Inside the Company That's Made Viral Videos Big Business

As online video has grown up, even the viral stuff has been co-opted–and turned into an efficient business.
On the set of FailArmy a Jukin Mediaproduced YouTube channel with 7.9 million subscribers that broadcasts “fail” video...
Julian Berman for WIRED

Nate Granzow settles into his chair and taps a few keys on his keyboard. Two large computer screens blink to life. The left screen has a browser with so many open tabs it looks like a comb. Granzow clicks a tab, and up pops a list of 40 videos he must watch in the next hour.

"Stingray scares little girl!" reads the title of one YouTube clip. It's about a minute long, and shows two toddlers leaning over a pool, watching stingrays swim by. The boy accidentally touches one and screams with delight. Seeing this, the girl sticks her hand in the pool. When a stingray swims near, she yanks her hand back and makes a face. “Hmmm. She didn’t get scared enough for me,” Granzow says, banishing the clip with a click.

Next up is "Funny French Bulldog (Moose) Sings Along with Accordion Practice," in which a dog snuggled in a zebra-striped blanket tries to follow an off-screen accordion with off-key yelps. Granzow watches skeptically. "All right," he finally says, "that’s cute." It is approved.

A guy in a hamster suit falling over at a children’s birthday party also gets the nod. It reminds him of a video his company approved a few weeks ago—Bugs Bunny and Daffy Duck performing the Nae Nae. He rejects “Close Call Canoeists.” I kind of like it (especially at 1:45), but he doesn't.

It may sound like Granzow is wasting time at work, but he's sifting for gold. And the airy, warehouse-like building of glass and exposed beams where he works is full of people just like him. He's a researcher at Jukin Media, a small company in Los Angeles that identifies extremely shareable videos, strikes deals with the people who own them, and then licenses the clips. "Viral videos are our world," the company website reads. "Whether you have them or you need them, we happen to cover both."

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Jukin's main product is a library of short clips—each of them just a few minutes long—cleared for third-party use. The current tally tops 20,000. When the company's media partners see something they like, they pay a fee so they can post it on their own social media accounts, websites, blogs, television shows, or practically any digital medium. The idea is to attract new eyeballs while eliminating the risk of being sued by the video's creator.

Such is the state of online video. In the beginning, it was a kitschy trifle, a grassroots kind of thing. People threw up monologues about elephant trunks, snowboard wipeouts, or inspired musings about double rainbows and passed them along to others. Viral clips made their way through the world via chatrooms or instant messages or email. But as online video has grown up, even viral stuff has been co-opted and turned into a business.

It mirrors what's happening on Vine, on Instagram, on Snapchat, on Facebook, on Vessel and Victorious and Vimeo, and on so many other platforms. YouTube, still the biggest player by far, is now a legitimate alternative to old-fashioned television, with large companies driving so much of the content, and popular video creators transformed into serious celebrities.

Today, old and new TV are unabashedly ad-obsessed. Online video can still be a grassroots thing, but corporate interests have moved in and they're here to stay. This is where the eyeballs—and the money—are. According to a study by market research outfit SMI, roughly $1 billion of advertisers’ dollars moved from TV to digital between October 2014 and June 2015. Another research firm, comScore, reported that 188.6 million Americans watched online videos in February—that's greater than the population of Russia or Japan—and comScore only counts desktop views. And then there's the 900 pound gorilla that is mobile. YouTube claims YouTube on the web and YouTube on mobile devices now reach more 18- to 49-year-olds than any cable network in the US. The average YouTube viewing session on mobile is now more than 40 minutes.

Jukin is helping all sorts of players tap the power of online video, which is especially crucial at a time when publishers are struggling to find a video strategy. BuzzFeed runs one of the biggest video operations of any publisher, and its CEO, Jonah Peretti, once said he saw video as an alignment of four crucial Internet trends. “Digital, video, mobile and social can all be the exact same thing," he recently told Fortune. "[It can be] someone sharing a video they love that they viewed on their mobile device."

Others are trying to do what Jukin Media is doing. ViralHog offers a similar service. Zefr helps networks and brands monitor and monetize videos submitted by fans. Storyful and YouTube recently launched YouTube Newswire, a channel meant to serve as a resource for journalists looking for user-generated videos from around the world.

Country Fried Home Videos

Jon Skogmo, Jukin Media’s founder and CEO, was a researcher for a television show called Country Fried Home Videos. He calls it "kind of like a redneck version of America’s Funniest Home Videos." Day after day, he pored over submissions from viewers and tapes from stock footage warehouses. But by 2005, at the age of 22, he realized he should get online. "I found this little site where video owners themselves were posting family-friendly content," he remembers. "It was called YouTube.”

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Skogmo reached out to a few people who'd posted to the site and asked if they were willing to sell the right to air their content. They agreed, providing him with a rich new source of clips. Then he imagined how many others could use this outlet. "One day, I realized that nobody was actually aggregating this content in the way those old clip houses were doing," Skogmo says.

So in 2009 he quit his job and started Jukin Media. The company began in his small LA apartment, and two years ago, there were still only 22 employees. Now, there are close to 100 in LA, New York, London, Spain, Russia and South America. The company’s investors include Bertelsmann Digital Media Investments and Maker Studios. Just last week, it added Samsung Ventures to the list, which agreed to back Jukin with $2 million. Jukin Media's clips have appeared on Good Morning America, The Today Show, MTV, and Comedy Central, as well as in ads and movies. It has syndication partners like Yahoo. It's also built YouTube channels such as FailArmy and Jukin Video, and it produces viral video compilations in a makeshift studio it has built in-house. When the company sees one of its videos about to hit a coveted 1 million views within 24 hours of acquisition, bells ring on every desk in the office. According to the company, it's on track to make $15 to $20 million in revenue this year.

Finding gold is not easy, though. It requires sifting through a lot of ore. On YouTube alone, people upload 300 hours of videos of cute pets, amazing physical feats, and fantastic wipeouts every minute. Clearly there's no shortage of content. The challenge is getting permission from the people who own it. "You have to have that drive. It’s almost like being a stockbroker in a way,” says Jukin’s director of research, Kyle Peters. “It’s really about putting our best foot forward as a company, so they know what we’re all about. And once they understand what we’re trying to do, and how we’re trying to help them, it’s easy to sell to them.”

'It's on BuzzFeed!'

In early July, Marja Baker, a 33-year-old school bus driver and founder of production company Smiley Productionz, woke up to a barrage of emails from Jukin Media, Viral Hog, and others. They all wanted to know if she'd let them license a video she'd posted in October, in which she pranks her 8-year-old son on his birthday. At first, she ignored them until friends contacted her on Facebook. “They said, 'Hey, I think you’ve been hacked,'" Baker remembers. "I said: 'What are you talking about?' And they told me: 'Some people are trying to contact me about your son’s video.'"

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Eventually, she signed on with Jukin. The views climbed into the millions—and she got her cut. “I had friends calling me saying, ‘Did you know your video was on Marlon Wayans' website?’ Another friend contacted me a day later and said, ‘Hey Marja, it’s on BuzzFeed!’ I don’t even know what that is, but it was on there,” Baker laughs. “And then just last week, I was on Facebook and my friend was like, ‘Ashton Kutcher, he shared your video.’ It was getting kind of funny—I never expected this.”

Baker declined to tell WIRED how much Jukin offered her to license her video, but the company says it will offer anywhere from $100 to about $5,000, depending on the quality, and owners have the choice of selling outright or taking an ongoing revenue split. One person recently pocketed nearly $500 for a crossfit fail video. A guy who was kicked in the head for taking a selfie in front of a speeding train says he's made more than $30,000 from a single video.

The Money Game

Jukin makes its money licensing videos to others. But it also pulls in cash by scouring YouTube and other sites for people who have reposted its videos. Using tools like the YouTube Content ID system—an automated system for identifying pirated copies on the site, including modified videos—workers identify copies of videos Jukin has licensed and issue takedown notices. Any ad revenue made by these copies is then redirected to Jukin.

Though the business model seems to be working, the company faces some hurdles. Most notably, there's no way to monetize video content on Facebook—the one player catching up to the YouTube juggernaut. A little over a year ago, Facebook launched its own video platform, which has gotten huge. Facebook claims it delivers up to 4 billion video views a day. (YouTube doesn’t publicize such stats, but says it’s "in the billions.") According to social media marketing company Socialbakers, Facebook has seen four times as many videos uploaded so far this year than in 2014, while growth on YouTube is flat.

There are other surprising numbers. Last year, YouTube was the dominant video platform on Facebook. That's no longer the case. The social media giant has an incentive to let native video on its platform reach more of its 1.49 billion users, and it does. It uses an autoplay feature, and its algorithm prioritizes videos to make up 30 percent of the News Feed. Native video on Facebook now reaches three times as many people as YouTube videos shared on the platform.

Brands and publishers are reacting accordingly, posting more video straight to Facebook than ever before. Facebook recently told Re/code it will, beginning this fall, give video creators like the NBA, Fox Sports and Funny or Die a share of the revenue from ads sold alongside their videos, marking the first time the company has done revenue sharing with video. But in the meantime, many YouTube creators are complaining about a form of online piracy called “freebooting," where YouTube videos are uploaded to Facebook and widely shared.

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Facebook freebooters don’t profit directly from reposting YouTube videos, though the practice does allow a brand or personality to benefit from the likes and shares generated by that content—thereby building up algorithmic currency, gaming Facebook’s built-in systems to determine how influential a brand or person is. According to a recent presentation at Vidcon by video marketing platform Tubular, video rips constituted 72.5 percent of the top Facebook video content in May. So Jukin Media issues takedown notices when it see copies of its clips floating around on unofficial pages in Facebook.

But for its legitimate customers, Jukin Media still provides an invaluable service. Personalities like Ashton Kutcher and brands like BuzzFeed can capitalize on the virality of Jukin's videos and expand their reach with little effort beyond simply buying content from Jukin's catalog.

Because online video has come so far from its humble YouTube origins a decade ago, you could argue Jukin is, to some degree, selling vapor. After all, it’s not impossible to promote your own videos on the many different platforms. That's ideally how online video was supposed to work on the Internet: It was supposed to be a place to share clips of funny recorded moments freely, and if some publisher or media mogul took interest, they could get in touch with you, the creator, and pay you to use it.

But online video has matured. People are creating videos with specific platforms in mind—a Vine creator will have something very different in mind than someone producing a clip for Vessel. And with those very specific plans come very specific ideas for monetizing the content. Jukin Media doesn't have to exist, but it exists because it can make a business out of a certain type of video. And if you're lucky, maybe it will find yours next.