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How Influencer Businesses Actually (Don’t) Work

How Influencer Businesses Actually (Don't) Work

How Influencer Businesses Actually (Don’t) Work



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Edited By: Andrew Gonzales

Music Courtesy of: Epidemic Sound

Select Footage Courtesy of: Getty Images

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#business #howmoneyworks
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Influencer run businesses are a multi-billion-dollar industry, but they are usually a terrible investment for everyone including the influencer. Ryan Reynolds is best known for his on-screen performances but behind the scenes he is a 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. 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 Jefferies.

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 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 Diageo that already owns brands like Johnnie Walker, Smirnoff, Baileys, Captain Morgan and their own Gin brand Tanqueray recognized the potential and purchased aviation gin outright in 2020 for six hundred and ten million dollars. Reynolds followed up his success by purchasing a reported 25% stake in telecom start up 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 one point three five BILLION dollars which with Reynolds stake should net him over three hundred 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.

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 also sold to Diageo for a billion dollars. Dr Dre had beats and Jay-Z had tidal that he sold to block for three hundred and two 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 audiences attention as effectively as traditional celebrities that make music’s, movies and tv shows because there is usually no direct cost to access their content. Someone who pays to watch or listen to content is always going to be more valuable than someone who watches for free. YouTubers can run ads through googles AdSense and have dedicated video sponsors but at current ad rates across the platform a creator would need five THOUSAND people to view their video to generate as much revenue as just ONE movie ticket sale. So, influencers have got into 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. Influencer 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 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 influencer businesses 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.

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Comments (37)

  • How Money Works Reply

    Download the Business of Creators Report: https://clickhubspot.com/5gw

    November 23, 2023 at 11:14 am
  • Florida Gaming Reply

    8:18🤪

    November 23, 2023 at 11:14 am
  • Nick G Reply

    Musician here ,you are absolutely right about beats headphones.Tried them once.I ,impressed for about 10 seconds and then quickly realised the"quality" i was hearing was an extended bass+ increased treble response.Because many headphones sound so bad the inexperienced buyer thinks they are good quality!

    November 23, 2023 at 11:14 am
  • Giga_chad Reply

    I’m about to actually switch to mint mobile with my dad, I’m a little skeptical because of the fact that it’s from a celebrity/famous person and usually don’t trust those fuck heads. But my dads gonna pay for it so hey can’t say no to that

    November 23, 2023 at 11:14 am
  • Don Wald Reply

    TLDW: be hot woman = rich lol.

    November 23, 2023 at 11:14 am
  • BEARWY Reply

    Is it bad if i don't know any of these people?

    November 23, 2023 at 11:14 am
  • Stifled Voice Reply

    A simple guide to happiness is to want nothing and need only the minimum in this world.

    November 23, 2023 at 11:14 am
  • Erik Flædt Reply

    The other problem with context creators is that 95% of them are insufferable morons whose only talent is getting attention.

    November 23, 2023 at 11:14 am
  • NoobsUnleashed Reply

    5:00 "let's see why influencer businesss are bad" -> jumps to a sponsored segment
    ironic, huh?

    November 23, 2023 at 11:14 am
  • Night Ridah Reply

    All this shows is average American is stupid and can be convinced to buy anything

    November 23, 2023 at 11:14 am
  • Grendy Reply

    That’s why I don’t understand how Kylie Jenner is a billionaire, she couldn’t have created that company by herself

    November 23, 2023 at 11:14 am
  • Jack Van Kirk Reply

    I still don't understand why Logan and Jake Paul are e-celebs.

    November 23, 2023 at 11:14 am
  • Morrasod Reply

    Prime actually tastes solid, it’s just not the most effective brand

    November 23, 2023 at 11:14 am
  • unkown 34X Reply

    The only product from an influencer I bought was from Linus Tech tips. I don't consider them influencers, coz they have knowledge of what they talk. (Most of the time) but! Yeah I bought a jacket from them, no because! It was from them, it's because it has the features I was looking for, and the tools I was looking for too. Also because I was curious. It was a very good investment to me! 🙂 But… Kardashians credit card.. hahahaha I died man, I also hate logan Paul so you know the answer. When you do your products right, and you are not into a lot! Of controversy, it can be very good

    November 23, 2023 at 11:14 am
  • Essai Sai Reply

    Thumbs down just for Ryan Reynolds’s face. Those Mint commercials. My god.

    November 23, 2023 at 11:14 am
  • Ellen Gill Reply

    When they sign up or purchase these influencer-owned products, consumers think they're doing business with the influencer. Then, the influencer sells pretty quickly after winning these customers, usually to some big corporate player in the particular industry. Seems fraudy-y to me.

    November 23, 2023 at 11:14 am
  • itsaok _TV Reply

    Prime signed with Barcelona top 3 biggest club in the world what you saying about that

    November 23, 2023 at 11:14 am
  • Synthetic_Future Reply

    I have this crazy thing where I buy food and drinks because they taste good no matter the brand of famous person behind it 😶 Same with electronics. I don't care about who promotes it. If it is good I buy it. I've never understood how these celebs get away with selling shit products 😅

    November 23, 2023 at 11:14 am
  • ToastyTasty Pancakes Reply

    Mint mobile was running on T-Mobiles network to begin with, so T-Mobile was getting our money anyways.

    November 23, 2023 at 11:14 am
  • Hamilton Gilpin Crypto Reply

    You've framed this like it isn't a viable strategy. The only issue for a brand is when the influencer leaves. The solution is to have an in-house influencer agency if your company is big enough. The same way football clubs train young talent and gain loyalty because of that. KOL led businesses massively outperform other businesses

    November 23, 2023 at 11:14 am
  • KAZPA APZAK Reply

    3:40 did you just compare a multi million dollar feature film to a YouTube video.

    November 23, 2023 at 11:14 am
  • Magical Streaming Reply

    And now i am sleepy head, boring presentation

    November 23, 2023 at 11:14 am
  • GameExplorer0115 Reply

    Mr. Beasts chocolate bars are really good though. Ordinarily I don't buy celebrity products.

    November 23, 2023 at 11:14 am
  • Lucario _style Reply

    Hey, @HowMoneyWorks. Seems like you left out the end there

    November 23, 2023 at 11:14 am
  • John B Reply

    Im more of the word of mouth kind of person. Most things i get i hear good things about from people in real life. And things that i cant do that with, a lot of reviews. Thats thanks to cyberpunk 2077.

    November 23, 2023 at 11:14 am
  • Alex Price Reply

    Kanye is a terrible example. Opinions on his reputation aside, he has continued to succeed in business. Adidas had all that merch because they removed the “yeezy” branding from their remaining inventory and people refused to buy it that way. They had to restructure the deal with him. His rep didn’t tank the sales, adidas’ underestimation tanked them.

    November 23, 2023 at 11:14 am
  • Silly Billy Sound Farm Reply

    I just figured out why your channel is so successful. You milk the hook. You always use some kind of background exposition as your hook, and then eventually you say something like, "we're going to think about something something", And that's the beginning of the actual content of the video. But that hook is so informative, fast paced, and long, that by the time you state your thesis I'm 45% of the way through the video I might as well watch the rest of it 😂… You get me every time man

    November 23, 2023 at 11:14 am
  • Murdrad Reply

    "oops. All cold open"

    November 23, 2023 at 11:14 am
  • Borselino Thadchack Reply

    you clipped the ending…too soon.

    November 23, 2023 at 11:14 am
  • Duelist-21 Reply

    Influencer Influence on my is already dead, so I dont have a problem with them.

    November 23, 2023 at 11:14 am
  • 99BullDog Reply

    Them "woke" clowns in these comments talking about "the less i know about a CEO, the more i trust the product" are the same ones that either they or family&friends are driving a Tesla, ordering stuffs from Amazon or dying to buy Louis Vuitton & Hennessy🤡🤡🤣🤣

    Human Hypocrisy is at an all time high in 2023

    November 23, 2023 at 11:14 am
  • TurdFurgeson571 Reply

    I find it so funny that someone will unironically call themselves an "influencer" while knowing full well they are doing their very best to emulate another person's work.

    November 23, 2023 at 11:14 am
  • Irok 121 Reply

    3:50 nice view count phone

    November 23, 2023 at 11:14 am
  • Madicyn Marinaro Reply

    Social media has a huge problem & I generally don’t see many talking about it. Obviously the key to social media is users. & unique ones at that. But at this point. So many users have been removed, shadowbanned, demoted, age restricted etc. bc there’s been a push the last few yrs on social media to basically gentrify it. But now the cookie cutter posters on social media all produce the same kind of content. Mainstream approved ad friendly content. Over & over again. It’s really destroyed authenticity on social media & also creativity. So it’s more interesting now to stay OFF social media. Which means these sponsorship friendly influencers have no1 to buy from them. Social media has become just an echo chamber of what it once was. & honestly it’s sad. But when u constantly attack smaller accts in favor of the more homogeneous easily marketable ones, this is what happens.

    November 23, 2023 at 11:14 am
  • Leroy Hopkins Reply

    Very informal!! Feeling good about listening to what's going on in the real world+ future!

    November 23, 2023 at 11:14 am
  • jasper pike Reply

    I've never bought because of an infuencer so called

    November 23, 2023 at 11:14 am
  • Hunter Herr Reply

    The basic problem here is celebrity worship.

    I have never understood it. I live in Korea, and celebrity worship here is through the roof. Daily, I walk by an advertisement like "Jenny's Pick", selling some brand of chips. If it didn't work, they wouldn't do it, but I still don't get why it works.

    Jenny is a KPop megastar. She's not eating chips. She's not eating much of anything, this is a known problem with that industry. Even if she was, she almost certainly didn't pick anything. Her agency did, and she was photographed with empty hands which a selected product was later photoshopped into.

    But let's say I'm wrong about that. Is Jenny some sort of chip expert? Did she manufacture it? How does her preference for junk food reflect on the quality of that food at all? Is it supposed to make the consumer more like her? What on earth does this particular star have to do with this particular product at all, and why should anyone care about their opinion of the product?

    November 23, 2023 at 11:14 am

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