When chess was invented the inventor presented it to the king. The king immediately fell in love with the game. 

He offered the inventor whatever he wished. 

The inventor asked that a grain of rice be set on the first square of the chess board then double on each subsequent square. He demonstrated it briefly – two grains on the second square, four on the third, and so on. 

The king agreed. He thought he’d gotten a bargain and ordered his treasurer to pay the inventor.

After a great deal of time passed the inventor returned. He complained to the king that he wasn’t given his reward.

The king called upon the treasurer. 

“Why has the inventor of this brilliant game of chess not been paid!?”

The treasurer explained it was impossible. 

By the time you were half way through the chessboard, the amount of rice required was more than the entire realm had or could even afford. The gift would empty the royal coffers and put the entire kingdom in debt.

What does this have to do with social media and advertising?

The entire industry tends to measure success in large numbers. We launch campaigns and watch to see how many views, comments, engagement, or impressions we generated. How did we do compared to our competitors? 

There’s nothing inherently wrong with this approach, but there is an unintended consequence. 

We never want to start small. We make the same mistake as the king – we can’t believe that starting with so little can lead to so much.

How many times have you heard (or asked for) this? 

“We want at least a million views!”

If an agency ended up getting 10 views on a YouTube video when the goal was a million, I think we all know what would subsequently happen. The agency would be viewed as failing to hit their KPIs and most likely let go.

While it’s counter-intuitive, starting small is the way to generate massive results in the long run. 

The formula is continued attempts + consistent refinement. 

Using the allegory of the king and the chess board, it’s how one grain of rice slowly grew to the net worth of the entire kingdom. 

A group of scrappy filmmakers, i.e. influencers (implicitly or explicitly) understand this. They’ve become one person media juggernauts by implementing it. One of them is ZHC (real name Zachary Hsieh). He’s a 21 year old YouTuber from San Jose, California who’s racked up a billion views and over 15 million subscribers. 

ZHC generates prime time TV level viewership. 

In the last month he’s reached 5x the audience of a typical ‘Monday Night Football’ viewing, 6X the audience of ‘The Masked Singer’ and more viewers than all episodes of ‘The Last Dance’. 

Think about that for a second. In the last month he garnered more views than all ten episodes of the ‘The Last Dance’. That was ESPN’s highest rated documentary of all time. It dominated news and social media for an entire month.

How the hell did ZHC become so huge? His viewership was not happenstance.

ZHC’s success seems deceptively obvious on the surface. His format is MrBeast meets Andy Warhol. Pop art with a stunt. 

ZHC takes high-end devices such as iphones, ipads, Tesla’s, and even a bus then paints them. He gifts these beautiful (and expensive) items to unwitting fans or other influencers. The reactions are always priceless.

There’s a formula. 

The gifts are expensive. The influencer guest appearances are top tier. He’s featured the single largest YouTube creator PewDiePie. Addison Rae who has the second largest following on TikTok. He’s collaborated with Marshmello, as well as, Charli D’Amelio who has over 70 million followers on TikTok. The reactions he captures create a halo-effect of elation.

It all seems very obvious – gather big stars and give them expensive gifts… However, unless you dig into his back catalogue, you won’t see his hundreds of videos that were the foundation for today’s “obvious” success. Like most ‘overnight’ successes ZHC has been grinding it out for years. He posted his first video 4 years ago. By the end of his first year on YouTube he’d posted 50 videos. 

Guess how many subscribers he had? 1,011.

Can you imagine working nights and evenings for a year and only have 1k subscribers to show for your efforts?

ZHC didn’t launch with his format fully defined and community in place. The process took time. Trial and error. We can learn a lot about the process from his work. Zach’s early videos were straightforward tutorials on how to draw various comic book characters. 

Over time Zach began experimenting. 

He slowly inserted more and more of his personality into videos. 

After 40 tutorial videos he finally did a video with himself as the focus (vs his art).  That first video was “3 tips for getting lots of instagram followers”. The video was one take. He was awkward and rambling at times. The backdrop was just his living room with Zach seated on the couch. That’s it. Watch the video. Could you ever imagine that awkward guy would one day have 15 million subscribers?

The experimentation continued. You see an evolution in slow motion. 

He methodically incorporated learnings into his videos. 

Zach’s 50th video was “My Inspirational Artists Journey Story”. It was his first attempt at inspirational content. He shared his struggles with school and how art became his salvation. It gave him confidence.

His 63rd video was a ‘challenge’ video – DRAWING 1000 FIGURES IN A DAY?!. It generated more views than his typical videos and he saw the power of integrating stunts.

A month later he did a reaction video. PewDiePie (who has over 100 million subscribers) had stumbled upon a piece of ZHC’s art. Zach filmed a reaction video to PewDiePie’s commentary. This was Zach’s first time featuring another influencer in his video and it got nearly 8 times the viewership he typically got.

He continued experimenting and applying learnings into his repertoire. It took three years before he’d refined the formula to what it is today. And his views have skyrocketed.

This was not slow linear growth – always a little up and to the right. This was the growth Buffett demonstrated in the allegory of the king and the chess board. 

Small at first, then massive.

ZHC’s efforts compounded. 

He went from averaging ten thousand monthly views in 2017, to one hundred thousand in 2018, to 5 million in 2019. Now ZHC averages 100 million views a month. 

So how does this apply to advertising?

As much as the ad industry is skeptical of influencers, there’s much to learn from them. 

While we want to create a perfect ad that enters into the pop-culture lexicon. The harsh truth is the world is not waiting for our perfectly produced vision. We must start by creating and then applying learnings to improve. 

Rumi, a 13th Century poet said it best “as you start to walk on the way, the way appears.” 

That’s the long-term solution.  Constant refinement and feedback. 

ZHC implemented this process. He consistently created videos. He’d implement small experiments, and apply the lessons learned. He slowly stacked incremental wins on top of wins. Inspiration. Storytelling. Collaboration. Challenges. Surprise and delight. ZHC worked to identify his personal approach.

The formula is continued attempts + consistent refinement. 

Quantity to lead to quality.

Sounds like a sweet gig, but according to Forbes, seven year old YouTuber Ryan’s ToysReviews has the market cornered and generated the most revenue of any YouTuber this past year.

YouTube has become a wealth generator for a new breed of digital stars. Just over ten years ago YouTube didn’t even have an ad product to help creators make any money – now it’s not uncommon to hear of creators generating 7 figure incomes.

In looking at the Forbes list of the top 10 Highest-Paid YouTube Stars of 2018 there are three major trends that really stand out to me.

1) BUILDING A BRAND (VS RELYING UPON BRANDS)

At YouTube’s NewFronts in 2015 John Green (founder of Vidcon and avid YouTuber) spoke to an audience comprised of major brands. He gave them a warning that “YouTube stars are building a world where they don’t have to depend on advertising and they are thriving.”

In short more YouTube stars will find other non-advertising revenue streams like merchandise sales and book deals to replace advertising dollars. It seems as that prediction has largely come to life.

All the influencers on Forbes list have invested in brands that live independent of traditional Fortune 500 advertisers.

Ryan’s ToysReviews partnered with BonkersToys to create an entire product line under the brand, Ryan’s World. Parents can purchase these in any major retailer, and demand is built-in. Ryan’s generated over 20 BILLION views and has over 15 million subscribers.

Ryan’s hardly alone, Jeffree Star, number 5 on Forbes list with an estimated $18 million in earnings, shocked the YouTube community when he unveiled his personal and professional life or Shane Dawson in a 5 part docu-series. In it Jeffree showed the factories producing his massive makeup line.

While most anyone familiar with the YouTube/makeup community on YouTube was well aware of Jeffree’s product line, few knew just how much revenue he was generating and the lavish lifestyle he was living as a result. Jeffree has a mansion in Calabasas, dozens of designer handbags worth hundreds of thousands of dollars, real estate, fancy cars, designer clothes, etc.

Logan Paul, number 10 on Forbes’ list, was once the darling of advertisers everywhere – having done brand deals with Fortune 500 companies Pepsi, Walmart, and Dunkin Donuts. After filming a body found in Japan’s ‘Suicide Forest’ this past year Logan was largely blackballed by brands, but that hasn’t stopped him from earning.

Logan has a massive merchandise business, Maverick By Logan Paul, where you can buy everything from Logan Paul branded socks, hats, posters, pants, shirts, and more.

Beyond Jeffree Star, Ryan, and Logan Paul all the other top earners from Forbes have invested heavily in developing their own brands and product lines.

DudePerfect has a product line with Nerf, DanTDM has done tours and sells merch, Markiplier launched Cloak, a high-end athleisure line for gamers, Jake Paul has created a network of creators, Team 10, and a massive clothing line.

All their businesses live largely independent of traditional ad revenue or brand sponsorships.

2) KIDS ARE FUELING GROWTH

In scanning the Forbes list of YouTube’s top 10 its clear that teens and young kids are fueling the growth of these channels (and the YouTube ecosystem as a whole).

Officially Google only allows people ages 13 and over to create a YouTube account, and the minimum age is as high as 16 in some EU countries.

However, it’s no secret that young kids and teens are making up an overwhelming amount of YouTube viewers.

70% of kids 13-17 use YouTube daily, and there are 8 million weekly viewers of YouTube Kids (YouTube’s app dedicated towards curating children appropriate content). The top 8 most recognizable celebrities amongst teens are YouTube stars, and the number one most desirable job amongst kids and teens aged six to 17 is digital star.

Ryan’s Toys Reviews format is a seven year old boy reviewing and unboxing toys.

Jake Paul has mentioned in multiple videos that his audience is as young as eight. Logan Paul has been nominated for five Teen Choice Awards.

A cursory look at any meetup these YouTubers have shows that the overwhelming majority of fans are young kids and tweens.

In spite of the fact that kids aren’t supposed to have YouTube accounts they’re fueling growth, and revenue for the biggest creators.

3) GAMING

Gaming has gone mainstream.

Six of the top 10 creators featured on the Forbes list of the Highest-Paid YouTube Stars of 2018 built their followings on the backs of gaming content:

• #9: PewDiePie is best known for his ‘play with me’ videos.
• #8: Jacksepticeye is also known for ‘play with me’ content
• #7 VanossGaming plays titles Call of Duty & Assassin’s Creed
• #6 Markiplier is known for his ‘hilarious’ gaming videos
• #5 DanTDM specializes in Minecraft

Furthermore, the #1 most subscribed YouTuber of all time is #9 on this list, PewDiePie. He’s currently racked up 75 million subscribers.

The trend within YouTube is representative of a much larger cultural shift. We’re at the stage where esports athletes are actually getting more recognition and social mentions than traditional athletes. Earlier this year Twitch Streamer, Ninja, actually generated more social mentions than every major, traditional, sports athlete worldwide – more than Lebron, more than Kobe, more than Rinaldo.

The US video game industry generated a record $36 billion in 2017 and esports leagues are generating so much revenue they’re offering $25 million dollar price bags for the winner.

So what’s the key takeaway from all this?

YouTube culture is pop-culture and the biggest earners have invested heavily in themselves. Time will tell if dominating the youth market today will lead to loyalty long-term, but in a future where creators are brands (and companies) what does this then mean for the future of Fortune 500 brands?

His success comes with confusion and criticism by people who think he earns too much money.

PewDiePie is worth $12 million.

I’d argue that he’s way underpaid for his work.

PewDiePie is one of a growing number YouTubers monetizing the platform to the point of business-building revenue. The present media environment is such that any audience of substantial size can be expressed in real dollars, so this 26-year-old content creator earns about $4 million in revenue per year on ads shown against his content: in-game footage from various PC and console titles with his frenetic free-flowing commentary running over it. It’s a model that might be easy for old-school media orgs to dismiss; it’s inane and doesn’t seem to require too much talent to execute.

But to blow off the examples of PewDiePie and other YouTubers of his ilk would be a mistake on the level of undervaluing an entire family of stocks in an emerging industry. It’s too important.

To determine what is valuable, we ought to look at what tween girls value in the present. PewDiePie and his well-followed YouTuber associates—Jenna Marbles, the Fine Brothers, Michelle Phan, and so on—boast high-value millennial audiences in the millions. These self-employed creatives make their own high-dollar deals with brands and get contracts with major television networks, all while maintaining their homegrown audiences of consequential size. This feature makes them worth an embarrassing multiple of what they are paid today. To be a YouTube content creator of their level is to achieve nothing less than a new caliber of celebrity, one that is made way more efficient with help from technology. To be a well-subscribed talking head on a video site requires little more than the personal computer one already has at home.

YouTube series are to entertainment media what startups are to the business world, angling hard to be of widespread significance while operating on drastically scaled-down means. A 1080p Logitech webcam costs $60 and worthwhile ideas, though hard to come by, don’t cost a thing. Meanwhile, networks pay an average of $2 million to produce a TV pilot.

The more-affordable paradigm enabled by YouTube isn’t something to be laughed away, but to be embraced. The stars of The Big Bang Theory earn $1 million per episode apiece while PewDiePie earned $4 million over all of last year. This raises the pertinent question: Who’s worth more? The guy who can create, produce, and star in content that reaches hundreds of millions, or just the talent on its own?

The singing-dancing-and-acting triple threats of Hollywood today can’t compete on a business level with the incoming generation of self-producing, self-directing YouTube penta-threats. They are a new class of creators who can find an eager and substantial audience for even niche content. And this content is free, on-demand, and available all around the world.

Everyone knows Justin Bieber puts on a show, but PewDiePie is his own show. Felix Arvid Ulf Kjellberg—PewDiePie himself—is usually a floating head in the corner of his gameplay videos, but he still opens everything with an intro and closes with a farewell, making eye contact with millions[1]  on a regular basis and doing so with no intermediaries beyond the YouTube terms of service. This yields an audience intimacy enabled by “limbic resonance,” a neurological feature of our brains in which they release chemicals related to love, motivation, sexual gratification, and addiction in order to drive an emotional connection with someone. If you’re looking for effective marketing, follow the dopamine.

PewDiePie is popular in a significantly different and more personal way than standard movie and TV stars are. While Tom Cruise certainly fits the bill as famous, movie stars seem distant and untouchable, so we don’t care about them as much. Meanwhile, YouTubers speak directly to the camera, often in their own bedrooms. The fourth wall is broken beyond repair, and we don’t want them to fix it. This content is intimate, it’s different, and it has a depth to it.

Importantly, the successful YouTuber demonstrates vast monetary value without ever suggesting anything less than total attainability. The basic (yet effective) production value leaves behind a strong suggestion that the high-profile job of “star YouTuber” is a possibility to each and every viewer.

Well-done YouTube content has an intangible of aspirationality attached to it. An audience mentality of “I could do that too” goes a long way towards driving subscriber numbers higher and higher. To subscribe is, on some level, to cheer for an independent creator. People most enjoy watching Web content similar to what they would make themselves, were it not for limiting factors like time or worthwhile ideas.

PewDiePie and his fellow YouTube creators hook their fans on a deeper level than any celebrity could hope for, and those fans exert real-world marketplace influence.

When PewDiePie released a video this year about an older and notoriously glitchy game called Skate 3 (his walkthrough of the game featured an overweight skater named Bob who tumbled hilariously when his skateboard tricks failed), consumer interest in the dated and unremarkable title was renewed to the point that people started buying it again. Retailers had to ask Electronic Arts to reprint new copies. Wielding influence of this level has so far seen PewDiePie write a book, start a production company, and release an iPhone app.

PewDiePie’s proven ability to generate consequential real-world income from his free video content is far from an isolated incident. When John Green’s young adult novel The Fault In Our Stars was adapted for the big screen, he was able to mobilize his YouTube channel’s 2.6 million subscribers to go see it in theaters. They did so in droves, even beating the new Tom Cruise movie at the box office.

Rock band We The Kings pushed none other than Beyoncé out of her number one Billboard spot based on the strength of their YouTube following alone. Connor Franta, whose Internet culture and lifestyle videos have earned him 5 million subscribers, wrote a book that spent 16 weeks on the New York Times bestseller list. Independent content creators no longer need a major network’s vote of confidence in order to make substantial economic impacts.

This isn’t a flash in the pan.

The Internet has simultaneously made distribution free and caused content consumers to redraw the lines for what they find sufficiently entertaining to watch on a regular basis. The anyone-can-be-a-YouTuber mindset turns triple-A entertainment on its ear and allows for a more personal reassessment of what one finds truly engaging. The on-camera talent for these niche series can also be the writer, director, producer, editor, and network. The cost of a webcam be broken out over multiple episodes, and it eventually costs a few bucks per episode to create an entire series rather than a couple million to make one episode of something that might not have any staying power.

By comparison to the television industry’s bloated budgets, YouTube series are lean and mean, commonly a one-person effort from top to bottom. They operate within a paradigm that allows for a new sort of credibility, one that holds deep and recurring significance online with effectively fixed production costs. As such, it’s a credibility that scales; every time someone clicks a YouTuber’s subscribe button, he or she reveals something of his or her tastes and general sensibilities. Moreover, this is content that a growing number of millennials prefer to other formats.

A study by Hunter Qualitative Research yielded results that millennials enjoy YouTube entertainment more than television. They find it more relatable and it makes them feel better about their lives.

The era of YouTube celebrity might be one where a foul-mouthed videogamer is captain of the ship, but YouTube as a juggernaut of attention has real staying power. You only need to look so far as Smosh, the two-person comedy team that grew its YouTube presence to 21.5 million subscribers over 10 years of regular activity on the site. It made headlines when PewDiePie passed them in viewership in 2014 (he’s now the single-largest entity on the YouTube platform). Ridicule him if you must, but don’t be surprised when Felix Kjellberg is earning ten times his current income in the near future.

Until mainstream media organizations learn to tap into this new and lucrative zeitgeist, PewDiePie can be found on his YouTube page, electrocuting his girlfriend.