Alloy Digital, Owner of YouTube's Top Channel, Raises $30M
Alloy Digital, which operates the most subscribed channel on YouTube, secured a $30 million Series A investment from ABS Capital Partners, the company announced on Thursday.
The new money arrives after two years in which Alloy Digital has aggressively acquired successful online video companies, including Smosh, Generate, B5 Media, Clevver Media and The Escapist.
Of all those acquisitions, Smosh stands out because the company operates the most subscribed channel on YouTube. The channel now has more than 8 million subscribers, giving Alloy Digital a network of channels with more than 12 million subscribers.
Yet Smosh also stands as a model for how nascent online video companies, possessors of massive audience but uncertain revenue, can monetize moving forward.
Anthony Padlla founded Smosh as its own website, and he and Ian Hecox have cultivated a base for Smosh outside of Google's video giant. Many of YouTube's most successful creators, such as Freddie Wong and Annoying Orange, have done the same -- whether through proprietary websites, merchandising or television.
"Our strategy is similar to how traditional media companies broadly approach content and intellectual property," Alloy Digital CEO Matt Diamond told TheWrap "We have a hit show and the monetization and marketing engine quickly gets around that with merchandise, international syndication and domestic syndication."
Another key to YouTube is cross-promoting your own channels, and Smosh sister channel "Smosh Games" now boasts 1.6 million subscribers while "Shupt Up! Cartoons" has more than 800,000.
Clevver Media, which Alloy Digital acquired in June 2012, also represents a major source of views thanks to channels like ClevverTV and ClevverMovies.
"It is at the forefront of the shift in content consumption to digital media," ABS Capital general parter Deric Emry said of Alloy in a statement. "Alloy Digital is perfectly positioned as major brands increasingly direct advertising dollars online, following a coveted demographic that has embraced multi-platform, digital media entertainment consumption."
No valuation was given with ABS Capital's investment, but recent, similarly sized investments may provide some guidance. When Time Warner invested $36 million in Maker Studios, it valued the company at more than $200 million. When Google poured $35 million into Machinima, it valued the company at around $190, million according to AllThingsD.
Diamond said the money would enable the company to improve the technological side of its produces and add "complementary, relevant properties and talent" appealing to its core demographic of consumers between the ages of 12 and 34. That could include more acquisitions to bolster its existing properties.
"What we want to do is continue to invest in intellectual property," Diamond told TheWrap. "The consumer has continued to embrace and focus their attention on multiple mediums, particularly digital. Traditional media has not focused on the younger demo anymore and that opens the door for a company like us to invest in and deliver content directly to that demo."