Irvine-based financial services firm Semaphore is betting on the growing field of YouTube entertainment and its increasing capacity to attract brands to advertise to the younger crowd.
The company recently rolled out Mozaic Branding, an extension of its current services focused on YouTube personalities, or “Tubers,” who produce and distribute content through their channels on the video-sharing website based in San Bruno.
It’s an extension by way of adding branding expertise on top of its existing financial services.
Semaphore, through its various units, including those focused on taxes, insurance, wealth management and investments, has been helping YouTube artists for about five years, primarily providing tax and accounting services.
“[We] effectively become the finance team for the YouTubers as their businesses get larger,” said Chief Executive Michael Bienstock, who founded Semaphore in 2002. “These Tubers are essentially running a small business, but they are creative folks, and they don’t have business expertise … so they lean on us to run the financial operations for them. This means they can focus on the content side, and we help with business strategy. It works well that way.”
Examples of Semaphore’s work include helping Tubers set up as S-Corps or LLC entities. Semaphore’s core Tax & Business Solutions unit, for instance, was a key adviser to YouTube show host Phil DeFranco in the 2013 sale of his DeFranco Creative business to Revision3, a San Francisco-based Internet TV network owned by Discovery Communications LLC. The price of the sale was undisclosed.
Semaphore is now “taking things to the next level” with Mozaic, which focuses on branding and helping Tubers monetize their content, said Fran Solomita, an entertainment industry veteran who joined forces with Bienstock and serves as chief executive of the Mozaic operations.
Maker Studios
Solomita most recently worked as vice president of branded entertainment at Maker Studios Inc., a Culver City-based producer and distributor of online video content. There, he led partnerships between media and consumer brands, such as Quaker and Pepsi.
Maker, in fact, served as an introduction of the YouTube niche to Semaphore, recalled Bienstock, who helped a client create the company in 2009. Maker was recently sold to Walt Disney Co. for $500 million plus milestone payments that could add another $450 million.
Prior to Maker, Solomita spent about 10 years as director of creative services at NBC Universal and also had a 15-year run as a professional stand-up comic.
Solomita said he’s working to leverage his experience in traditional media to help reach new audiences.
“Right now is an opportunistic time,” he said. “There is a shift in consciousness at the brand level. [Traditional ad firms] are doing million-dollar commercials that are slick but don’t resonate anymore with the young audience.
“So it’s like the first time that they’re kind of lost. They’re standing back and saying, ‘This worked before. What’s going on here?’ They’re struggling to understand the new media world, how some kid in his house can pull a bigger audience than a cable channel. So there’s the ‘new world order’ of YouTube and consumer brands merging, and there’s a need for streamlining the process.”
That’s what Mozaic is setting out to do, Bienstock said.
“We have extensive experience working with the new-media talent,” he said. “We have an ability to sit down and help the brands understand the talent better.”
He wouldn’t disclose how many Tuber clients Semaphore has or overall financial details for the company.
“I will say that we most certainly work with the largest concentration of top YouTube talent in the industry,” he said. “We tend to start working with talent when they’re crossing six figures. If your income range crosses $125,000, that’s when you need to start thinking about incorporating for tax purposes.”
Semaphore has 10 employees and one office in Irvine. Mozaic is also headquartered here and has an office in Los Angeles, with Solomita in charge. It is planning to set up an outfit in New York to be led by Peter Bray, cofounder and chief strategy officer. Bray is an advertising industry veteran and most recently was director of digital at Saatchi & Saatchi in New York.
Mozaic is expected to benefit the overall Semaphore family of companies, as it provides room for leverage, Bienstock said.
“We can easily put the proper teams in the room to handle client needs,” he said. “Many YouTube talent need [business owner] policies and commercial auto policies, so we can just walk over the Semaphore Insurance team to get this handled. … When they’re working on taxes, they’ll go to that team. And when they’re working on branded integration, they’ll work on those with Mozaic. …
“The key is that there is a trusted relationship between the Semaphore family of companies and our clients. We expect all existing relationships to cross over to Mozaic Branding, and we have been creating many new relationships based on our mission of connecting talent and brands.”
Semaphore’s client base is balanced between YouTube personalities and other small businesses, Bienstock said, with the “new-media talent” side starting to grow at a faster pace than the traditional business.
‘Great Sensitivity’
He said there’s a “great sensitivity” among Tubers to “selling out” by trying to monetize their content and appearing to be nongenuine.
“But the reality is, if they don’t do a strong job on monetizing their videos and their profiles, they will not be able to stay in business,” he said. “Most fans do get this. It just takes some time for talent to realize that they need to build teams and real companies in order to sustain the content creation that usually starts in their home [or] as a hobby. Once they realize how important this is to their longevity, they shift their focus to doing the right kind of deals, which is where we come in.”
