As the creator economy has grown, so have the financial options for creators looking to bankroll their businesses.
Credit cards and funds specifically for creators do serve a purpose, but Aaron DeBevoise, founder and CEO of Spotter, argues they’re not enough to move a small business into an enterprise. “The short-term solve like a credit card, those things can scale really quickly to a lot of creators, which I think is great, but ultimately won’t be the step change that they need to go to the next level,” DeBevoise says in the latest episode of Fast Company‘s podcast Creative Control.
For YouTube creators who have shown consistent engagement and revenue for at least a year, Spotter offers cash upfront in exchange for acquiring their back catalog of videos for a limited time. These deals have ranged anywhere from $10,000 to $50 million, which has allowed creators, such as MrBeast, to create Spanish and Portuguese language channels. The guys from Dude Perfect are building a new headquarters-slash-experiential location in Texas. Aaron Brown, host of Smokin’ & Grillin’ wit AB, is using his capital to open a restaurant in Las Vegas.
“It was taking a lot of years for the big channels like Dude Perfect or others to get to where they were in terms of scale, and we think they could have done it a lot faster,” DeBevoise says. “Because YouTube’s video algorithms rewarded high levels of engagement that drove very predictable viewership patterns, we thought that the traditional entertainment-financing model could work for creators and super-accelerate their growth into becoming not just full-time but into enterprises.”
DeBevoise is set to accelerate even more creators with a fundraising round last month, led by SoftBank Vision Fund 2, that put Spotter in position to invest $1 billion into YouTube creators.
It’s an eye-catching sum for sure, and DeBevoise breaks down where and to whom the money is going, the possibility of expanding to TikTok, and how changes to YouTube could impact Spotter.
Diversifying a creator portfolio
Spotter has attracted major creators in MrBeast (91.8 million subscribers) and Dude Perfect (57.3 million subscribers) who, arguably, were in better financial positions to grow their businesses than smaller creators. DeBevoise initially went after bigger names to educate the market at a higher level on what Spotter is. Going into three years with the company, DeBevoise says that Spotter continues to broaden its reach toward smaller creators, striking several $6,000 deals ($4,000 below Spotter’s typical baseline).
“We’re testing [Spotter’s] theory by trying to diversify our investments, even if it doesn’t make financial sense,” he says. “It’s like doing the $100 million film and the independent film. They’re really difficult, both of them. Yet, they don’t have the same potential from a revenue perspective. So we are forcing ourselves to spend the time learning how to deal with all types of creators.”
Spotter not only acquires YouTubers’s back catalogs for a set period, but it also works with creators on the future content that the company doesn’t have rights to, in an effort to help maximize reach and engagement. After all, the more popular a creator becomes, the more likely people are to watch their old videos.
But can Spotter adequately service such a broad spectrum of creators? “One of the main reasons why I started [Spotter] was that we really struggled in my previous companies, Machinima and StyleHaul—and others we saw in the market—to service all creators at the same time,” DeBevoise says. “So if you’re doing branded integration, you could either focus on micro-influencers or big influencers. But it’s hard to do both.”
In addition to striking deals with smaller creators overall, DeBevoise notes that Spotter has invested more than $125 million thus far in multicultural creators. Pushing for even more access for creators, Spotter is also developing a platform that will automate the financial education side of the business (how Spotter prices content libraries, why making a deal may be a good investment, and so forth) as well as building better analytics tools to give the creators they work with sharper insights into how to have a higher retention rate and better thumbnail-clickthrough rates, among other details that can make for a more successful YouTube business.
“I absolutely believe that there’s a combination of tools and capital that can help every single creator on a platform like YouTube and beyond,” DeBevoise says. “We have to figure out, what does that mean on TikTok? It’s not ad revenue. Right now, it’s all branded integration, but maybe it’s commerce. Maybe it’s digital goods. I don’t quite know yet, but our mind is on it.”
Because YouTube has a long history of monetizing creators’s content through ad revenue, companies like Spotter and Jellysmack have an easier time predicting which channels have stable and reliable income. Creators on other platforms, such as TikTok, can only monetize through outside means (brand deals, merchandise, and the like), which can make for a riskier investment on Spotter’s end.
“The biggest thing for all creators is what’s going to happen if I spend an hour of my time on X? Is it $5? Is it $500?” DeBevoise says. “MrBeast recently said that 10% of his time is spent on [TikTok] and 90% is YouTube.”
However, DeBevoise says that he and his colleagues haven’t ruled out expanding to platforms outside of YouTube. He sees a model where Spotter is able to use its insights to map purchase intent to viewership. For example, if you watch a cook’s video, you’re 40 times more likely to buy a certain spice blend. “That alignment—and that understanding of data—we’re not telling you how to make a product, but what it’s telling you is what you should focus on,” DeBevoise says. “Maybe that’s where TikTok starts to thrive, and if that’s the case, I think we can be very involved.”
Beware the adpocalypse
Spotter’s revenue comes from what it earns off of back catalogs, and the value of those videos can only increase as creators gain more subscribers going forward. While YouTube’s AdSense model has made it easier for companies like Spotter to predict which creators and categories will be profitable long-term, there’s always the looming possibility that changes to YouTube’s features, policies, or algorithm could impact Spotter’s portfolio. “YouTube Shorts actually had a really big impact on longform,” DeBevoise says when asked about this issue. “It actually reduced the viewership in the the videos that we looked at.”
Shorts—YouTube’s answer to TikTok’s brief, vertically shot content—launched last year and has been a key priority for the platform. In January, YouTube CEO Susan Wojcicki announced that Shorts had hit 5 trillion all-time views and was expanding to 100 countries.
Although Shorts has had an impact on longform videos (YouTube’s prior primary focus), DeBevoise notes that some channels that Spotter works with have seen as much as four times the amount of viewership in both longform and shorts. “So we can then share those results with the creators we work with, and the creators we want to work with, to say, ‘Wait a second, don’t move away from longform. Use shorts as a mechanism to drive longform,” DeBevoise says.
Perhaps a more distant, but still potential, threat to Spotter would be another adpocalypse.
Back in 2017, YouTube began to place a heavier focus on brand safety after major companies including Coca-Cola, Amazon, and Procter & Gamble suspended ad buys on the platform because their commercials were running against videos of hate speech. That same year saw the controversy of Toy Freaks, a now-removed YouTube channel that featured a father putting his two young daughters in seemingly exploitative scenarios. YouTube responded by tightening its algorithm of which content should or should not be monetized. The problem was that many creators who weren’t posting racist or disturbing content (but not necessarily family-friendly content, either) were claiming that their videos were also being demonetized. YouTubers feared another adpocalypse in 2019 after more concerns of child exploitation and online hate speech surfaced on the platform.
YouTube’s sheer scale has long proven to be complicated terrain for the company to weed out bad actors, which can leave some innocent creators caught in the fray. Spotter actually doesn’t make deals with YouTube creators in news or politics, in part to avoid any potential controversies. But DeBevoise doesn’t see any immediate issues on the horizon for Spotter.
“I would’ve been a lot more concerned years ago, because it wasn’t clear why certain content that may seem a little too edgy was still being recommended at high rates,” he says. “Today, most creators are aware of the things that are gonna potentially hurt them. So they follow the guidelines pretty closely.”
Listen to DeBevoise’s full interview on Creative Control in which he goes deeper into how injecting $1 billion into YouTube creators will affect the platform and his predictions on where the creator economy is going next: Apple Podcasts, Spotify, RadioPublic, Google Podcasts, or Stitcher.