The Leveraging Of 110m Instagram Followers

Kylie Jenner’s cosmetics empire was featured on the cover of Forbes magazine – America’s most prolific business monthly.

Whilst much contention was raised about the claims that her wealth was “self-made” (which it wasn’t), the bigger question was how this actually happened – and the numbers behind it.

Jenner’s “Kylie Cosmetics” business has raked in an estimated $660m in sales during its 3 year lifespan, with $330m in 2017 alone.

Whilst the business is private, and thus its numbers are not publicly available, even if these estimates were 50% off, the figures would be staggering.

What’s more – the “company” only has 7 full time employees. Everything from packaging to PR is outsourced, and the only way that Jenner gets customers is by leveraging her 110m Instagram followers.

This article examines how it was done.

Social Midas

The core of Jenner’s success has been the 110m followers on Instagram.

The company doesn’t advertise outside of the platform, doesn’t have any shops or stockists and generally just peddles its products directly to its community.

Whilst this sounds like a marketer’s wet dream, the most important element was Jenner’s lips.

In 2017, precisely 2 years after registering the trademark for her brand, tabloids around the world started running reports on the size of them; with the help of fillers, she’d managed to almost quadruple their size.

The point here is not so much about what she looks like, but how she capitalized on the interest… she’d inadvertently uncovered one of the biggest “trends” of the modern West – women lusting over youthful, full lips.

To this end, putting $250k of her modelling money into 15,000 lip kits, she set up a page to sell them online. Almost instantaneously, they sold out.

Whilst this was a great step, the next process was Jenner’s omnipotent mother – Kris Kardashian – bringing in Shopify in February 2016 in order to make the business a fully fledged ecommerce operation.

A few months later, the company started selling with six shades of lip kit – all of which sold out very soon after launch.

Exponential Growth

Whilst the store did well immediately, what spurred continued interest was its maintained growth.

Rather than being a small blip – where girls go and buy the latest product because it’s on-trend – the business kept producing buyers at an alarming rate.

This could be handled thanks to the way in which it had been set up. It’s a quintessential “dropship” operation; all of the product development & sourcing was out-sourced to a company called Spatz cosmetics, who’re estimated to have made ~$180m from the venture.

This figure represents the COGS (Cost of Goods Sold) of the business; a little-known number which will help us actually determine the true value of what’s been developed.

You see, when it comes to money, 99.9% of people are generally wrong. This isn’t me being disrespectful; they’re just not experienced / level-headed enough to actually consider the facts from the hype.

Jenner’s “business” isn’t a real business. It’s a marketing company which trades in attention.

Like all things “Kardashian”, that attention comes from multiple sources – but is ALL directed towards the family. The matriarch (Kris) then turns this attention into money.

Unfortunately, a lot of people have conflated Jenner’s attention with the value of her business. They are mutually exclusive, and in the investment world, has lead the “price” of Jenner’s pull to be “overvalued” (people think it’s worth more than it actually is).

As mentioned, she doesn’t have a “business” because all the product creation is outsourced. She has a website that sells outsourced lip gloss etc.

This means that if you’re actually looking at what’s really going on, you have to be able to consider what the business actually is, and – ultimately – whether it can be sustained (no).

Worth / Value

When it comes to valuations of companies – the most important thing to consider is that almost the entire populace of the world is wrong about which ones will win in the long run.

And although I’m no sage on the topic, I’ve been around long enough to know which companies will sink and swim.

In the case of Jenner’s, I see a flash in the pan.

It has very little – if any – competitive advantage, and is primarily built around a persona which is false.

It’s my opinion that most of the current purchases (and yes, they are HUGE in volume) are predominantly impulse purchases.

Curious teenagers, and even mid-twenties women, are buying the products because of the promise of a richer, fuller pout. But without costly filler injections, this is just a dream.

My own estimation is that Jenner is probably worth ~$20m. Her “business” is worth about 1/5 of its profit (which is likely nearer to $100m than the $800 revenue reported by Forbes), and thus the whole thing just stinks of a marketing gimmick.

Further to this – actual metrics of the various products being sold by Jenner seem to indicate a slowing growth curve – just 7% in 2017 after a meteoric first year surge.

This is not to put shade onto her success. But to label her a “self made” success story is incorrect, as well as inflating the numbers in sales. With at least 50% of the revenue going to Spatz (who also work for L’Oreal), it’s my opinion that they are the real winners out of it all.