The business of MrBeast: YouTube’s top earner

Sascha: [00:00:02] From Equity Mates media. This is the dive. I'm your host, Sascha Kelly. Mr. Beast. No, you've got to stay with me. I had no idea who he was either. But the self-made YouTuber has just reached 100 million subscribers. So I hear yourself asking, well done to Mr. Bass, but why should I care? He's the highest earner on YouTube, and he's just the second individual to reach 100 million subscribers. And his content, it's clearly engaging. 

Audio clip: [00:00:31] If you push this button, you will get an insanely stupid and random punishment, which probably makes you wonder why would you press? 

Sascha: [00:00:38] But we today at the dive wanted to find out a little bit more about what's behind Mr. Based. It's Friday, the 26th of August. And today I want to know who is Mr. Bass and how did he get so big? To do this today, I'm joined by my colleague here at Equity Mates. It's Darcy Cordell. Darcy, what have you got me into today? I have no idea what this stuff is going to be like. 

Darcy: [00:01:01] This is going to be a fun one, Sascha. It's fair to say we're going to go beast mode. 

Sascha: [00:01:05] You've been sitting on that one, haven't you? Just in preparation. Oh. So, Darcy, I'm told reliably that Mr. Based is a YouTube legend. And so in thinking about the best way to introduce him to those who don't know, like myself, earlier in the week before I found out about this topic, I thought it would be best to go through some of his biggest YouTube videos. [00:01:27][21.8]

Darcy: [00:01:27] Yeah, let's do that. I'll give you a list of some of his most popular and most viewed videos. So he gave his 100,000,000th subscriber an island. [00:01:35][8.1]

Audio clip: [00:01:36] To celebrate I the size of his private island. I'm giving it to one of you in this video. So I brought 100 of my subscribers to compete in four extreme challenges. Last one Standing wins this island. [00:01:47][11.4]

Darcy: [00:01:48] He paid participants $10,000 for every day. They survived in his prison. He put 100 people in a circle and gave the last to leave half a million dollars. [00:01:56][8.8]

Audio clip: [00:01:57] But if you touch the red line, it's game over. I don't care how long this takes. Whichever one of you leaves last wins half a million dollars. [00:02:05][7.6]

Darcy: [00:02:05] He adopted every dog in a dog shelter. He gave his 40,000,000th subscriber. 40 cars. [00:02:10][4.6]

Audio clip: [00:02:10] You are 40 million subscriber. And because of that, take off your blindfold. We brought you onboard card. [00:02:17][6.5]

Darcy: [00:02:17] And lastly, he created a video that pays his friend $0.01 per every view. [00:02:21][4.0]

Audio clip: [00:02:22] The challenge has started. What it tarikh wins and you just Tariq's not. [00:02:25][3.0]

Darcy: [00:02:26] Currently that video has 138 million views. [00:02:28][2.7]

Sascha: [00:02:29] Sascha Oh my gosh. These ideas are brilliant but also sound incredibly expensive. So let's walk it back. Who exactly is Mr. Bass? I'm assuming that's not his real name. [00:02:40][11.3]

Darcy: [00:02:41] It's not Jemmy Donaldson is his name, but he's always referred to as Mr. Paste, thanks to his YouTube channel. He's only 24 years old and has been credited with pioneering a genre of YouTube videos that centre on expensive stunts. He first started posting in 2012, but went viral in 2017 for the counting to 100,000 video. [00:03:02][20.3]

Audio clip: [00:03:02] 2008 thousand and 20,030 3000 92,006. You know. [00:03:09][6.5]

Darcy: [00:03:09] And since then there's been plenty more viral videos, as I've talked about, with some getting hundreds of millions of views. One of my personal favourites was when he recreated the set from Netflix series Squid Game, where 456 people competed for a $456,000 prise. [00:03:26][16.1]

Sascha: [00:03:26] Now D'Arcy I didn't watch Squid Game because I thought it was going to be too scary for me, but it's kind of a life or death situation, isn't it? [00:03:33][6.9]

Darcy: [00:03:33] I knew you'd think that, but no, this wasn't life or death like this, so the stakes were a little lower. But his success is no accident. He set out to try and crack viral videos on YouTube and he told his parents he was going to college where in fact he was sitting down with his mates from 7 a.m. to 10 p.m. testing videos for years. He wanted to find out the formula for a viral video, and it turns out he's done just that. [00:03:56][22.5]

Sascha: [00:03:56] Well, then, what's the secret? What is the formula? [00:03:59][2.4]

Darcy: [00:03:59] The videos fall into four buckets, but the first of which is the outrageous challenge, such as stay inside a block of ice for a day, or being the last one to leave a vat of ramen noodles. [00:04:10][10.1]

Audio clip: [00:04:10] Lastly, this call for ramen wins $20,000. [00:04:13][2.5]

Darcy: [00:04:14] The second the celebrity guest appearance Mr. Bass often works with other marquee YouTubers. [00:04:18][4.4]

Audio clip: [00:04:19] Is $1 million, and these are 15 of the biggest creators on YouTube. [00:04:23][3.8]

Darcy: [00:04:23] The third is the reaction video where Mr. Bass has a posse of those childhood friends and they participate in his stunts and generally play the role of hot men. And the last is gaming videos. He's actually got another gaming channel and he literally employs six people full time just to build Minecraft maps for him to play. [00:04:41][18.0]

Audio clip: [00:04:42] I have 100 Minecraft players here and whoever builds the best house in one hour gets a real house. [00:04:47][5.7]

Sascha: [00:04:48] Okay. It sounds like he's done his due diligence to find the success for those different formulas. So I guess my next natural question is how does he afford to do this? These stunts and YouTube clips seem really expensive. [00:05:01][13.2]

Darcy: [00:05:02] Yeah, it's a great point. And they are, but we'll take it back a bit. YouTube. The platform he uses is the absolute king of video. According to a recent Pew survey, 95% of us teens use YouTube and after parent company Google. It's the second most visited site on the entire Internet. So Alphabet has the two most visited sites on the Internet. [00:05:21][19.5]

Sascha: [00:05:22] Serious dominance. That's amazing. Wow. Okay. [00:05:25][2.6]

Darcy: [00:05:25] And YouTube pays their creators a share of their advertising revenue. So when Mr. Bass videos get hundreds of millions of views, he gets paid. [00:05:33][7.4]

Sascha: [00:05:33] You've avoided the specifics, though. How much money are we talking about here? Like how good a business is being a YouTube superstar? [00:05:41][7.6]

Darcy: [00:05:41] Mr. Bass has a net worth of $25 million. But more stunningly, according to Forbes, he earned 54 million USD last year alone. But as you have rise Sascha his videos centre on expensive stunts and made expensive his average monthly content creation expenditure is $4 million per month so that's $48 million a year of annual expenses from his $54 million of earnings. [00:06:07][25.4]

Sascha: [00:06:07] Still 6 million a year. Happy to take it, Darcy. [00:06:10][2.7]

Darcy: [00:06:11] Not bad at all. But it's not just YouTube where he makes money. Like any celebrity, he's signed some big partnerships and endorsement deals. So from companies like Electronic Arts or Air Sports, they're famous for Microsoft, Nike champion Shopify. And he also earns merchandise sales from his own brand, Mr. Based. One of my favourite things that he's done is opened a burger restaurant, mister based burger. But Sascha, it's not actually a restaurant you can walk into. It's a ghost kitchen. [00:06:40][29.0]

Sascha: [00:06:40] Ghost kitchen? I'm assuming that's not a YouTube stunt. What exactly is a ghost kitchen? [00:06:45][4.6]

Darcy: [00:06:45] Yes. So there are actually restaurants you can't physically walk into and they only exist on delivery apps like Ubereats, Menulog, Postmates, DoorDash. So in March, he had 1600 virtual restaurants. Basically, local restaurants sign up to be a based burger franchise. They get his recipes and branding and then list as a base burger on the app. [00:07:06][20.6]

Audio clip: [00:07:07] So right now, we don't have any physical. We have 1600 virtual restaurants. Oh, so you order it online and then they deliver it? Yeah. So, like, let's say you own a mom and pop restaurant. You you can literally just sign up, go through the course. You learn how to make all the stuff on a menu, and you just order our ingredients in our packaging and then you just flick it on on Ubereats, DoorDash, GrubHub, and you can start taking orders and we let you keep a majority of the revenue. [00:07:27][20.3]

Sascha: [00:07:27] So essentially white labelling his burger recipes. [00:07:30][2.7]

Darcy: [00:07:31] Yeah, exactly. And that virtual burger chain just selling through the apps has crossed $100 million in total revenue recently. [00:07:38][6.9]

Sascha: [00:07:38] So that is not small change. Okay. Any other crazy businesses that he's got? Because if you're white labelling burger recipes, you've got to have some good ideas, I imagine. [00:07:47][8.6]

Audio clip: [00:07:47] I want to tell you guys about my new snack company, Vegetables. [00:07:50][2.3]

Darcy: [00:07:50] Which is he started his own line of chocolate bars called festivals. And true to Brand, he went big to promote them. He built a Willy Wonka style chocolate factory, complete with a river of chocolate. And he's giving that away to one subscriber, Sascha. He also did a video with Gordon Ramsay judging cakes with a $500,000 cash prise. [00:08:11][20.5]

Audio clip: [00:08:12] What are you. [00:08:12][0.4]

Sascha: [00:08:13] An idiot sandwich? Okay, that one's definitely going to the top of my list. I'm a massive Gordon Ramsay fan, so despite these deals, I'm understanding that the majority of his money comes from YouTube. So explain to me how moneymaking works exactly on YouTube. [00:08:27][13.9]

Darcy: [00:08:28] The acronym you need to know if you're making content is CPM. So media businesses from News Corp to Mr. Based and everything in between, including us here at the Dive. We operate on essentially the same business model CPM cost per mile or cost per thousand impressions and YouTube CPM varies massively what country you're in, what type of content you're making. But a website that we came across estimated that the average CPM in the United States is $13. [00:08:53][25.8]

Sascha: [00:08:54] So for every thousand views, you get paid out $13. Is that right? [00:08:57][2.9]

Darcy: [00:08:58] Yeah, exactly right. So, Mr. Bass, most popular video it is squid game video with 285 million views. If we do the maths on that, 285 million viewers at a 13.8 pm, that's $3.7 million. [00:09:12][14.3]

Sascha: [00:09:13] Wow. So he might have paid the winner of that script game video $456,000. But he made millions from the advertising revenue alone. So this is all starting to make sense. Okay. So so far we've just been talking about Mr. Bass, but there's a whole world of YouTubers out there, including us here at Equity Mates. So let's take a quick break and then talk about the broader ecosystem. [00:09:36][23.0]

Audio clip: [00:09:44] Also that that video to look at the new account reminds me, I think Netflix in total has 220 million subscribers and that video just crossed 220 million viewers. Wow. [00:09:53][8.7]

Sascha: [00:09:53] So welcome back to The Dive. Today. We're talking about the business of Mister Based. So for those of you like me who had no idea who this guy was before researching today's episode, Darcy's just been explaining who he is, but it really has me wondering about who else is out there on YouTube that I don't know about. So, Darcy, explain to me why we're talking about Mr. based over other YouTubers today. [00:10:19][25.4]

Darcy: [00:10:19] Well, his YouTube channel has over 103 million subscribers, and it's the fifth most subscribed channel on the platform. But Mr. Bass is the highest earner on YouTube. [00:10:28][8.9]

Sascha: [00:10:29] Okay, so give me the other top five, because I'm really curious about this now. [00:10:32][3.2]

Darcy: [00:10:33] So number one is T-Series with over 220 million subscribers, it's actually an Indian record label and film production house famous for their Bollywood soundtracks and Indian pop music. And that's held the most viewed title since 2017. All right. [00:10:48][14.4]

Sascha: [00:10:48] Number two. [00:10:48][0.2]

Darcy: [00:10:48] Cocomelon nursery rhymes. They're popular for the bath song, which I'm not sure if you've said Sascha, that has over 5 billion views on the platform. [00:10:56][7.5]

Sascha: [00:10:57] I jump in the bass drums, this time to get a lead. I haven't seen it, but I've got some friends at kids who are probably yelling at me now saying, How have you escaped the bath song? I can completely understand. You know, when you're a kid, you just want to hear the same thing over and over again. It's easy to see how that's ended up at 5 billion. [00:11:17][19.8]

Darcy: [00:11:17] Yeah, that's what Cocomelon offers. Then we've got set India at third. This is actually Sony Entertainment and it has a massive reach in India. They air a mix of dramas and reality shows like India's Got Talent and Indian Idol. It's one of the fastest growing channels. And then in fourth, bear with me here on the name Felix Arvid Kjellberg. That might not ring a bell, but PewDiePie am famous and infamous for his online Let's Play Gaming Content. His YouTube fame has taken him from episodes of South Park to Time's 100 Most Influential List. He has over 28 billion views on the channel alone, and he's the most subscribed individual personality on the platform ahead of Mr. Bass. [00:11:58][40.8]

Sascha: [00:11:59] There's two things I take away from that such an eclectic mix, you know, really surprising. And then the numbers, they are just staggering. 223 million subscribers. When you're thinking about the fact that 5 billion people in the world have Internet access, that's almost 5% of all Internet users subscribing to just one channel. It just indicates how big the YouTube ecosystem is. [00:12:23][23.9]

Darcy: [00:12:23] Yeah, you're right. And we've just gone through earnings season where public companies report their numbers to the public. And in the past three months, YouTube ads brought in $7.3 billion and YouTube kids, 45% of that money, Sascha, and they pay out 45%. So they pay out 55% to creators, though, meaning about $4 billion was paid out to creators in the past three months alone. [00:12:47][23.3]

Sascha: [00:12:47] Yeah. So such a huge clip that take 45% of someone's work. That's an absurd amount of money. [00:12:54][6.7]

Darcy: [00:12:54] It is. So to put that in context. YouTube paid over $15 billion to creators last year, but in the last financial year, NewsCorp made about $10 billion in revenue. Well, The New York Times, they made about $2 billion. [00:13:07][12.8]

Sascha: [00:13:08] So YouTube creators, if we looked at them as a business or a media empire in their own right, they would be a giant. [00:13:14][6.3]

Darcy: [00:13:15] And let's keep that $15 billion number in mind. Netflix, they brought in about $30 billion in revenue last year. [00:13:21][6.3]

Sascha: [00:13:22] So, Darcy, I guess any other final thoughts? Any other creatives that I should be aware of? [00:13:28][6.0]

Darcy: [00:13:29] I've got to tell you quickly about Ryan Kaji of Ryan's toy reviews. He's just nine years old, Sascha, but he was the highest paid YouTuber in 2020. He made almost $30 million from his toy review video as a nine year old. [00:13:42][13.6]

Sascha: [00:13:43] This video features toys I made for you. So I guess my next question is how big can YouTube become? These numbers are massive, but is there still room for growth? [00:13:52][9.8]

Darcy: [00:13:53] I think there is, Sascha. YouTube is really unique compared to most of its rivals. Its model shares the unit economics a lot better than other platforms. You can have millions of followers on TikTok, but not really automatically make any money, whereas with YouTube it's one click and you can turn monetisation on. So that's a huge drawcard for creators. There's a reason you say heaps of Tik Tok is an Instagram. Influencers try to push followers over to their YouTube channels. But here's the other stat that reminds us how big YouTube could be 95%. And I mentioned it earlier, Pew Research on US teenagers found that 95% said they were YouTube users. Compare that to 67% Tik Tok, which is catching up 63% for Instagram, 59% for Snapchat, but just 31% on Facebook. So the takeaway is that YouTube is huge with the next generation of Internet users and it really is not showing signs of slowing down. [00:14:49][55.3]

Sascha: [00:14:49] Okay, Dorsey, one last question just for my own curiosity. What's your favourite YouTube videos to watch? [00:14:54][5.0]

Darcy: [00:14:55] It's now Mister Based. [00:14:56][0.7]

Sascha: [00:14:58] That's such a genius answer. If you enjoyed this episode, please tell a friend about it. It really is the best way for a podcast to go. You heard about those CPMs? Please, please get us to a couple more listeners. And if you're listening because you have been referred, then welcome. We have a growing back catalogue that's well worth checking out. I lost three episodes. We talked about the best stories from reporting season. We talked about the race to put satellites above our head and what's happening in the world of streaming. Remember, you can also follow us on Instagram at the dived up business news. You can contact us by email the diver Equity Mates dot com and you can subscribe wherever you are listening right now. See you never miss an episode. Darcy, thank you so much for joining me today. 

Darcy: [00:15:39] Thanks, Sascha