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Maker Studios, Omnicom Sign Eight-Figure Upfront Deal for Web Video

Maker Labs Program Turns YouTube Stars Into Brand Spokespeople

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Maker Studios' 55,000-plus YouTube channels include Epic Rap Battles of History
Maker Studios' 55,000-plus YouTube channels include Epic Rap Battles of History

Here's one way Disney can begin to recoup the $950 million it plans to spend on YouTube network Maker Studios.

Maker Studios has signed an upfront deal with Omnicom Media Group ahead of the network's Digital Content NewFronts presentation on Tuesday night in New York. The deal includes an ad spending commitment in the "low-eight figures," according to a person familiar with the matter.

The deal is the first signed by Maker Studios, according to Maker Studios head of global sales Jason Krebs. In a recent interview with Ad Age, Omnicom's president of U.S. digital investments Jon Schaaf said that the agency holding company doesn't publicize its upfront deals unless they are "transformative opportunities." The last upfront arrangement Omnicom announced was the $100 million deal with Instagram.

"Obviously we do a lot of deals with media [companies]. We don't go to market with all of them because some may be more [media] trading terms that aren't necessarily newsworthy," Mr. Schaaf said last month.

The deal is the latest coming-of-age signal for YouTube networks. Like blog networks, companies like Maker Studios started out as confederations of YouTube channels that pooled their audiences to collectively bargain for ad dollars. Now they're joining the ranks of Google and Facebook in securing upfront arrangements with media buyers, driving more money to the medium and potentially siphoning from TV's share of ad budgets.

"There is a genuine desire for advertisers to understand [online video] better. This deal is not about the size of the deal or its upfront nature, but about learning. It's a strategic deal about learning," said MediaLink CEO Michael Kassan, who helped broker the deal.

Omnicom's eight-figure spending commitment will go towards ads against Maker's content, but the deal also buys its agencies and clients an inside track to that content. For example, they'll get to turn Maker's 50,000-plus creators into spokespeople through Maker Offers. That program will have the YouTube stars creating videos for brands and uploading them to their own YouTube channels. Advertisers will also get access to Maker Labs, akin to the YouTube network's in-house agency. "Labs are a new way of creating content with brands involved…. Our version with Omnicom is to shorten the timeframe of relevant content creation," Mr. Krebs said.

Brand integration programs like Maker Offers and Maker Labs carry a lot of importance to the network's bottom line. Typically companies like Maker Studios have to give up 45% of their YouTube videos' ad revenue to the Google-owned video service. But they usually get to keep the money from marketer tie-ups like product placements and branded videos. That's why many of the networks -- as well as YouTube -- have made a point recently to pump up brand-creator collaborations.

Omnicom isn't getting exclusive access to Maker's inventory or talent, but they will have a first-mover advantage. "What I'll tell you is when you're with a group of people at the bar, you often ask your closer friends what they want to drink first," Mr. Krebs said. Maker Studios expects to sign similar deals with other agency groups, he said.

Los Angeles-based Maker Studios grabbed 20.6 million U.S. unique viewers in March 2014, according to comScore. That same month the company agreed to sell to The Walt Disney Company in a deal that could eventually total $950 million.

Coincidentally, the Walt Disney Company is an Omnicom client.

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