How does Linus make money? – 2020 Update

– How does LMG make money too. 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, 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" 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 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, There's like so many
layers of sponsor section in this video. And that is how LMG makes money..

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