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What Kylie Jenner's lies tell us about the influencer economy
Forbes published a pretty shocking article this week on a subject I typically wouldn’t care anything about: Kylie Jenner.
So why am I writing about it? Because this particular Kylie Jenner news intersects with a subject I cover closely: monetization of an online brand.
Some might remember when, last year, Jenner was officially crowned by Forbes as a billionaire, with the magazine attributing most of her wealth to a cosmetics company she launched in 2015. The news was extraordinary because Jenner had seemingly leveraged her massive celebrity to build a brand worth much more than anything created by her other famous family members. Even those who typically turned their noses up at Keeping Up With the Kardashians had to admire Jenner for her entrepreneurial hustle.
Only it turns out that her billionaire status was most likely built on a web of lies. This week’s Forbes article, based on analysis of public records, reveals that Jenner probably faked tax returns and other documents to artificially inflate her wealth. The magazine’s new estimate puts her wealth somewhere south of a billion dollars.
While many were fascinated by the story because of the celebrity scandal, I found it interesting because of what it says about the limited appeal of influencer merchandise and why companies built on the back of the personal brand of a single individual will always struggle to scale.
Kylie Jenner, with her 200 million+ followers on social media, sits within the top .01% of the influencer world, but her approach of building a merchandise company off the back of her personal brand has actually been practiced by plenty of online celebrities, from YouTube stars to Instagram influencers.
In some cases, the influencer merely slaps their brand logo on a t-shirt or backpack. The more ambitious players in this space will take it a step further and design their own fashion line or beauty product, usually with some kind of outsourced help. These products are typically sold in online stores, though sometimes, when the influencer’s reach is large enough, they’ll form a partnership with traditional retail outlets.
It’s easy to see why influencers are attracted to this business model. Sure, it diversifies their revenue sources, but it also can allow them to capture more of their own longterm value. When all of your monetization comes from ads and sponsorships, then you’re essentially outsourcing your audience to brands for which you have no ownership. Selling your own merch allows you to take a significant cut of every sale you drive.
In some cases, this kind of business model can be quite successful, generating a six or seven figure income, depending on the size of the influencer’s audience. Not only do influencers, by their very nature, have tremendous marketing power, but their most rabid fans will often buy the products as a form of support. We saw this when the YouTuber Shane Dawson, who has over 20 million subscribers, sold millions of dollars in makeup despite the fact his channel doesn’t focus on beauty care.
Most are likely satisfied with this level of success, but there are some, like Jenner, who convince themselves they’re the new Steve Jobs and that they can build entire business empires that will eventually rival some of the largest corporations in the world.
That’s certainly the case of Dan Bilzerian, an Instagram celebrity who blew through $35.4 million last year trying to grow his own product line of party supplies. Despite only generating $7 million in sales during that same time period, he’s claimed to Bloomberg that his company is valued at $52 million.
Why do these influencer-powered businesses usually hit a ceiling? For one, they’re not exactly inventing groundbreaking new products. Typically they’re taking something that’s already commonly available in stores and modifying it slightly. With Jenner, she’s selling makeup, which is a product category with thousands of competitors and limited ways to differentiate your product from others. One of Bilzerian’s main products is bottled water. These people aren’t exactly inventing the next iPhone.
What’s more, these products rarely appeal to consumers outside of the influencer’s core fanbase. If you’re one of Logan Paul’s 21 million YouTube subscribers, you’ve likely been exposed to his Maverick brand of clothing and other merch. If you’re not a Paul fan, you probably don’t even know what Maverick is.
And with these brands so dependent on a single online celebrity, they’re particularly vulnerable when that influencer attracts controversy, which is a common occurrence within the influencer space. Major corporations like Walmart and Amazon have weathered hundreds of scandals because their brands aren’t driven by individual employees. They have massive marketing budgets that expose new customers to their sales funnels, and they rely on the institutional knowledge of their thousands of employees to drive product development and secure production/distribution advantages.
None of this is to diminish what folks like Jenner and other influencers have accomplished. Building a business that generates tens of millions of dollars in annual revenue is something that 99% of entrepreneurs can only dream of, and doing so required a fair amount of business savvy on Jenner’s part. But with easily commoditized products and limited reach, there’s only so much you can build on top of a celebrity’s personal brand, even when that celebrity happens to be a Kardashian sister.
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A cool article about how music labels will hire TikTok influencers to help their new songs go viral on the app [link]
How a DIY YouTuber landed her own show on HBO Max. [link]
A cool case study in how a personal finance YouTuber built a following and then diversified his revenue beyond his YouTube channel. [link]
"Of the 602 job vacancies at TikTok, nearly 10% (55 of the roles) are focused on talent management, per LinkedIn" [link]
Anybody else surprised to learn that Microsoft had over 800 people working on its editorial news team? That's a larger headcount than most major newspapers. [link]
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Image via Wikipedia Commons