influencer run businesses are a multi-billion dollar industry but they are usually a terrible investment for everyone including the influencer [Music] Prime energy Ryan Reynolds is best known for his on-screen performances but behind the scenes he is ruthless venture capitalist with two nine-figure exits under his belt before the age of 50. in 2018 Reynolds acquired an unspecified minority stake in aviation Gin from Davos Brands a new york-based distributor that had purchased the brand in 2016 from house Spirits distillery in Portland the stricken Aviation gin make you feel like a superhero I wouldn't know Reynolds used his star power to promote the gin and drive sales from 15 000 cases a year to 96 000 cases a year according to the financial services firm Jeffries and then we had our children and that's when I realized that I love gin the liquor Market is dominated by well-established brands that customers show a high degree of loyalty to the market for alcohol in America has also stagnated with younger consumers choosing to drink less or not at all as a healthy lifestyle choice or a way to save money in a declining and rigid Market a 540 increase in sales over just three years is a clear sign of how effective a dedicated influencer-led marketing campaign can be the liquor giant diagio that already owns Brands like Johnny Walker Smirnoff Bailey's Captain Morgan and their own gym brand tank array recognize the potential and purchase Aviation gin outright in 2020 for 610 million dollars um well I love uh marketing Reynolds followed up his success by purchasing a reported 25 stake in the Telecom startup mint Mobile in 2019. he repeated the process of promoting the company to his audience to increase the customer base and then sold the company to another Legacy industry giant T-Mobile for over one and a quarter billion dollars which with Renault stake should net him over 300 million dollars before taxes in just five years Reynolds was able to leverage his Fame to make north of half a billion dollars on top of the money he made from his day job as an actor I think I think I can now say that I've done pretty well in the business I mean you know Reynolds is just the latest celebrity to make headlines for selling their business to a big company for a ludicrous amount of money George Clooney had his own tequila company that he had also sold to diagio for a billion dollars DrDr had Beats by Dr and Jay-Z had title that he sold to block for 302 million dollars celebrity businesses are nothing new but the rise of the internet influencer is making them a lot more common social media influencers can't monetize their audience's attention as effectively as traditional celebrities that make music movies and TV shows because there's usually no direct cost to access their content when you see a tweet or an Instagram post from one of your favorite celebrities showing off the good life with a cool outfit a new beauty product or a beautiful vacation spot there's a chance the star has a good reason to tell you about it money someone who pays to watch or listen to content is is always going to be more valuable than someone who watches for free YouTubers can run ads through Google AdSense and have dedicated video sponsors but at current ad rates across the platform a Creator would need 5 000 people to view their video to generate as much revenue as just one movie ticket sale YouTube is also the most monetizable of influential platforms Instagram Tick Tock and Facebook do offer ad share programs with creators but the rates are usually a couple of cents per thousand views a tick tocker would need more than a million views at that rate to make the same Revenue as one movie ticket I understand that this isn't a one-to-one comparison movies are feature length not 60 seconds or less and movies have large production and marketing budgets but making content isn't free and independent creators are spending more and more money to stand out in the increasingly competitive Marketplace for attention so influencers have gotten to the business of business the model is simple an influencer will promote their product which gives them a Competitive Edge over other businesses that need to pay for traditional marketing campaigns infos or businesses only work in high margin consumer focused products that typically have large marketing spends Like Liquor fashion cosmetics and fast-moving consumer goods Gatorade spent 59 million dollars on marketing in America in 2021 according to company filings If Logan Paul and KSI can get similar Market recognition without spending that kind of money on traditional advertising they will have a business that is far more profitable and valuable business to business products and products that don't rely on large advertising spends gain much less from being run by an influencer because their business Edge is the free advertising they offer if you study this space for long enough you will realize that there is not much Variety in influence your business is and that's just the first problem out of four so it's time to learn how money Works to find out why influencer businesses are terrible Investments even when they are worth billions of dollars this video was made possible by HubSpot in this video I'm narrowing in on one very specific part of the Creator economy but there's so much more to it and there's a report that I suggest that you check out the business of creators report by HubSpot I've put a link to it in the description for you to download for free this is the report to understand the Creator economy and it Dives deep into the business models of content creators what motivates them to create content how they grow as content creators and how they make money I've learned a lot from this report even as a Creator who has a decently sized audience for example did you know that about 59 of content creators found consulting or coaching to be their most profitable way to make money well I didn't and there's a lot of things that I'm learning from this to improve my own little content business for both how money works and how history works by the way they take data from over 300 marketing and business specific content creators and how they operate their businesses so you know it's packed with real insights if you're a Creator looking to become one or just interested in this video topic I'd highly recommend this free resource there are report was made by HubSpot which is today's sponsor the first problem with influencer businesses is that they are only as good as the influencer themselves companies built around an affiliation with one individual have a single point of failure which makes them a risky investment if the influencer steps back from the business the brand loses its free advertising and its Competitive Edge when Reynolds sold his share in aviation gin to diagio part of the deal was a 10-year earn out for him to remain on as a media spokesperson and maintain the performance of the brand diageo's M A Team knew if they lost Reynolds the brain would become just another premium gin in a highly competitive shrinking Market it can be even worse if the individual decides to go full Kanye and publicly destroy their reputation if a brand is aligned with the image of an individual person it's essential that their image stays desirable Adidas was left with 1.
3 billion dollars worth of unsold Yeezys after their split with West but let's say it doesn't get Kanye level bad even the influencer businesses have a shorter than average life cycle just the success of an influencer's business can make their fans unhappy because nobody likes being advertised too and the cultural stigma of selling out can turn their fans against them this is more common with certain types of celebrities particularly music genres that Pride themselves on their Counter Culture image Ryan Reynolds received substantial fan backlash after his part in selling mint to T-Mobile fans liked the low-cost product but they also liked the alternative to traditional cell carriers which are some of the most hated companies in America alongside the Weinstein Company EA and Monsanto fans were sold on this alternative by someone they trusted and Reynolds used that trust to make 300 million dollars by selling it to the bad guys finally Gonna Fill whatever hole I have inside my soul which possesses me to emphasize external success over quieting an inner child futily craving some sort of illusory acknowledgment from my now deceased father it's not just the fans that lose out here Reynolds himself could struggle to repeat this business plan again after losing favor with his audience the company can also suffer a large Telecom company buying a small Telecom company happens all the time and usually their customers never even know what happened but Reynolds involvement made it big news and people are leaving mint just to make a point Reynolds was only a minority shareholder in both of these companies so he may not have been able to stop their Acquisitions even if he wanted to and that's problem number two with influencer own businesses the influencers don't own them Logan Paul and ksi's Prime energy is majority owned by a distribution company called Congo Brands the professional internet idiots each own 20 of the business and the other 60 is controlled by the distributor bringing a food and beverage product to Market is a very difficult process the brand needs to get FDA approval find a producer and work with distributors in dozens of countries I am sure that MrPaul and KSI are very smart men deeply down but even if they did have the skills to manage such a difficult product rollout it would consume a lot of their time as businessmen their time would be better and more profitably spent screaming into a microphone getting punched in the face and selling nfts to their impressionable young audience using a company with experience to make an upfront investment and handle the operations was a good deal for the duo most other influencer businesses use experienced Distributors to handle their products I will use myself as an example for some self-serving promotion I recently launched my own merch shop to give people a fun way to support the channel instead of finding my own suppliers and setting up a warehouse I just signed a distribution contract with spring they handle the website hosting manufacturing payment processing and distribution for a cut of the profits on whatever I sell so this hoodie made some YouTuber six dollars is the whole truth I knew this was a risk if the supplier drops their quality standards people wouldn't blame them they would blame me if the influencers don't own the company selling what is supposed to be their products they can lose control of their Brand's Direction and end up contractually bound to a product they no longer support or being forced to provide positive PR for decisions they were against in November of 2010 the Kardashian sisters announced that they would be launching a prepaid debit card called the Kardashian card the card was a horrible Financial product it came with numerous fees including 99. 95 sense just to open an account it also came with a monthly fee of 7.
