What is Niche and Why Did Twitter Pay $50 Million for It?

Breaking News / Computers/Technology / Featured / Featured News / Latest News / February 24, 2015

As far as deals go, Twitter’s purchase of Niche for somewhere between $45 million and $60 million depending on the value of Twitter stock when the deal is consummated, isn’t really notable for its size but is significant nonetheless. The reason this deal is getting attention is that Niche’s primary function is to connect advertisers to the rising stars of the internet, specifically those who create videos that are posted on social media sites such as Vine and Instagram.

Cofounded by Rob Fishman, who had previously managed social media initiatives for Huffington Post, and Darren Lachtman in late 2013, Niche was created to capitalize on the massive numbers of followers of certain individuals on the sites, which translates to appealing markets for advertisers. Another aspect of the attraction of advertisers to Niche’s stable of talent is that users of Vine, Instagram, YouTube, etc. are typically younger and far less accessible through traditional media channels. Niche counts over 100 brands as partners, including the NFL, Gap, BMW, Coca-Cola, American Eagle, and Aetna.

On the creative side, Niche works with over 6,500 people who produce videos ranging across a wide range of topics including fashion, humor, shopping, and video gaming. At the top of the food chain on Vine, Nash Grier has over 11 million followers followed by Andrew Bachelor (King Bach) with 10.7 million followers. For the sake of comparison, Justin Bieber, who appeals to the same pre-teen and teenage girl demographic as Grier, has 3 million followers. According to an article in New York Magazine, Grier recently made Vines lasting 6-seconds for Virgin Mobile and MTV and was paid over $4,100 per second, which compares favorably with the $5,800 that Robert Downey Jr., currently Hollywood’s highest paid actor, was paid on a per second basis for the “Avengers”.

For Twitter, which has seen stagnation in the growth of its user base for the last several quarters, the objective of having an in-house social media talent agency is to develop two income streams; the money paid directly for Niche’s services and increased advertising revenues on its site as well as on apps and other sites. In the company’s most recent earnings report, advertising revenues were up almost 100 percent despite tepid user growth. The purchase of Niche should enhance advertising revenues even further. The two income streams will also enable Twitter to finally monetize its investment in Vine, which it purchased in 2012 for $30 million. Prior to purchasing Niche, Twitter was on the outside looking in when deals were made between a Vine celebrity and a corporate sponsor, but Twitter will now do the deal-making in-house, which could make the purchase of Niche a solid investment.




Gervais Group

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