data up front.”

FameBit is Science’s first foray into YouTube, but its experience working in all the other major social content platforms should translate well. And, of course, the company has existing relationships with brands large and small, not to mention a reputation as a leader in data driven marketing and customer acquisition.

The big question is, can FameBit claim this long-tail market segment as its own or will the giants like Maker Studios (or even YouTube itself) choose to move downstream to compete. An automated, marketplace-style solution is a bit counter to the MCNs’ traditionally high-touch approach, but it seems ripped right out of Google’s playbook, begging the question of whether the company may look to enter this space in the future.

“The most interesting thing to us is that we’ve found a very profitable perspective inside YouTube for both creators and advertisers,” Pham says. “We looked at investing in MCNs – [Science co-founder] Mike [Jones] was an angel in Maker Studios – but the economics weren’t that attractive to us.”

There was a time, not too long ago, when investors had seemingly soured on the YouTube space. Fear over Google’s heavy handed approach to monetization and the slow migration of ad dollars from TV to online video had left a lot of previously funded startups struggling to find sustainable business models. But recent major acquisitions, including Disney’s purchase of Maker Studios for up to $950 million and Dreamworks Animation’s $117 million Awesomeness TV deal have breathed new life into the category – among both investors and Madison Avenue.

Sponsored videos are the holy grail for YouTube stars because they don’t need to pay Google a 45 percent cut of this income. But until recently, that was a luxury available only to the largest stars. FameBit has managed to democratize the sponsored content game, making YouTube a potentially lucrative platform for long tail brands and creators. It’s a fairly compelling offering if the company can find scale on both sides of the platform – and if YouTube continues to play nice with this commission sidestepping model.

[Image via Lisa Pullano]