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How Michelle Phan turned a YouTube channel into a multi-million dollar empire

Beauty is a big business, and one YouTuber-turned-entrepreneur is cashing in big time.

Michelle Phan shared how she took her popular YouTube makeup tutorial channel that has more than 8.6 million subscribers and turned it into a profitable business.

Her company, Ipsy, is a makeup subscription company with 1.5 million paid annual subscribers and counting. It is reportedly worth $500 million.

YouTube sensation, entrepreneur and founder of Ipsy, Michelle Phan speaks at CNBC's Iconic Conference in Denver on June 15, 2016.
David A. Grogan | CNBC
YouTube sensation, entrepreneur and founder of Ipsy, Michelle Phan speaks at CNBC's Iconic Conference in Denver on June 15, 2016.

So how does she keep up the momentum?

"I do so by really just building my influence and creating content, generating authentic content that speaks directly to the audience," Phan said.

Finding an engaged audience was crucial to Phan's success.

"A lot of it has to do with really not just me building the influence, but having a true authentic community that cares about developing the relationship with Ipsy," she said.

Like other game changers, Phan solved a problem her audience had.

"They wanted a better beauty discovery experience," Phan said. "And this helped to inspire the conception of Ipsy."

For entrepreneurs and other companies, Phan said that being able to adapt to the changing landscape of the internet is crucial.

"Things can change so fast," she said.