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MrBeast's $1.5B YouTube empire
The world's most-followed YouTuber has mastered the 21st century consumer playbook.
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Today, we’re talking about YouTube’s biggest creator: MrBeast.
Also this week:
Bearly AI update
Crypto’s iPod moment?
TikTok’s most viral video in 2022
Jimmy Donaldson (aka MrBeast) is the most followed person on YouTube. He’s turned that massive audience into a massive consumer business. And is raising money for his empire at a $1.5B valuation.
Below is an article I recently wrote for Bloomberg Opinion about MrBeast.
MrBeast Is Writing a New Consumer Playbook
With more than 200 million subscribers, the YouTube star is building an empire by combining content and commerce.
What was the most important M&A deal of 2022?
One candidate: in August, Casino operator Penn Entertainment Inc. spent $162 million to acquire 36% of digital media site Barstool Sports, thus completing a multi-year acquisition (Penn already owned 64% of Barstool via multiple transactions dating back to January 2020).
On the popular business podcast All-In, investor and entrepreneur David Friedberg said it was the most important deal of the year because it highlights an important consumer trend: People buying consumer products from influencers instead of corporations.
Let me explain his argument with a quick thought experiment:
Imagine that you work for Procter & Gamble Co. in the early 2000s and want to sell a mop replacement called the Swiffer. How would you market it to millions of people? Well, first you’d create the product then buy ads where the attention is concentrated: print, TV, radio and in-store placements.
Today, the creation of popular consumer products often proceeds in the reverse order of operations. Internet influencers build massive followings on social media — in other words, they capture attention — then they go out and create products to sell to that audience.
That’s the exact playbook that Jimmy Donaldson (aka MrBeast) is perfecting. Only 24 years old, MrBeast has built an enormous audience by creating viral content like re-building Willy Wonka’s Chocolate Factory, amassing more than 200 million subscribers across multiple YouTube channels (as of last week, his original channel — with 112 million subs — made him the most followed person on YouTube)
And now he’s selling products to that audience.
In December 2020, MrBeast created a delivery-only burger chain called MrBeast Burger which has done sales of more than $100 million. He did so by creating an ordering app for consumers and partnering with 1,000 locations across Europe and the US. In September of this year, MrBeast Burger opened its first physical location at the American Dream Mall in New Jersey (~10,000 fans reportedly showed up). Separately, in January 2022, MrBeast created a chocolate bar called Feastables, which has already generated sales of more than $10 million.
“Distribution is the number one problem for consumer goods and services,” according to David Friedberg on All-In. “If you don’t naturally have content creation in your blood, you will have to go and buy a content business or…you will not be able to compete effectively.”
Why? Because consumer goods are so competitive — and so easily substituted in many cases — that the best way to stand out is with story and content. And social platforms like Instagram, Twitter, YouTube and TikTok are where people are increasingly going to consume said content.
Traditional consumer brands without a successful content play are stuck spending huge dollars on advertising. In fact, Procter & Gamble is the world’s largest advertiser, spending $11.5 billion in the 2021 fiscal year.
MrBeast can sidestep such ad spending because he already commands the attention of millions. MrBeast of course has expenses. Any ad money he makes from YouTube gets plowed back into the business at the current pace of $8 million a month.
Here’s a key difference, though: Advertising a product may create short-term interest, whereas making content creates an owned asset that can continually bring in new fans.
Is the combination of content and commerce enjoyed by MrBeast replicable by those who aren’t one of the world’s biggest YouTubers?
According to Ben Mathews — a general partner at Night Ventures, a VC fund connected to MrBeast’s management firm Night Inc. — influencers can take a few different routes.
“There are less than 100 celebrities or creators who are truly big enough to carry their own white labeled brand,” Mathews tells me over an email. “Everyone else is better doing a licensing deal like Kanye [West]. Doing it yourself is really hard.”
Mathews says the main trade-offs the influencers must consider are margins, product quality, ownership and speed to market. In September, Night Inc. launched a $100 million fund with Peter Chernin’s Chernin Group to help other successful internet creators navigate these trade-offs and build a MrBeast-like consumer empire.
Let’s circle back to Barstool Sports, which has done several interesting product partnerships.
In October 2018, Barstool Sports launched what is now the world’s most popular hockey podcast — Spittin’ Chiclets, which is co-hosted by two former NHL players (Ryan Whitney, Paul “BizNasty” Bissonnette).
In an early episode, Whitney said his favorite drink was pink lemonade and vodka. Pictures of fans making the drink at home started going viral and — eyeing an opportunity — Barstool CEO Erika Nardini partnered with distiller E&J Gallo to manufacture that drink combination. They named the flavored vodka Pink Whitney and, when I wrote about the brand in March 2021, it had sold more than $100 million in its first 18 months. (Full disclosure: I was recently a guest on the podcast to talk about the FTX meltdown. Sadly, no pink lemonade vodka was consumed.)
A month ago, the Spittin’ Chiclets team was back at it and launched a beer called Big Deal Brewing, in partnership with Labatt USA.
“Conventional wisdom is that the beer industry is on the decline,” says Bissonnette’s manager Jeff Jacobson. “But if your audience has followed you for a long time and trusts you, you can take the risk. Hockey fans might be a small niche compared to the totality of MrBeast’s audience, but as the success of Pink Whitney shows, you can have a huge hit with the right product and right strategy.”
Ultimately, the sports and comedy platform was attractive to Penn Entertainment because of its huge built-in audience. Under Penn, Barstool launched an online sportsbook that brings awareness to the casino operator’s properties (which would otherwise be a big marketing expense).
The marriage of content and commerce isn’t only for physical consumer products. Attention is truly the only finite asset, which means every industry has to fight for it.
The Hustle, a tech and business newsletter with 2 million subscribers where I previously worked, was acquired by HubSpot, and the marketing software firm now promotes various products through the newsletter. Other software firms that acquired media operations include investment platform AngelList (and Product Hunt), fintech firm Stripe (and Indie Hackers) and automation platform Zapier (and Makerpad).
Building brands tightly tied to an individual obviously has risks. Over the past month, Adidas AG and The Gap Inc. both canceled lucrative contracts with Kanye West after he made a string of anti-Semitic comments. Now, Adidas has to replace the $1.8 billion in sales attributable to West’s shoe brand Yeezy, which is responsible for an estimated 45% of the company’s net profits.
What’s next for MrBeast?
Recent reports show that the super-YouTuber is seeking to raise $150 million for his business empire at a valuation of $1.5 billion. If the deal goes through, it’ll be a major milestone. And it won’t be long until the most important M&A deal is a massive creator buying out a legacy brand.
Bearly AI update
I’m about a month into building Bearly AI, an AI-powered research tool that helps people save hours of work with:
Reading (instant summaries)
Writing (rewording, grammar correction, create next paragraph)
A lot of people have asked me if anything has changed with the drop of OpenAI’s ChatGPT program (which has gone stupid viral). Nothing has changed.
Our goal is to provide AI text tools that fit conveniently in any workflow: one keyboard shortcut away wherever you are on the internet.
To that end, we're integrating chat functionality into Bearly and just dropped another new feature: an Amazon Review Analyzer.
With one click, we aggregate the most helpful reviews and instantly summarize the key pros and cons from the reviews. Perfect for writing copy or holiday shopping.
Check it out!
Links and memes
Crypto’s iPod? Crypto has been in the sh*tter this year, but there was an interesting development last week.
Ledger — which creates a hardware wallet for people to self-custody their own crypto — released a product called Stax, which was designed by Tony Fadell (who designed Apple’s iPod and founded smarthome startup Nest).
One of crypto’s biggest hurdlers — other than insane scam artists like SBF — is usability. Most people don’t want to bury a metal plate with a seed phrase in their backyard. Ledger's mission is to make it easier to self-custody your Bitcoin and Ethereum.
But its early products take like 30-minutes to set up. Enter Fadell: Stax has a slick E-ink touch screen (to see and use your crypto assets) and only takes 3 minutes to set up. It costs $300+ (vs. $200+ for Ledger’s older USB-looking stick).
Wired has a good article on Fadell’s collaboration. There's a long way to go to mainstream crypto, but Fadell is best-in-class for consumer hardware (Elon tried to hire him for Tesla in 2008).
For his efforts, Fadell received “significant equity” in Ledger. And Ledger didn’t just get design and manufacturing chops, it got crazy connections. Here’s a good excerpt from the Wired piece:
Early in 2022, Foxconn, the manufacturing giant that Ledger retained to assemble the Stax units, said that it wasn’t going to meet its February 2023 deadline for shipping final products. Maybe June? “We were freaking out,” Gauthier says. Fadell told him, “I got this.” He wrote to Foxconn’s CEO, explaining that the deadline was important and it would be a great favor if he looked into it. “Fifteen minutes later, boom, we were back on track,” Gauthier says.
Disney+’s Andor: When someone tells me “you have to watch [Show X]”, I reply “Ok, I’ll add it to the list”. Except the list isn’t a list at all. It’s nothing. There is no list. I’m just being polite.
But, enough people told me to watch the new Disney+ Star Wars show Andor that I cracked. And it’s good. Directed by Toby Haynes — who did the Bourne films with Matt Damon — the Andor story tracks the early days of the Rebellion (it takes place before the 1977 Star Wars film).
Most Star Wars projects are about the special FX and basic good vs. evil story. Andor is more of a spy thriller and shows the complicated decisions that individuals have to make in choosing the Rebellion or the Empire. And the Empire isn’t shoved in your face. Rather, the villainy is built up gradually, which leads to a good pay-off (it’s like in Jaws: you don’t even fully see the shark until 2/3rds the way of the 2-hour film).
TikTok’s most viral video in 2022…is someone making a giant chocolate giraffe. I don’t have the app myself (and still think the US should ban it and force a sale...but can't say 'no' to year-end viral content lists). Don’t worry, you can view on web.
…and heres some tweets and memes:
As mentioned in the MrBeast article, I went on the Spittin’ Chiclets podcast a few weeks ago to talk FTX. I knew the show was a popular (top hockey podcast, top Canada podcast). But then I found out how popular it was because I’ve never received so many DMs after a podcast appearance (dozens of them along the ilk of “I heard you on Chiclets, thanks for breaking down FTX”). So, shoutout to the Chiclets crew and Jeff Jacobson for setting it up.
Since Chiclets is a hockey podcast, the fan reaction had some solid hockey jokes. This one comment from the Spittin' Chiclets Instagram asking which hockey team I played for put me in stitches:
On Thursday, the US government made an official prisoner swap with Russia. WNBA star Brittney Griner has been in a Russian prison for nearly 10 months. Why? While playing professionally in Russia, she was caught with medicinal cannabis oil (which is illegal in the country). Ultimately, the Russians freed her in exchange for Viktor Bout, who is one of the world’s most notorious arms dealer (his nickname is the “Merchant of Death”).
Here’s a pretty surreal video of the prisoner exchange happening on a tarmac in the United Arab Emirates. I’m not going to get into the politics of the swap, but want to flag that Vin Diesel — of Fast and Furious fame — posted an Instagram photo earlier this year that read “I need Britney Griner home before Christmas”…leading to this incredible tweet: