How bootstrapping YouTubers are beating Netflix

Bootstrappers Of The World, unite and take over sang The Smiths in 1987, but they made a late change to the lyrics and the song title became Shoplifters Of The World. Ok, I’ve made this up, but like all new bands they adopted the bootstrapping DIY ethic at the outset before they could fund better equipment, studios and marketing support.

Many of today’s ventures did too, take Netflix. Started in 1997, Reed Hastings and Marc Randolph had an idea to rent DVDs by mail. They tested the concept with friends, and Netflix was born. They raised no funds for the first five years of their venture, testing product-market fit and their value proposition with different customer segments, routes to market and pricing models.

This included Netflix.com, the first DVD rental and sales site, and a subscription service offering members unlimited DVD rentals without due dates, late fees, or monthly rental limits. They upended the existing value proposition and business model of the market leader, Blockbuster which had 9,000 stores, that eventually collapsed in 2010.

Netflix pivoted again and moved television beyond timeslots in 2011 when it became a streaming company. ?Streaming is now an industry in itself, and a competitive market for content creation – Netflix will spend $13bn this year on content, more than any major studio spends on films. Subscribers will get 82 films in a year when Warner Brothers, Hollywood’s biggest studio, will send cinemas twenty. Disney is putting out ten.

Nobody can watch everything, but everyone can watch something. Netflix has 2,000 ‘taste clusters’ watching its watchers. Analysis and metrics of how well a programme will reach, draw and retain customers in specific clusters lets them offer customer-oriented content for selective or binge-release. Their subscriber model gives them a deep understanding of its consumers to serve content most likely to appeal.

This mixture of breadth and depth, exclusive content, mass market and hyper-personalised engagement is the heart of Netflixonomics - getting people to subscribe to television on the internet - which has hastened a decline in broadcast television and led millions of consumers to dispense with pay-tv: Americans aged 25-34 are watching 40% less pay-tv than a decade ago. ?Amazon is best placed to compete, its video service is available pretty much everywhere Netflix are, but video will always be part of a bigger strategy. For Netflix it is everything.

Netflix has 283m subscribers in 200 countries, but their business model is under threat by YouTube bootstrappers. Just as they were the disruptors, another paradigm shift is happening: Americans spend?more time in front of their?TVs watching YouTube than Netflix. Whilst YouTube may not have seemed like a rival when confined to computers and smartphones, it has begun to colonise the living room. Close to 45% of YouTube viewing in America takes place on?TV, and YouTube is selling ad-free subscriptions for $13.99 a month.?

YouTube’s DIY brigade of self-taught filmmakers are coming for the television industry. When Jeff Bezos wanted publicity for Blue Origin, his rocket firm, he did not go to a television channel. Instead, he offered Tim Dodd, who runs the YouTube channel Everyday Astronaut? an exclusive factory tour. The resulting video, in which the two men spend an hour admiring hydrogen tanks and discuss the finer points of rocket-engines, may not strike everyone as compelling, but it got 1.6m views.

As the internet has cut out middlemen and empowered enterpreneurs to produce things themselves, an enthusiastic YouTube bootstrapping crowd is taking on mass-market incumbents, reaching 2.5bn viewers globally each month and accounting for a tenth of all the television that Americans watch, more than any other streamer or channel. And much of that audience is young, building viewing habits that may last for decades.

In the battle for viewers, amateurs are increasingly beating the pros at their own game. Worldwide, 2.5bn people tune into You Tube monthly. Creators are the new Hollywood. Marketeers are listening and siphoning?TV?budgets into the medium as social media and television blend into one. It’s way bigger than just a bunch of folks in their bedroom. Sidemen, a group of seven British YouTubers with more than 100m subscribers has a staff of forty. Like Mr Beast (330m followers) they are exploring sidelines, including a restaurant chain. Their brand awareness and reach is strong.

Few YouTubers have such a sophisticated setup, but professionalisation is becoming more common. Technology has helped. Hardware such as 4K cameras and special effects software is more affordable and powerful video-editing software runs on laptops. Drones replace helicopters and make dramatic aerial shots possible. People working from home can make videos with relatively high production values for a tiny fraction of the traditional cost. The quality gap will only shrink. By automating many steps in the process, AI will make video production even easier.

As a platform, YouTube throws many of the existing business model rules out of the window. Anyone can upload anything they like. Most videos are free to watch. YouTube inserts advertisements and split the takings with the filmmaker. But what is more striking is how much genuinely engaging stuff bubbles up, and whilst YouTube has spawned its own megastars, its most interesting effects will be felt at a smaller scale. Because making content is cheap, YouTubers can earn a living serving niches too small to be profitable for other streaming firms. From rocket science to rock climbing, knitting or ancient history: think of an interest, and at least one YouTube channel is probably dedicated to it.

So, what are the bootstrapping traits YouTube disrupters show for other self-funded startup founders to adopt, to spur them onto their own bootstrapping journey?

• Self-funding to start small: You don't need a massive budget or perfect equipment to start. Most YouTubers started with basic kit and work in their spare time. They invest their own resources building an audience and then look to commercialise their endeavours.
• Resourcefulness: They often learn skills like video editing, SEO, and marketing through online tutorials and experimentation. This resourcefulness and self-directed earning is key to bootstrapping?
• Minimal overhead: YouTubers initial costs are low and although bootstrapping out of your own funds is tough, it instils good husbandry habits on setting priorities and smart resource planning. Being frugal is a virtue!
• Leveraging existing platforms: YouTubers have an established global platform which enables them to reach audiences without significant upfront costs and low ongoing cost of acquisition. The partnering model is something every startup founder should consider as part of their go-to-market efforts.
• Build a brand: YouTubers focus on creating an identity around their unique content to find, win and keep followers. Brand reputation is a core asset for bootstrapping founders. For example Mr Beast Started with gaming videos and grew his channel through creative challenges and philanthropy. PewDiePie: Built a massive following with entertaining gaming commentary and unique humour. Michelle Phan: Gained popularity with makeup tutorials and now has a successful makeup brand.
• Experiment with monetisation: Bootstrappers need to explore different ways to earn income, and YouTubers again show the way trialling various revenue streams like ads, sponsorships, merchandise, and affiliate marketing. YouTube’s Partner Program offers merchandise sales too, ?enabling them to sustain and grow their channels.
• Route to market: Increased accessibility to both creation and distribution through advances in technology have made it easier for anyone with a smartphone and internet access to create and share content as a YouTuber. The key takeaway for all startups here is how to reach users quickly and at scale.
• Focus on value: Creating content that helps or entertains their audience is what YouTubers focus upon, often tapping into niche interests. This focus on value builds and retains dedicated fan bases that traditional media might overlook. Diversification of content spanning a wide range of genres, including vlogs, tutorials, gamification and educational videos cater to various audiences.
• Build relationships: With mass markets of one built by personalisation, YouTubers nurture a community around their channels, with engagement through live event streams and social media interactions. Collaborations with other YouTubers expands reach and introduces content to new audiences, fostering a supportive community among creators.
• Be Patient: Building a successful YouTube channel takes time, dedication and consistency. They build their audience organically through content rather than relying on paid advertising. Iterative improvement is a bootstrapping virtue, and again we see YouTubers adapting their content based on audience feedback and evolving trends.

Summary

The YouTuber revolution is a movement democratising content creation and distribution, allowing diverse voices to contribute to, thrive and grow, to the evolving landscape of digital media. This is an essential element in the evolving entrepreneurial markets where disrupters can be Davids to incumbent Goliaths by changing the cost structure, value proposition and customer relationship aspects of the business model.

YouTubers capture the essence of bootstrapping because they typically start their channels with limited resources, relying on their creativity and dedication to build their brand and audience, create content using basic equipment and leverage free social media and word-of-mouth for promotion.

Many conflate bootstrapping with starting a small business, but the reality is that most bootstrappers have huge ambitions, they just prefer to go it alone. Bootstrapping means maintaining control. Bootstrapping means freedom. Bootstrapping means getting to play.

Bootstrapping your startup from the ground up enables you to test all aspects of your thinking. It’s not about winning or losing, but understanding how it works from a customer perspective. By bootstrapping, you give yourself space and a landscape for experimenting with how to build great products and how to find, win and keep customers, expanding your capacity to innovate. You can come up with the best version of your product or service.?

Being a bootstrapper is like paying your dues rather than opting for some instant gratification that comes with investor funding. ?Without investors to answer to and their KPIs to hit, bootstrapping offers much-needed practice and fine-tuning time, operating in less of a stress pressure-cooker environment. The game has lower short-term stakes, makes us more resilient and innovative in the long run.