If Content is King, Build Tools for the Creators
"Content is king."
In 1996, Bill Gates published a letter while at Microsoft claiming that, "Content is where I expect much of the real money will be made on the Internet, just as it was in broadcasting." People across businesses and industries subscribed to the idea – that content would drive value creation on platforms.
In many ways, this has proven true. Platforms like Instagram, Twitter and Snapchat have provided talent with the infrastructure to build and connect directly with their fan bases, expanding what entertainment could be and redefining what it means to be considered a celebrity. Celebrities are no longer just movie stars, pop stars and athletes – today they include Instagram and TikTok stars, Twitter personalities, and anyone else with a following of a few thousand people. Technology eliminated gatekeepers and made distribution of content easier, and as a result, celebrities and influencers don't just provide entertainment, but they are also sought out for opinions on current events, advice and product recommendations.
This shift in fan expectation led to a wave of applications that provided new mediums for fan engagement. Text with Kerry Washington on Community, have Carole Baskin wish your brother happy birthday on Cameo, or get beauty tips on Supergreat. These platforms provide a home for large, engaged and somewhat homogenous userbases (at least from the standpoint that they each have a common interest), and by extension, allow celebrities to more easily monetize fan interaction. 
Interest in these applications is not new, but has been invigorated with social distancing measures accompanying the arrival of COVID-19. For the past two years, startups have raised at massive valuations, riding the wave of interest: Community raised its Seed at $80M pre-money (May 2019), Cameo's Series B at $300M post-money (June 2019), and most recently, Clubhouse raised its Seed at $100M post-money (May 2020). Aggressive valuations were supported by user and eyeball counts, and in the lion's share of cases, followed platforms looking to build a new or better medium fan interaction.
But like all marketplaces and platforms, celebrity platforms still rely on two distinct groups: celebrities and their fans. And as with any platform, the question becomes, who do you build for? Do you build a fan-focused application, hoping to create a better or new medium for interaction? Or do you build infrastructure, focused on the talent and providing them the tools to better monetize themselves? Fan Focused Applications Fan focused applications are built to provide a new or better way to facilitate, broadly defined, fan engagement. The focus here is the interaction, which also serves as the point of monetization. These platforms charge for the ability to interact with celebrities: pay for a Cameo, advertise on a livestream, or take a cut of the e-commerce transaction. The variety of monetization options, and the fact that fan bases are so engaged and willing to spend, is largely what has caused excitement in the space. More intimate fan interactions have brought fans onto these platforms, capturing eyeballs and users, and ultimately driving valuations. But the very thing that has caused these platforms to grow so rapidly is the thing that makes their sustainability so questionable. Because novelty value drives the purchase decision in most of these applications, and that novelty value is created by its "newness" or differentiation, it brings into question their long-term viability. While novelty value can lead to sustained behavior over time, that's a big bet to make. Investors are therefore reliant on applications to either successfully change consumer behavior or to continuously innovate and develop new mediums of interaction, in order to keep users on the platform and justify bullish valuations. Talent Focused Infrastructure Alternatively, platforms built to enable and serve the needs of the talent offer different long term value as a business. Rather than focusing on the point of interaction between celebrities and their fans, these platforms are built to provide business infrastructure to celebrities that can help them to better monetize.
These 'businesses in a box' can take a number of forms, from allowing individuals to better control their fans' data to providing e-commerce infrastructure that allows them to more easily sell products online to providing platforms that allow celebrities to host digital events. In each of these instances, the major difference is that they're providing a service to the talent, thus capturing them as the payor.
In contrast to fan focused platforms, building tools for the talent creates a less flashy, but arguably more sustainable business. With repeat purchase driven by the value provided to the talent, these platforms remain valuable regardless of what the newest app is or the ebb and flow of fan/consumer preferences.
Concern around talent focused infrastructure, rather, centers primarily on size of the market. Market size concerns are based on two different considerations: first, whether or not products will need to be verticalized to such an extent that they won't be broadly attractive, and second, whether or not these services are only valuable to smaller celebrities who can't afford to build out tools themselves. Despite these concerns, we're confident that the total addressable market is large enough, specifically believing that while the initial cohort may have smaller followings, individuals who start on these platforms will not abandon them once they reach scale. So What's This All Mean?
We started looking at celebrity and influencer platforms largely because there's so much activity, and a lot of smart people involved. Usually when that's the case, there's something there, we just didn't know what. We focused on product and applications because that's where the most people seemed to be: Who had the best talent roster? Which product was the least reliant on novelty? And how were they assuring that they'd keep the talent on the platform? We started chatting with friends and builders in the space, and in those conversations, two things emerged: first, our initial concerns around the importance of novelty in driving adoption were, at minimum, recognized by all, and second, we'd completely ignored the point of view of the talent, the group that we'd deemed most important to the success of these platforms.
It quickly became clear that platforms could be built to provide talent with more than just a way to monetize direct interaction and that the race to capture eyeballs and users had left the business tools these individuals needed woefully underdeveloped. By building a platform that serves the needs of talent, the talent becomes the customer, and revenue becomes smoother and recurring.
So where'd we wind up after all of this? We know that while fan demand exists for applications that facilitate talent interactions, concerns around the size of the market and reliance on novelty to drive purchase decisions makes it hard to bet on who's going to successfully build long-term enterprise value (but we believe that someone will!). Rather, we're excited by founders who are building infrastructure that empowers talent to run their businesses. We believe that these platforms can generate smooth, recurring revenue, and that there are a few ways to do this.
We want to see someone build Salesforce (and Shopify!) for celebrities. There's still limited ways for talent to collect, organize and use data and information on their fan bases, and empowering them to better target and engage with their following would create real, sustainable value. We also believe that this product would provide real value to groups well-beyond celebrities. As technology has enabled talented people across industries to go direct-to-consumer, we see the opportunity to build platforms for individuals and SMBs in every expertise-driven business (e.g. actors, musicians, comedians, doctors, psychiatrists, financial advisors, etc.).
Content is still king, and the users, engagement and willingness to spend are all there. So rather than chase the new medium of engagement, we're executed by the opportunity to build the picks and shovels that will help talent to better monetize themselves. |
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