January 27, 2020
Honey Sells For $4b & Kylie Jenner Makes $600 Million

Honey Sells For $4b & Kylie Jenner Makes $600 Million

– I literally woke up to
some big news in e-commerce, so we’re gonna analyze it and tell you how it affects you, ’cause it does. This is big for online business owners. So it’s time for a
Capitalism special report. (dramatic music) This is Ryan from Capitalism.com and we’re gonna analyze
two major acquisitions that happened this week
because there’s a lot that we can learn from them even if you are just
starting as an entrepreneur. These acquisitions
really are great examples of how we can conduct business so that we’re more profitable and we’ve set ourselves up for an exit at some point in the future. What you’ll discover after
we analyze these acquisitions is that all of these businesses’ focus went into getting as many
customers as possible. That is how you build a real business. So as you’re watching this analysis, keep in mind how you can
be allocating your time, your attention, and your budget just to get as many
new people as possible. If you want more on this
in terms of strategy, there’s a really good video right here that was a presentation
from one of our events from Joel Marion, who talked
about how they spend money to be able to get as
many people as possible on their list and in their business while still remaining profitable. Two major acquisitions
are now in the books. PayPal announced that they
acquired the app Honey for $4 billion, and Kylie Jenner sold 51% of her makeup line for $600 million, valuing the company at $1.2 billion. Kylie Jenner is officially a billionaire. Now what’s interesting about
both of these case studies besides the billion
dollar value valuations is the fact that they were startups. They were small businesses
just a couple years ago. So this is really relevant to those of you who run online businesses even if you’re just
building a side hustle. In Kylie’s case, the name
of the game was her audience because her audience was used to light the fire of that brand. But what’s interesting about Honey’s case is they did almost exactly the same thing. They just did it
differently than Kylie did. A lot of e-commerce entrepreneurs think that they have to build an audience, which, by the way, I’m a fan of, so they spend a lot of
time creating content and running ads in order to get followers. But Honey didn’t do that. What they did was really, really smart. Honey spent most of their
advertising budget on influencers and getting the influencers
to talk about the business. And they used what I think are the two most underpriced areas to get attention from
influences, YouTube and podcasts. In fact, I was sitting in the office of the principal investor behind Honey the day the acquisition happened, and he told me that they were
the number one advertiser to influencers on YouTube specifically. Really interesting. And that should be a sign to you. The name of the game here
is customer acquisition. Kylie had her own audience,
so she was able to leverage that audience in order to
acquire a whole lot of customers. And then Honey did the exact same thing, where they were driving
people to get the app and they were just sponsoring influencers, leveraging other people’s audiences. But in both cases, it was all about getting as many customers as possible. Whether you are selling
products on Shopify or you’re selling them on Amazon or you’re selling affiliate products or you are just building an audience, it is about acquiring people. Where are you putting your efforts to be able to bring people to one place where you control them? That’s how you scale a company. Some of you wonder why do these companies raise all this money and
then lose all this money and still have high valuations? It’s because their money is
going into acquiring customers. The real hack to all of this is do you have enough meat on the bone to be able to spend money on advertising, and if you don’t, that’s
why people raise money. There’s a reason why tech
companies raise a ton of money and then burn through it in
order to acquire companies. It’s because once you have the customer, that’s when you can
market additional products or get them on subscription services. You see, a lot of startup entrepreneurs are just taking a product
and throwing it on Amazon or they’re just churning
through a bunch of products, hoping that one sticks. But if you want to build a company, specifically a company that you can sell, your focus and your budget
has to go into spending money to acquire customers, and that
can come from influencers, that can come from Facebook ads, it can come from Instagram ads, Pinterest, or wherever your audience
already hangs out. So the step-by-step process to be able to model, kind of,
these types of acquisitions is to identify who that core audience is, who that core customer is, acquire as many of them as possible, and then give them a great
product that keeps them around. And that’s why I think
the biggest opportunity in the world right now is
to go to the influencers who have pull with their audience and build brands around those influencers. There’s a really big difference between being famous
and being influential. Being famous gets lots and lots of likes. Being influential gets
buyers, acquires customers. So when you put everything
through that lens, it allows you to focus
on what really matters, because too many people
are doing too many things in an effort to grow without evaluating which activities actually
bring in new customers. If you sell on Amazon and you’re taking your
customers from Amazon, you’re missing a really big opportunity by not leveraging that customer base and bringing them into other channels and selling them additional products. If you are only going and
acquiring those customers and then hoping that you
make a profit, you’re toast. That game lasts for about 12 months and then you go out of business because another competitor can come in and buy more attention than you and outspend you and you go kerplunk. The game you’re really
playing is your valuation, getting the value of the
business as high as possible. That’s how you build a real company and that’s how you have an exit that really sets you up for life. Number two, there’s still a
lot of big money in e-commerce even for niche ideas. A lot of people don’t realize that Honey was just an affiliate app. It was just making money
on affiliate promotions because they had an affiliate relationship with the different recommendations that they made in the app. Why did PayPal buy that company? Because they had a ton of users. Because they had a ton of attention. Because now they can
connect those two platforms and drive up PayPal’s valuation. What you are doing at
the end of the day here is creating value that
doesn’t exist right now. And whether you’re selling on Amazon or you’re driving ads or
you’re acquiring companies, the entire focus of entrepreneurship
is acquiring customers, serving them, and keeping
them for the long term. Hey, whether you are just
starting your journey or you want to be a billionaire,
we believe in entrepreneurs and capitalists at Capitalism.com. If you are just getting started, we have some free resources for you over at Capitalism.com/start. And if you’re new to the
channel, make sure you subscribe. And check out this video right here because I predict the next
e-commerce billionaire. Spoiler alert. They’re even younger than Kylie Jenner. Enjoy. (gentle music)

8 thoughts on “Honey Sells For $4b & Kylie Jenner Makes $600 Million

  1. Hey ryan, what do you think about how elon musk has built tesla with zero advertising vs buying customer attention?

    Why is he the one exception, and also arguably the most successful example of brandbuilding?

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