How does Linus make money? – 2020 Update

by birtanpublished on October 29, 2020

– How does LMG make money too. Lttstore.com. It doesn't take a deep thinker to figure out that we spend a lot of money around here, on staff, our facility, filming sets, production equipment, computers, et cetera, et cetera, et cetera. What's tougher is where it all comes from. I've seen speculation that were involved in everything from IT consulting to commercial film production to back alley deals with industry giants to suppress their competition. All of which is pretty funny to me because I know that at least 2 million of you already got the answer to this question. We only make YouTube videos or at least back then we did.

In fairness to you guys, the last four years has seen a lot of change in the influencer industry as a whole. And our company has also changed. We've nearly tripled in size by our headcount. So I guess I felt like in the interest of maintaining the kind of transparency with our community that y'all expect from us, it was time for an update. And this video is sponsored by Shopify. A lot of what I'm about to tell you is going to be the same as last time. Starting with how we keep money from polluting our editorial content. So we still maintain strict guidelines for our sponsors' behavior,

Even going as far as to issue ultimatums for poor business practices, like for example, making it difficult to cancel recurring payments or even cutting them off outright for poor customer service. And every brand from small indie shops who couldn't pay us money if they wanted to all the way up to large multinationals with quarterly or even annual spending commitments with us gets the same treatment when it comes to product reviews. You cannot buy a positive review at Linus Tech Tips. And in fact, you can't buy a review at all. Our editorial calendar is not for sale. Even if you sponsor a product showcase or some other similar demonstration of your product, which by the way is never

The same as a review on our channel or anyone else's, in accordance with FTC guidelines, we won't give any opinion we can't stand behind. And we would rather scrap the video and leave the money on the table rather than compromise the trust of our audience. We've done it. Why you might ask? Well, mostly because we're just nice people. And we care about both the work that we do and how it affects you. But even if you don't believe that and you'd rather believe that we're an evil corporation that's only out to make money, I've got that covered too. Our most stalwart fans,

The ones that buy merge from lttstore.com, support us on Floatplane where we upload early access and exclusive videos and buy products using the paid links under our videos directly contribute a massive 32% of our annual revenue as a company. And the most mind bending thing about that number is that my most generous estimate puts that group of people at roughly 100,000, less than 1% of our subscribed viewers on the main channel. That makes you, the 1%, a more powerful block than any corporate overlord or sponsor could ever be, which is both really cool and also a little humbling. So if you're taking a sip of water from our water bottle or watching this on Floatplane,

Then from the bottom of my heart and everyone here, thank you. You guys make a way bigger difference to us than you probably realize. Out of that 32%, the smaller portion of affiliate revenue here is mostly Newegg, and Walmart, with Amazon Associates making up the rest. Now Amazon is still a pretty big chunk of change. But since 2016, it's fallen from 16% of our overall income to just 9%. And honestly speaking a big part of the reason for this is that we're actually afraid of calling out the links in our videos for fear that we're going to get kicked out of the program again

For like, doing it wrong, even though it's the way that other people do it. So we just chuck the links down there in the video description and hope that people find them on their own. I mean, how crazy is that? An affiliate program with rules that are so opaque and enforcement that's so random that participants are afraid to promote it. Floatplane is also significantly down compared to Vessel, the Early Access startup company that we used to publish our videos early on. But that's less of a scary bad thing than you might think. Unlike Vessel which as far as we could tell, was basically just flushing venture capitalist money into

The pockets of online creators. Floatplane is a sustainable alternative revenue source for us. It's also a bigger chunk than it looks like because it's almost all content that we would have produced anyway. So there's next to no extra expense to produce it. And unlike physical goods, you don't need to buy it ahead of time and stock it in a warehouse before you can profit off of it. Bringing us perfectly to our biggest gainer overall. Merch has grown a massive five times from 3% all the way to 15%. So if you found yourself wondering, "Ooh why is he always like lttstore.com?"

Well, there's your answer. The big difference maker here was abandoning the turnkey solutions that we tried before, like Teespring, in favor of an approach that allows us to maintain strict control over both our storefront through Shopify. Did I mentioned they're the sponsor this video? Thanks, bros. And product quality. So now we source our own blank shirts. We design our own artwork. And we work with a local printer here in Vancouver to make our own t-shirts, while also maintaining our own relationships with overseas factories for other products like underwear,

Water bottles, cable ties, et cetera. Shopify also has lots of tools that have helped us grow this segment. Like deep integration with third party add-ons, analytics that help us understand where our traffic is coming from and how well we're converting. And much, much more. Of course, we've seen growth in other areas too. In 2016, we were doing about 400 million views a year company wide. This year, we're tracking over a billion views on the Linus Tech Tips channel alone. And at that kind of scale even a fraction of a cent per view adds up to some pretty crazy numbers,

More than I expected, actually. I mean, obviously, as CEO of the company, I look at our books from time to time, but this kind of analytical reporting needs to be generated manually. So I've been going on gut feeling all this time thinking that we've become less dependent on Google compared to four years ago, when actually it's more. Now YouTube takes a lot of flack. And often rightfully so for their management of the platform and its creators. But let's give the team some credit here. Between tools that contribute directly to our bottom line, like memberships and super chats and more indirect ones like YouTube Premium,

Which for those wondering contributes way more to the channels that you watch than ads, our RPM or revenue per thousand views has gone up a shocking 44% even though CPMs, or how much an advertiser paid per thousand views have actually fallen by nearly 20% in that time. Another way we've grown is through direct sales. At 42% of our total revenue in 2020 compared to 51% in 2016, they've technically dropped down a fair bit. But in fairness, those guys have a lot on their plate. And one of the ways that they've stepped up is by greatly diversifying the types of sponsors that we deal with. We've gone from PC hardware vendors. So these are brands whose products

We could conceivably also cover editorially, making up 85% of our sponsor dollars to just 26% so far this year. This has been one of my goals for as long as we've existed as a company because not only does it diversify our revenue streams, which is like business 101, it also reduces the potential for conflicts of interest. The way that we sit right now, our independence as a media outlet can never be compromised by say, you know, some whale corporate sponsor who might try to pressure us into providing favorable coverage by threatening to withhold funding that we need to survive. It cannot happen. Breaking these numbers down a bit.

We obviously do a lot less live event coverage now. Thanks COVID. And fully sponsored videos have actually dropped off as a share of total revenue. But we've pretty much made up for it with those regular mentions that you guys see at the beginning and end of LTT videos. And with mentions on channels that simply didn't exist before, like TechLinked, our thrice weekly tech news roundup and Short Circuit our back to basics unboxing and first impressions channel that features many different hosts from the team here. So let's throw up a summary chart here. Yep, all right.

So there it is. Other is some reimbursements and crap. And then our Minecraft server is also in there for a whopping zero percent. Although I'm actually expecting that to be an area of growth as Jake and the team roll out new features. By the way, you can check that out at the link down below. And then I think everything else on here I have addressed already. So that's the big picture. That's how the sausage is made. Leaving only one thing then the title of this video. Some of you are probably going to be a little annoyed to hear this, but I'm not going to address it directly.

But hold on, hold on. I actually have a few good reasons for that. One, while I could tell you the salary that I take home to actually live on day to day that would be pretty meaningless, given that the company is owned entirely by me and my immediate family. So that would just that would be not lying, but definitely misrepresenting. Reason number two, I could instead cite my annual increase in net worth, except that the problem is it would be really easy for people to misinterpret that. Like Let's say for example, the value of the Linus Tech Tips YouTube channel goes up year over year by some big number, let's say, a million dollars compared to last year.

That makes it sound like I made a million dollars. But it's also a number that I'm completely pulling out of thin air unless I have an actual buyer for the channel, which I don't. And to realize that gain, I would actually have to sell the channel, which I have no intention of doing, making the entire discussion purely academic. Finally, reason number three, it's none of your beeswax. The good news is that I've given you an absolute wealth of data here, pun intended. Including some numbers that can fairly easily be tracked back to known values.

So if you care that much and you've got the requisite background knowledge, you could at least try to make an educated guess at it. I'm not going to confirm or deny any such theorycrafting. See reason number three. But what I will say is that I've seen at least one past attempt that was pretty close and also a lot that were completely out to lunch. Speaking of lunch, you should pack your beverage in an insulated water bottle from lttstore.com powered by Shopify. Big shout out to our Canadian bros over there for sponsoring this video. Not that there was no ulterior motive behind it.

Shopify loves drawing attention to online businesses both small and large that use their platform to grow their business online. And that 500% growth in the last few years, actually almost all of which was in the last two. We are definitely one of those. If you want to create an online storefront that looks great and has tons of features, Shopify has got you covered. Check them out at the link in the video description. And if you want to see an example of a great Shopify store that you might also enjoy you know buying some products from just visit lttstore.com, There's like so many layers of sponsor section in this video. And that is how LMG makes money.

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