Everyone knows Web video is basically a money-pit. Then again, most people aren’t trying to make money on Web video: They’re tinkering around, primarily for their own amusement.
But what if you tried really, really hard to turn a profit. Could you do it? Or at least break even? Three guys from Austin, Texas, are trying: Last fall they quit their day jobs as teachers to turn a hobby, Dadlabs, into full-time jobs.
The three guys produce four 5-minute parenting-related shows a week: “The Lab,” “The Lounge,” “Daditude,” and “Gear Daddy.” They have a nifty Web site, their own studio, and a distribution and marketing deal with New York-based For Your Imagination, which handles distribution, ad sales, merchandising and licensing through a revenue-share agreement
How do the economics work? They don’t, yet. But if the guys squint, they can sort of see a light at the end of the tunnel.
After seven months in business, the guys have built up an audience of about 100,000 views a week via their own Web site, YouTube, Yahoo, blip.tv, etc. The dads keep 100% of all ads/sponsorships they sell on their own, such as a recent deal with Baby Bjorn, and get 50% of ads sold by FYI.
Right now, they’re grossing something like $5,000 a week in advertising and sponsorships ($50 CPM), and another $2,000 a month from merchandise sales, for a total of $22,000 a month. Half of Dadlabs’ ad revenue come from products the dads endorse on the shows. In May, the guys took in $15,000, net of FYI’s cut, and spent $25,000 to run the business. They’re financing the deficit with funding from friends and family.
Where does the money go? Most (70%) went to salaries: three full-time employees (the Dads), two “almost full-time” shooting/production people, and one part-time writer. They rent a warehouse on the outskirts of Austin (20%), and spend some money (10%) on props and other equipment. The guys are about to take another $300,000 from a local investor
Assuming they can increase their audience 16% month-to-month, the dads think they’ll have a profitable business in 6 to 9 months. In the meantime, the guys aren’t starving: They’re budgeting $210,000 a year to pay themselves and three other employees, and the latter three aren’t full-time. And you can stretch a dollar reasonably far in Austin. But even if all goes to plan, nobody is getting rich here, and everyone is fully aware the whole thing could fold just as easily fold in a month or two as succeed.
“We’ve never been closer to success, or in a more precarious situation in terms of the finances of the company,” says Dadlabs chief creative officer Clay Nichols. “There is definitely the sense that we have to keep holding on. It means a month-to-month kind of mindset.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.