Hello Gorgeous: The Money in Beauty on YouTube

/ Jul 9, 2013

BusinessofBeauty_Wide

Beauty is one of the most intriguing content categories on YouTube, because it’s changing the way billion-dollar brands are selling everything from acne and anti-aging creams, to nail polish, mascara, and even deodorant.

Take L’Oreal Paris, the third-largest global beauty brand in terms of overall revenue. In 2012, the company ran ads in eight of the top fifteen beauty videos, a clear vote of confidence in the most popular YouTube beauty gurus’ power to boost brand awareness, affinity, and purchase intent. And with good reason. Although most brands have launched their own content channels, there are challenges to amassing loyal audiences that rival the size of a Michelle Phan.

First is marketplace fragmentation. There is just too much content for any one beauty fanatic to consume. Lancome, for example, is another brand that purchased ads in the top beauty videos of 2012.  Its YouTube subscriber base is fractured between three channels: Lancome Worldwide, with just over 6,500, Lancome Spain with just over 2,000, and Lancome USA, with 14,100 subs. While sizable, those numbers are nowhere near the level of active engagement of a popular beauty guru like Jessica Harlow with nearly 454,000 subscribers.

The second challenge is the difficulty in matching the genuineness that YouTube content creators bring to their audiences. “The commonality across the successful beauty creators is that they are honest, authentic, and easy-to-understand,” says YouTube beauty and entertainment strategist Taylor Marcus.

Most successful beauty haulers didn’t start out with ad revenue on their mind — they started posting content because they were crazy about makeup or skincare, and wanted to connect with others who felt the same. That’s an intangible quality that few brands are able to replicate, even with a dedicated content development team.

 

Helping Brands Feel Pretty

Screen enough beauty videos on YouTube though, and you’ll see the multitude of brand partnerships and sponsorships currently available. The YouTube team helps facilitate many of these deals, such as a recent cross-platform integration between CoverGirl, Walmart, and EleventhGorgeous.

“P&G wanted to drive awareness of CoverGirl cosmetics and encourage purchase at Walmart, so [we] connected P&G with YouTube creators and beauty influencers to create a custom video integrating the brand and key products,” Marcus says. The video was so well received among EleventhGorgeous fans that the influencers created an additional video featuring P&G products at the request of subscribers, at no cost to the brand.” The deal also included a national print campaign that ran across multiple publications like Us Weekly.

Media companies like Conde Nast are also potential partners for brands and beauty content creators. In Elevator Makeover, for example, Jessica Harlow teams up with Glamour contributor and hairstylist Theodore Leaf to do a ridiculously fast, special occasion makeover of a woman — while she’s in the elevator on her way to the event. P&G is the underwriter of the show, a deal announced as part of a whole roster of new, sponsor-backed original series for Glamour from Conde Nast Entertainment.

So who are these digital beauty gurus that dominate on YouTube? “We’re seeing a whole host of incredibly successful beauty creators, all succeeding with different strategies,” Marcus says. “Obviously Michelle Phan is one of the biggest names on YouTube and her success with Ipsy and as a Lancome ambassador is impressive. But we’re also seeing creators like Tati Westbrook from GlamLifeGuru be nominated in Allure’s best beauty vlogger competition and of course, Bethany Mota from Macbarbie07 has over 2.3 million subscribers to her channel.”

Other notable beauty content creators include Kasey Marie, Franchesca Ramsey, Rachel Talbott, Alba Garcia, and Kandee Johnson.

 

Join a Network or Go at it Alone?

Currently there are three main revenue streams for YouTube content creators in the beauty business: direct ad sales from YouTube, partner revenue from a multi-channel network (MCN), and merchandising or product sales.

Since brands want scale, the prospect of joining an MCN is appealing for beauty haulers that may be popular — just not in terms of millions, or even hundreds of thousands of viewers. Although contract terms and benefits vary, the premise is that an MCN will help individual content creators make more money by bundling their views and offering marketing, sales, and sometimes even production support in exchange for a cut of the ad revenue.

Backed by $17 million in VC funding, StyleHaul is one of the largest of such networks. Founded in 2011, the StyleHaul network attracts 50 million unique monthly views. According to president and CEO Stephanie Horbaczewski, StyleHaul is sharply focused on adding the right content creators to its network, citing the “viewers’ attachment to the influencers” as one of the key factors in its success.

“There are best practices such as quality, consistency, and composition, but ultimately innovation and the ability to engage the viewer are most important,” Horbaczewski says. That dedication to quality talent continues to attract brand partners like Maybelline, which recently partnered with StyleHaul to ramp up viewership in its “Recreate the Runway” series.

Meanwhile, Big Frame’s Polished offers creators the premise of additional revenue outside of YouTube with its multi-platform strategy, according to director Lisa Filipelli. “Polished is multiplatform in that it is first driven by the content on YouTube, but also socially via several other platforms such as the Polished.com blog and website, Instagram, Pinterest, Facebook, Twitter, and Google+,” Filipelli says. “However, this is just the beginning. We know that there will be additional opportunities in the future for books, TV shows, and we will be expanding to other areas of entertainment as the need for content grows and expands every day.”

Other networks include PopSugar TV and Channel Nine.

Yet a search through various forums shows that some content creators are still on the fence about whether or not to partner with networks.

Is Y-Commerce the Future of Beauty?

Looking toward the future, it’s clear that brands will continue to invest in YouTube — particularly with content creators that can give them instant likeability and credibility at scale. But as the content clutter gets harder to cut through for both brands and creators, the industry will also need new options for monetization. That’s where retail comes in, fueled in part, by a “shoppable” player that lets viewers get the products that content creators are using and reviewing in real time.

It’s the same premise that brands like 1-800-Flowers have employed on Facebook, it’s the way that retailers are beginning to leverage Pinterest, and with the level engagement offered by video, it seems like a no-brainer. “Our team has been intrigued by shoppable video players for a while,” Filipelli says. “The pilot that YouTube has created is awesome and shows the future of videos, especially in this category. I think shoppable video, with a strong affiliate program will be key in the next 12-24 months.”

YouTube would not comment directly on the implications of the shoppable player it initially tested with TRESemme, but if the player does get wide distribution, the additional retail revenue could be a game-changer for the industry as a whole. There’s no doubt that it could ultimately move content creators away from dependency on ad sales, so YouTube is understandably treading carefully — but if the company doesn’t launch it, another upstart video network will.

Come farther down the beauty rabbit hole with VideoInk as we continue exploring the Business of Beauty on YouTube this week. I offer an introduction to beauty content on YouTube here, and stay tuned for profiles on various successful creators throughout the week.

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