The Confessional #2: MCN Vice President

My latest interviewee for The Confessional is a VP at a well-known MCN. In this interview we focused our conversation on the display media side of the YouTube ecosystem. We also discussed the challenges that often arise in working with creators and brands – that a great deal of talent are burning bridges with brands, while surrounding themselves with ‘yes men’.

The major points of our chat include:

•       The difference between buying on reserve vs Trueview
•       Why more people should be buying media on reserve
•       Whether MCN’s actually increase CPM’s for their talent
•       How many YouTubers don’t understand brands

The Confessional is a series of anonymous interview with influencers, brands, marketers, agencies and MCN executives to get honest, no-bullshit opinions on working in the space – the biggest gripes, the toughest lessons, the most valuable advice.

The following has been edited and condensed for clarity.

Can you explain the difference between buying in auction (TrueView) and buying media in advance (with reserve) on YouTube?

Think of it like a restaurant reservation. There’s a hot new restaurant in town and you want to go to this restaurant. Let’s assume you have to pay 20% more to make a reservation, right? But you can make a reservation well in advance for the best table, for your one-year anniversary, but your meal is going to cost 20% more. That’s like buying on reserve.

You know that you want to eat at that restaurant and you know the day you want to go eat there. You probably would want to make a reservation, especially if, let’s say, your anniversary is around Valentine’s Day or New Year’s Eve or Christmas when you know that it’s going to be busy at the restaurant.

While buying on reserve is paying a premium to reserve your media (or table if we’re continuing with the analogy) and TrueView is like walking in and hoping that you’re going to get a table.

Now, it could be that you walk in and it’s a slow night and a slow week. You get an amazing table and you pay 20% less. But, if it’s a hot restaurant, you may know that it’s never dead. You’ll have to show up and you’ll maybe wait an hour and then you’ll get a table. So it really sort of depends on the inventory — your risk tolerance — in a sense. Some people would prefer to take the risk and potentially get a really great deal, but other people are less risk-averse and would rather say, “I’d rather reserve in it advance, I know I’m going to get it. I don’t have the tolerance to go and show up and eventually have to wait in line.”

On TrueView, can’t you get the same inventory (ie any channel you want) but cheaper than reserve?

Buying on TrueView is operationally difficult to target on the channel level. Technically, yes, you can do it. There’s a section in adwords where you can target even to specific videos if you want. In my experience, though, that is an operational headache.

There’s also the idea that if you’re targeting a very specific set of channels and you’re in the auction, there’s a lot fewer impressions that you could win. If you’re like, “I need to fill a million impressions, only on these five channels,” you need to make sure that you win almost every auction to fill the campaign.

The final point – there are certain times of the year, Q4 for example, where TrueView is generally more expensive than reserve. I think if you were a sophisticated buyer of TrueView, you could probably target individual channels and get the same content for less, but there’s also risk involved. Maybe you won’t get the exact inventory you want because its already been bought on reserve or you’ve been outbid.

On the media side, creators often join MCNs thinking their CPMs are going to go up because more of their inventory is going to be sold on reserve. How often do you think that typically happens for a creator in an average MCN deal?

At the MCN I work at, when we talk about renegotiating or resigning channels, media and higher CPMs are oddly not a huge part of conversation. I don’t know if that’s a choice we make or that’s just not something that our creators ask about. Most of our creators are more concerned with content guarantees and with ancillary revenue opportunities. Book deals, licensing, stuff like that.

But I totally agree with you. I have to imagine it’s a bigger point of conversation for your mid- to long-tail creators, because I think that most of them are self-aware enough to realize that they’re probably not big enough to get brand integration deals. I have always been a huge fan, maybe naively, of reserved media. I think it’s one of the very few win-win-win products that MCNs offer.

Selling reserve video inventory is better for the creator because they don’t need to do anything and their CPMs go up. Even with YouTube rev-shares, those net CPMs are 20-30% higher than what they’re already getting via the auction and other AdSense revenue.

Selling reserve inventory is good for the MCNs because it’s operationally easy to do. Obviously you need to have a little bit of understanding, but there’s no back-and-forths with creators, margins are predictable because it’s based on flat pricing. Selling on reserve you don’t have unexpected travel expenses, you don’t have all of the stuff that comes with working with influencers — which is worth it, but it can be unpredictable. I think it can be a fairly decent margin business.

It’s an easy way to get revenue in the door at anywhere from between 20-40% margin depending on how you can scale it.

The third win is with the brands and agencies, in the sense that I think you could make a case that its more premium inventory than you could get anywhere else, or at least more targeted or more transparent. You could argue that a lot of the inventory that MCNs have in their network is among the most premium video inventory on the web. I think that’s good for advertisers.

For brands that do not understand or don’t feel comfortable with influencer marketing, buying media  allows them to dip their toe in the water.

That is my belief on the media side of things.

But, I don’t think selling the ad inventory has really been a focal point of any of the MCNs.

How do you think the brands and creators have evolved to work with each other? One thing we hear a lot, especially from creators, is that brand’s don’t ‘get it’ (ie that brands don’t understand how to work with YouTuber creators). But, do creators ‘get it’? Have they adapted to work with brands?

I think brands have adapted to working with creators more than creators have adapted to work with brands.

I wonder if part of this, is the result of creators having gotten into this business because they didn’t want to get real jobs. They figured out what they love to do and they’ve been savvy enough to figure out how to make a living doing it.

I often get asked by creators “Why can’t I just do a cool video and just slap a logo on it. Why is that not good enough?”

They don’t understand that these companies have real people working for them that want to be great at their jobs, who want to work hard and provide for their families, live happy lives.

The prevailing perception among YouTubers, is that brands are just some faceless organization with a shit load of cash that is just indiscriminately throwing money and they don’t actually want something in return.

In reality, there’s someone who’s vouching for this creator or making a decision and their boss, understandably, expects a report showing why they made this decision. There’s hundreds if not thousands of people involved in the entire process.

We have gotten to a point where certain people treat popular YouTubers in such a way that the YouTubers don’t feel that they need to think about accountability. They think that because they’re the new hot thing, they don’t have to be accountable.

So what’s the outcome of this in terms of project execution?

I continually experience that kind of over-promise, under-deliver from the creators …a lot of them are super entitled. They’re a pain in the ass to work with.

They are surrounded by Yes Men and Women, management, MCNs.

I hate to say this, but in some ways creators are almost like a commodity in a sense that, if the [REDACTED – NAME OF FAMOUS CREATORS] are a pain in the ass to work with, there are 50 other channels that are pretty similar to. That’s the case across the board.

Eventually, everyone will get wise that some creators are easier to work with others, word will get around that so-and-so is difficult to work with.

I think some creators are going to realize that they have burned themselves by being hard to work with. In some cases, yes they’re hard to work with because they’re jerks or they’re entitled, but I wonder if another part of it is that creators don’t know when to ask for help, or they try to be a one-man team, but they’re getting five brand deals a month and they’re making $10 million a year.

There’s no one-person company out there that makes $10 million in revenue. Most organizations that are bringing in the amount of revenue that a lot of these creators are doing are creating sustainable businesses by making sound business decisions, by hiring a staff, by putting structures in place to be able to follow timelines and execute deadlines. I understand why some creators may have no interest in doing that. They may not personally want to make $250 thousand a year on 10 million in revenue by building themselves into a company.

They may prefer to keep it independent and to make $10 million salary on $10 million in revenue, but I think eventually a lot of them will either burn out or they’re not going to be able to handle that much big money, and in two years, word is going to go around that they’re not easy to work with, and they’re going to fall apart.