How Money Works
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Edited By: Andrew Gonzales
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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.
Nice
Stop having kids folks! Spare them all the pain & suffering in this cruel world we live in! We don’t have the moral right to inflict serious, preventable harms upon our children without their consent! Existence brings guaranteed harm & is imposed without consent. Because a child cannot consent to being born, the default should be to assume that consent doesn’t exist and that no action should be taken on the child’s behalf. Just like how it’s not okay to rape an unconscious person just bc they can’t say no to sex!
Ye
Love your content mate. Keep it up
The fact this video has a sponsor is very ironic
Truly one of the best YouTube channel
Damn i just talk about this with a friend then you pop up with such a great video thanks so much 😅❤
Honestly, I think the less you know about a company's CEO or Founder, the better. If a company is heavily cashing in on the big man/woman behind the whole thing, it may be trying to hide a flaw in its core business model. There are many examples of this I can think of, but the best one by far is Theranos and Elizabeth Holmes.
Amazing Content man! Keep killing it!
I always wonder who buys this garbage. Just scalpers apparently.
Why do influencers always act dumb and flex and act like they made it themselves when they were just lucky or their parents had connections or they got money from their mommy and daddy. Like do they want me to hate them?
Influencer backed companies are good at marketing, not at making great products. Don't buy marketing.
Mint Mobile being sold felt like such a stab in the back
8:18 "professional Internet Idiots" 💀💀💀
As a personal rule, I never buy products promoted by influencers, if I considered buying a thing and I see it promoted I immediately go to the next choice
Listen, i dunno if it was on purpose, but cutting the video a few seconds into your sponsor spot at the end was genius and really, REALLY funny
The word influencer still makes me want to puke
I'd love to see Colin and Sameer to react to this video.
the professional internet idiot was og ma man
EA up their with Monsanto. I am actually impressed. It takes talent to be that bad at making games.
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