How YouTube's 'Oprah effect' boosted a skincare startup's sales by 700%

Oprah

“Mom! Grace Helbig just posted about Drunk Elephant on YouTube! That’s huge! Do you even understand how crazy that is?”

Any teenage girl or YouTube dabbler will tell you that comedian Grace Helbig gushing about anything at all to her 3 million YouTube followers is a big deal. So when she heard from her 15-year-old daughter that her startup got a pretty glorious shout-out from Helbig in her June Favorites video, Tiffany Masterson was understandably elated.

“I am constantly surprised and appreciative — I pinch myself every day — because you hope that this will happen and when things work out it’s fun to see your company grow and flourish,” says Masterson, who started her skincare company Drunk Elephant two years ago.

Helbig, known for her tongue-in-cheek delivery, says in the video, “This company is called Drunk Elephant. That is the only reason I bought it. Because of the name…It makes me feel like my skin is healthier, a little tighter, feels a little cleaner.”

YouTube has become a colossal platform for advertisers, sometimes for free and often not. People build their following and brands on YouTube, often using the site as a launching pad for offline careers (YouTuber Michelle Phan became Lancome’s first video makeup artist, started a makeup line with L’Oreal and a beauty sampling subscription service Ipsy). Drunk Elephant has not paid anyone or any publication, YouTubers included, for advertising.

“I’m a shy person and I think I’ve unknowingly taken that attitude with the brand. I’m just not comfortable pushing my company on others. There was definitely an innocence, a naivete about the way we did things,” Masterson says. “We didn’t have specific plans to connect with other influencers, but these connections happened quite organically.”

But for now, Drunk Elephant is enjoying the wave of free advertisements; the company will experience 700% growth in the next year, according to Masterson. “YouTube is the new Oprah effect. If these girls like your brand, then the world likes your brand.”

But Masterson says it never dawned on her to proactively turn to YouTube (GOOGL) to boost sales. A stay-at-home mom-turned-entrepreneur, Masterson wasn’t remotely aware of the material impact that a single YouTube video could have on her company. That is until last June, when beauty blogger Kathleen Lights (who has 2.4 million followers) posted a video about her skin-care regimen that has garnered 821,000 views. In the video, Lights says she found out about the brand through a Sephora salesperson who mentioned it to her when she was in search of a serum.

Though Masterson didn’t pay a cent for the shout-out, Lights’ two-minute homage paid dividends, says Emily Parr, founder of Poke PR, the agency that represents Drunk Elephant.

There was so much interest that Drunk Elephant couldn’t keep up with demand. “I saw Kathleen’s impressive number of followers, but it wasn’t until a month later that I fully realized the insane effect of that single video on sales. That serum shot up to No. 1 in my line. YouTube has a very loud impact.”

Does it pay to play?

While Drunk Elephant hasn’t felt obliged to pay influencers, many brands are “paying to play,” offering thousands of dollars in exchange for a 30-second mention from a YouTube influencer. If the aim is to reach the coveted eyeballs of malleable teens and 20-somethings, it would be utterly foolish to ignore digital platforms.

And Facebook (FB) is trying to capitalize on this digital media landscape where extraordinarily ordinary individuals find compelling ways to engage with a young demographic.

The social media giant is paying about 140 media companies and established celebrities like Olympic swimmer Michael Phelps and celebrity chef Gordon Ramsay to create Facebook Live videos. But in addition to these household names, the company has reached out to internet influencers with established presences on YouTube, Vine, Instagram and Snapchat, according to a document reviewed by The Wall Street Journal.

This shouldn’t come as a surprise, given the level of fangirling on these digital platforms.

“When someone has two or three million followers, they really mean business. People worship these YouTubers. They love them. It’s like the Kim Kardashian effect. Whatever they say is like the gospel,” says Masterson.

These influencers congregated at BeautyCon in Los Angeles earlier this month. The conference is the mecca for up-and-coming digital stars, and it’s where partnerships are forged and deals are made between digital stars and beauty brands.

Glow Recipe is a site that discovers and curates Korean beauty products, bringing them into the American marketplace. Co-founder and co-CEO Christine Chang attended BeautyCon, where she says she was inundated with young influencers looking to clinch partnerships with hot young brands. Some YouTubers were asking to get paid $70,000 for a quick mention in a longer video.

“We never pay for someone to review our products,” Chang says. She emphasizes that influencers get a lot by partnering with Glow Recipe, as they have the opportunity to be at the forefront of beauty innovations, especially in such an emerging market like K-beauty.

“YouTubers like joankeem recently reviewed our J. One Jelly Pack product. We saw a lot of engagement on our own blog posts and product page afterwards,” says Chang.

“These stars command audiences and presences that are akin to a magazine. The question is whether they are being really upfront with their followers if something is sponsored or not,” she says. “YouTube was supposed to be the new authentic chanel but the lines get blurred when brands are paying you to talk about them.”

The optimal scenario would be for top influencers, unsolicited, to discover and explore new products on their own.

When Masterson was asked whether she would ever pay influencers to use her products, she says, “It’s not my style, though I never want to say never. Whatever is going on is working well. If things change dramatically and we see that we’re being left out and falling behind, I’ll keep an open, flexible mind.”