Why Alloy Digital Might Hold the Secret to YouTube

Why Alloy Digital Might Hold the Secret to YouTube

Alloy Digital was the only major network hosting its own event this week in New York

When advertising and media executives entered a nondescript building on West 36th Street in Manhattan on Tuesday, they were greeted by waiters carrying pizzas on hooks.

As the buttoned-up executives pushed further into the open space, they would find French toast and éclairs stashed in circular cubbies, a man holding balloons weighed down by a tray of chocolates and a woman painting wasabi on a serving platter.

“I'm more afraid of the pizza than that,” one executive said, pointing at the unusual array of pastries.

While this unorthodox approach to lunch may have taken some off-guard, it reinforced that the event's host, Alloy Digital, is different from every other media company pitching advertisers this week in New York.

Like Yahoo, AOL and other companies unveiling new web shows, Alloy Digital distributes content from outside producers like Vuguru, Michael Eisner’s multiplatform production studio. It unveiled one of those shows, "Espressologist," on Tuesday.

Also Read: 3 Things That Need to Happen Before Big Money Gets Spent on YouTube, Hulu, Yahoo & AOL

Yet few companies both distribute shows and also produce and own shows of their own. Yahoo and AOL both use their massive worldwide audiences to entice major Hollywood actors, directors and producers to make videos Yahoo and AOL can host on their sites. Hulu, like Netflix, is pivoting from hosting content that aired elsewhere to acquiring orignal content. They are 21st century cable providers, the Comcast and Time Warner Cable of online video. They serve as platforms, providing a place for people to watch other companies' content.

The producers of the shows can sell them elsewhere, as the creative forces behind Yahoo hit "Burning Love" did, securing a TV deal with E!.

Those that do produce shows, like Univision, are doing so to boost their broadcasting offerings. 

Alloy Digital is a content creator, and by acquiring six different companies over the past two years, it has transformed into one of the most potent forces on YouTube, the biggest online video platform of all. Alloy owns and operates a suite of channels, including the most subscribed channel on YouTube, SMOSH, and most subscribed animated channel, Shut Up! Cartoons.

Thanks to its acquisition of Clevver Media, Alloy also owns the top entertainment news provider, Clevver Media.

Clevver just added a new talk show, Clevver HQ, one of seven new shows unveiled on Tuesday. Others included reality competition show "Dorm Biz" and "Dropping the Soap," which stars Jane Lynch and takes viewers behind the scenes of a fake soap opera.

As a producer and distributor of these shows, Alloy Digital would seem to belong in the teeming flock of multichannel networks (MCNs), companies like Machinima, Maker Studios and FullScreen that have amassed massive networks of YouTube channels. 

Yet while the other MCNs net billions of viewers a month, dwarfing Alloy's total, they rely almost exclusively on YouTube. YouTube is one of the biggest investors in Machinima while a former YouTube executive runs Fullscreen. When TheWrap spoke with two founders of Maker Studios last year, they saw little reason to explore other distribution options.

"To not take a brand and expose it to audiences in hundreds of other places is limiting it," Diamond said. 

Though YouTube is undoubtedly the biggest platform, it also takes a large cut of  advertising revenue and inhibits a show or company from building its own brand.

One major advertising consultant noted on Tuesday that Alloy's own brand is nonexistent, but the company has used its subsidiaries to demonstrate how the burgeoning crop of online video companies can generate meaningful revenue from their massive audiences by operating outside YouTube.

Several of its entertainment brands have a website Alloy owns and operates, none more popular than that of Smosh. While YouTube takes a hefty cut of advertising revenue from ads on its platform, Alloy takes home all of the revenue from those sites.

"What's unique about us is we've got these brands that don’t only live on YouTube but on their own dotcoms," Chris Young, who became chief Marketing Officer after Alloy acquired his DBG last week, told TheWrap.

Many of YouTube’s most successful creators, such as Freddie Wong and Annoying Orange, have adopted the same appraoch — whether through proprietary websites, merchandising or television.

Owned and operated sites are just the beginning. Diamond said Alloy is happy to distribute shows on websites it has no relationship with — yet.

"If we have an NFL-based story, we'd love to have NFL.com and ESPN as distributors," Diamond said.

This is why Alloy Digital, which draws a fraction of the monthly views that Machinima does, is the only one hosting a NewFront. 

“Other MCNs are distributors first and do content second,” CEO Matt Diamond told TheWrap. “We think of them as equal.”