Michelle Phan knows a thing or two about making a fun and profitable YouTube channel--and turning viral hits into a long-term business strategy. The 29-year-old entrepreneur is among the highest-grossing celebrities on YouTube, pulling in roughly $3 million in ad revenue through the social network, where she posts makeup tutorials to her more than eight million viewers.

Phan's channel has amassed over one billion views to date. She's also parlayed her social media fame into a beauty subscription service, called Ipsy. 

Felix Kjellberg, another star vlogger, is the highest-paid on YouTube, according to Forbes' most recent estimate. He goes by the gaming alias 'PewDiePie.' Last year, Kjellberg brought in a reported $15 million through his channel, where he entertains his 43 million subscribers by playing video games and inserting lurid commentary. Kjellberg's main chunk of revenues come from sponsored advertisements, as well as a handful of game endorsements. 

A YouTube channel can be an extremely lucrative business. Creators can also make money by inking endorsements with brands, as Phan did with Lancome, in 2013, when she launched her own collection of makeup through the beauty and cosmetics company.

Still, captivating and growing a massive audience for a sustained period of time is much harder than it looks. And, while the $3 million that Phan makes is certainly nothing to sniff at, consider that it boils down to just about 40 cents per viewer. Phan, who is now lauded as first-generation YouTube royalty, started out making just 5 cents a day through the platform, and was initially rejected when she applied for the partners program back in 2008.

If you're planning to create profitable YouTube channel that people actually want to watch, here are five essential tips to keep in mind:

1. Know your audience and stay on top of trends.

When starting a YouTube brand, it's important to know your market. This means consistently interacting with your viewers--in the comments section, for instance. Phan says she sometimes wakes up as early as 5:30 am to read (and subsequently respond to) comments on her personal YouTube channel.

"We know how unpredictable it can be whenever you're creating content," she said in an interview with Inc. "If you know your audience, you know exactly what they're going to watch."

That requires staying on top of trends and the broader social media zeitgeist. Phan urges her network of more than 10,000 vloggers to push out content on new platforms, including YouNow, Meerkat and Periscope, in conversation with their pre-existing YouTube channels.

"People always want new things, and it's my job to find new outlets and new ideas for everyone and share them," she said.

Kjellberg creates familiarity with his audience by referring to them as his "BroArmy." He insists that his viewers are his equals: "I am just like you, not above you in any way," he explained of the relationship in an interview with Icon, a Swedish magazine, in 2014. "I tailor the content according to the response I receive. It may shift from day to day. But I think it's one of the reasons why I've succeeded."

2. Put in (a lot) of time.

In the early days, both Phan and Kjellberg quit their pre-existing commitments to focus their efforts on YouTube. Phan left her job as a waitress in 2008 so she could spend more time filming in her college dorm room. 

Kjellberg, who was studying engineering at the esteemed Chalmers University of Technology in Gothenberg, dropped out of school and began working at a hot dog stand. "I was the happiest I was at that time, because I was finally doing what I wanted to do, and the fact that I could make videos was so much more important to me," he recalled in a recent video.

Phan estimates that a simple three-minute clip can take as many as four to five days to shoot, splice, and refine. 

3. Keep the marketing language to a minimum.

Content creators are most effective when they're being authentic, or when their videos aren't read as advertising.

"The reason why people love the Internet so much... is that they feel like they're learning something, and no one is really trying to sell them anything," Phan said.

This is a difficult balance to strike, insofar as many creators have inked endorsements with brands, and may be selling product indirectly. It's important that YouTube vloggers only work with companies they feel especially passionate about, she says. 

It's also important to choose your partners carefully. Make sure you both share the overarching vision for the channel and brand. Kjellberg keeps things honest by refusing to hire an editor to help him churn out more videos, adding the point that his fans don't care about how "high-quality" his videos are.

"The fact that people know it's just me making the videos -- with no crew -- has proven to be a winning concept," he said. "The thing that has made YouTube so successful is that you can relate to the people you're watching to a much higher degree than to the people you see on TV."

4. Experiment within your theme.

Although Phan sticks to makeup tutorials, she learned to experiment early and often, teaching viewers how to apply a facemask made of kitty litter, for instance, or to achieve the classic "Lady Gaga" look. "It [video production] is for pure experimentation or creativity," Phan says.

Kjellberg generally posts videos of himself playing video games, and screaming at the monitor, but sometimes he'll post clips in conversation with his girlfriend, Marzia Bisognin, who goes by the alias CutiePieMarzia.

5. Take on long-term partnerships, rather than short-term sponsorships.

Be wary of taking on sponsorships, and make sure what you sell is uniquely in line with your brand. "Instead of just thinking about sponsorship, where it's so short term, think about partnerships," said Phan. 

A longer-term deal with a trusted retailer may ultimately amount to more dollars (and more viewers), than an ad-hoc deal. 

Published on: May 4, 2016