How Does Funny or Die Make Money?

It appears President Obama believes laughter really is the best medicine.

The administration's HealthCare.gov got a big shot in the arm last week after President Obama appeared on Funny Or Die's Between Two Ferns program to plug the heath care website.

It seems to have worked: Roughly 24 hours after a video was posted Tuesday morning, more than 13 million people watched the interview and some 54,000 of them heeded the president's advice and checked out the government-run insurance exchange HealthCare.gov, making the comedy site the highest source of individual traffic referrals to the federal health insurance marketplace, a White House official said.

It's easy to see why the president would go to the website to tout the health care program. Funny or Die (FoD) gets 20 million unique visitors a month and has 7.8 million followers on Twitter and 5.5 million likes on Facebook. White House Press Secretary Jim Carney told reporters:

The President's interview with Zach Galifianakis on Between Two Ferns was designed to reach Americans where they live. And they watch the show in huge numbers -- I think the average video gets something like 6 million views. I'm convinced we're going to break that average.

It doesn't hurt to have Will Ferrell on staff

The comedy site was launched in April 2007 by venture capital firm Sequoia Capital and a Hollywood production company whose principals include Will Ferrell, Chris Henchy, and Adam McKay.

Sequoia funded FoD with an $18 million Series A and $15 million Series B rounds. The site hasn't raised venture funding since 2008, but other investors include Creative Artists Agency and Time Warner  (NYSE: TWX  ) subsidiaries HBO and Turner Broadcasting.

The privately held site is profitable, but principles won't say just how profitable. According to Wall Street Journal sources, the website's revenue grew 40% to 50% in each of the past three years, to a projected $40 million in 2012, with profit expected to be in the single-digit millions.

That makes FoD quite the outlier. Being a profitable entertainment company on the Web has been an elusive trophy for many. For example, Walt Disney's (NYSE: DIS  ) interactive unit lost money for 12 consecutive quarters and recently laid off 700 employees, about a quarter of its workforce.

So what does FoD do differently?

The winning formula, according to CEO Dick Glover, is: keep the cost of content and marketing low, keep the quality high.

On the content and marketing side, FoD keeps costs down by producing everything produced in-house. The small team of writers, directors, producers, and editors churns out upwards of 20 to 25 videos a month. 

And while other online video companies settle for serving up content on YouTube, depending on the Google-owned giant for traffic, promotion, even monetization, FoD is different, relying primarily on direct traffic to its site. This allows the site to retain all of its advertising revenues.

On the quality side: The site has undeniable star power. Celebrities line up to star in video goofs such as "Justin Bieber After the Dentist," "Undercover Karaoke with Jewel," and "Lindsay Lohan's eHarmony Profile." But the celebrities are paid little or nothing.

The ace up the FoD sleeve, however, is branded entertainment. Companies such as Under Armour (NYSE: UA  ) , Starbucks (NASDAQ: SBUX  ) , and Subaru, are now coming to Funny or Die to pitch their products. The writers create branded entertainment, generating a new revenue stream for the site and an entire new genre for marketers.

Insiders told The Hollywood Reporter that branded campaigns can run from $100,000 to $900,000, depending on how many videos are created and other criteria. Those fees include salaries for staff and payment to the stars.

So far, branded entertainment has been a successful strategy for the website. FoD's direct traffic has certainly made the site alluring to stars looking to let their hair down and advertisers who want to amp up their cool ratio. It remains to be seen whether other video websites will be able to replicate that success. And whether they'll be able to snag President Obama for an interview.

In case Zach Galifianakis didn't answer all your questions...

Obamacare seems complex, but it doesn't have to be. In only minutes, you can learn the critical facts you need to know in a special free report called "Everything You Need to Know About Obamacare." This FREE guide contains the key information and money-making advice that every American must know. Please click here to access your free copy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2877142, ~/Articles/ArticleHandler.aspx, 7/30/2014 4:35:13 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement