The Influencer Value Chain: A Snapshot And A Cameo

Is that Cody Ko on the left?

I continue to be fascinated by the rise of the influencer economy, an evolution of fame and celebrity from the widespread adoption of digital media platforms. YouTubers, Instagram models, Twitch streamers, and TikTokers have all amassed audiences by producing popular content on their respective platforms. They defy the traditional routes to fame in TV, music or film, to focus on fostering more intimate connections with their followers. Of course, famous actors, musicians, celebrity chefs, and talk show hosts, have all been integrated into this ecosystem, which has become almost as important as their mainline projects for sustaining relevancy and growing a fanbase.

Accordingly, these celebrities on the internet, be they homegrown influencers or reality TV stars, leverage this perception of intimacy into the power to influence spending. One (pre-COVID) estimation of future growth in influencer marketing expects an almost doubling in value from 8 billion in 2019 to 15 billion in 2022. This speaks to how we are just starting to harness the power of influencer marketing, an industry that did not even exist 10 years ago. Additionally, we have to keep in mind that marketing is only a subset of the total “value” of influencers, and does not take into account the money in merchandise, live events, direct subscriptions, and more.

I’m especially fascinated by a startup named Cameo and its meteoric rise in the past few months; it has now secured around 60 million in funding and could be worth up to 500 million. Before we dive into how Cameo, a startup marketplace for influencers and celebrities to sell personalized videos to their fans, fits into the influencer value chain, it’s helpful to have a clearer picture of the different pieces of this ecosystem and the myriad of different ways influencers capture this value.

From now on, whenever I mention “influencer,” I mean anyone that has a sizable and monetizable following on a platform like YouTube, Instagram, Twitch, TikTok, or Twitter.

A Snapshot of the Influencer Value Chain

The Platform

The platform influencers build their initial followings on is an important consideration. Each of these platforms add value to the influencer’s reach and potential by attracting and keeping an audience. The above platforms I mentioned possess some form of the following two elements: a diverse and deep catalogue of content (attraction mechanism), and some sort of recommendation algorithm that efficiently serves up new content (retention mechanism). There is a symbiotic relationship between all three parties here: influencers seek viewers, viewers seek influencers, and the platform facilitates these interactions.

The platforms I’ve mentioned have also carved out a niche for themselves in the type of influencer they are best suited for: YouTube for medium to long form video, Instagram for images, especially in the lifestyle category, Twitch for streaming, games or otherwise, TikTok for short-form video, and Twitter for pithy aphorisms.

Content Creation, Audience Building

Once the influencer has chosen a platform to specialize into, they must then focus on building an audience on that platform. Consider the influencer as a product to be sold — the process of content creation and audience building is where the influencer starts to accrue value which can later be monetized. The value lies in their viewers’ eyeballs and susceptibility to being persuaded into spending money. There are a myriad of ways to accomplish this, but the general rule is to be entertaining and/or informative; being conventionally attractive is a huge plus, but not always necessary.

Listing the infinite paths to success and niches in which to be successful would be a pointless endeavor. What is not infinite are the metrics on which influencers are judged. View counts, follower/subscriber figures are surface-level and tell you roughly how popular an influencer is relative to their peers. But engagement matters too, maybe even more than sheer numbers — what percent of their audience regularly engages with their content by liking or commenting? If they make videos, how much of their video on average do viewers finish before clicking off? How quickly are they growing, and can they leverage that growth into expanding onto other platforms?

Whereas raw follower and subscriber numbers describe theoretical maximum reach, engagement metrics describe the quality and attentiveness of an influencer’s audience. These tend to be more important for advertisers, since they value an ambassador who can actually motivate their audience to spend money on what they are endorsing.

Passive Monetization

When I say passive or active, I mean that in the sense of how much action an influencer’s audience is required to take to generate revenue. In this case, the mere fact that an audience consumes the influencer’s content generates revenue for that influencer. The two major categories here are native advertising and sponsorships/endorsements.

Native advertising refers to YouTube ads, Twitch ads, etc — ads provided by the platform that influencers can choose to show as part of their content. Influencers do not usually control what is shown, which, in the case of YouTube for example, is determined by a complex and automated bidding process between different advertisers. Influencers get a cut of whatever revenue is generated by ads played on their video.

Sponsorships and endorsements are obtained independently of the platform. Influencers negotiate offline with sponsors to either implicitly or explicitly endorse a product in their content, ranging from a singular Instagram post, to a 10-second shout-out on a story, to entire video productions. Regardless of whether a viewer purchases the product or not, the influencer has already signed a contract and received a payout for the sponsored content. Note the difference between this and affiliate agreements, which do require a viewer to at the very least click through the provided affiliate link, or even make a purchase. This would crossover into the active monetization category.

Active Monetization

Now this is where things get interesting, and also where Cameo fits into the value chain. This category contains all of an influencer’s products and services that require the audience to actively spend money on to access. I’ve categorized some of these modes into four categories, depending on the level of intimacy in the interaction.

An explanation of the x and y axes:

Personal vs Impersonal: this tells you how intimate the product is. 1 is personalized, meant for one fan, while many is mass-marketed.

1 influencer vs many influencers: this tells you how many influencers a product gives access to. 1 is one influencer only, many is many influencers.

A quick explanation of each quadrant:

1 influencer, Personal
This category represents paid interactions between one influencer and one audience member, which can range from meet and greets to Cameo requests.

1 influencer, Impersonal
This category contains services like Patreon, where audience members pay to access premium content and services that the influencer provides exclusively to subscribers. Merchandise and live events would also fall under here, as both are one influencer’s standardized products that are sold to a wide audience.

Many influencers, Personal
This is a bit of an unusual category, but I like to think of it as purchasing a single product that facilitates interaction with many different influencers. The best example for this is conventions, like Twitch Con, Playlist Live, etc. where buying one pass can theoretically allow one person to have many intimate interactions with many different influencers. The focus is on meeting many influencers in person or taking part in smaller-scale events like special panels or informal meetings.

Many influencers, Impersonal
This category describes services like YouTube Premium, which gives access to a variety of premium content from many creators. The content is designed for a large audience and the person with the subscription can view content from many different creators. Another example of this is Twitch Prime, where, on top of other benefits, users can choose to get one free subscription to their favorite streamer. The fact that the user can change the specific streamer they are subscribing to month to month is why this gives access to “many” streamers.

A Cameo Analysis

The startup Cameo allows fans to spend money to buy personalized videos from their favorite influencers. It fits neatly into the 1 on 1 interaction (1 influencer, personal) category, which has so far not experienced too much innovation digitally since influencers typically meet their most dedicated fans in person through live events. COVID has shut down these live events, however, and allowed influencers to realize the lucrative potential in monetizing their fame by selling their presences online. Fans, now unable to meet their favorites in person, turn towards the internet to fulfill that desire.

It’s unsurprising, then, that Cameo has exploded in popularity during quarantine as both influencers and regular folk spend more time online and live events are canceled. It was profitable for the first time in April, the fact that Cameo has gained more mainstream recognition and coverage certainly speaks to its great potential as a new channel for monetizing fame.

Cameo’s value proposition: leveraging the internet to provide intimate and personalized video interactions between influencers and their fans, acting as an addition source of income and connection to fans for the former and a permanent, memorable keepsake for the latter.

Here are the upsides and downsides to this business model.

Strengths

1. A huge market: The “famous people” market is huge and as long as we live in a celebrity culture, there will always be a subset of fans who are willing to pay to interact with their favorites. This suggests that there is a huge total addressable market, especially since one person could potentially be fans of many people.

2. Low-to-nonexistent marginal costs: The marginal cost to providing a Cameo is zero dollars for Cameo. As with all digitally-enabled marketplaces, this equals huge margins once a critical mass is achieved.

3. Free marketing: The fact that the product they are selling is influencers themselves means free advertising from these influencers with huge audiences. There is little need for marketing spend as long as they have major influencers promoting the platform.

4. The potential for aggregator status: This would be similar to Amazon but for influencer interactions. If Cameo is able to convince most influencers to join their platform, audience members will go to Cameo first for future requests, and vice versa for influencers looking to expand their digital monetization channels.

Weaknesses

1. Lack of recurring revenue: Other aggregators thrive because they address a recurring need (Google with search, Amazon with general living needs), but Cameo requests are much more niche — they could be seen as luxury purchases, even. One fan is not likely to buy more than one or two Cameos a year.

2. Low barriers to entry: anyone can start a platform like Cameo and offer better rates to poach influencers. This weakens the moat around Cameo’s first-mover status.

3. Devaluation of core product: Flooding the market reduces the value of individual Cameos. Influencers may end up competing on price on the platform especially between influencers with overlapping fanbases; this creates downward pressure on the top line for Cameo.

4. Questionable demand post-pandemic: Once the novelty wears off and live events start up again, there will likely be greatly reduced demand for Cameos.

Suggested Improvements

1. The offering of more complex and involved influencer-fan products/services. Cameo should deeply entrench themselves as the number 1 facilitator for in depth interactions between influencers and their audience. They can take advantage of the fact that they are the first in the digital 1:1 space for active monetization and expand quickly to cover a breadth of different types of interactions, from video, to virtual meet and greets, to workshops and classes. This sort of variety can help generate a more sustainable moat against any potential competitors, as well as exponentially grow the theoretical TAM.

2. Better tools for video creation (see TikTok for inspiration). These tools would give influencers as well as audience members the ability to elevate their video footage into something more special. We have seen how TikTok’s video editing capabilities, which users have taken and ran with, substantially decreased the barrier to creating more impactful and entertaining content. Cameo implementing such capabilities allows it evolve from simply facilitating to actively adding unique value to its service, which again serves to solidify its competitive positioning.

3. Introducing scarcity with a bidding system. I would imagine many of the most popular celebrities on the platform might receive more requests than they are able to handle, especially after COVID once they have less free time to film Cameos. Bidding not only allows an influencer to accurately gauge their value, but also drives scarcity — this increases top line potential.

4. Develop a subscription service which contains premium features. The platonic ideal of Cameo is the perfect platform for all digital interactions with influencers, and this subscription could include access to exclusive events that those without are not privy to. It can also include discounts on Cameo purchases as well as priority on Cameo requests (so that influencers fulfill them more quickly).

Conclusion

I see Cameo as an inevitable extension of the relationship between influencers and their audience, brought on by the rise of social media and the internet. In-person interactions will still be more valuable for the audience, but the internet allows influencers to immediately reach all of their audience all over the world, without the need to plan expensive travel and logistics between cities. This means that it has huge upside potential.

Of course, Cameo is still gated by the image of Cameos as a luxury item, meaning little reason for consumers to purchase continuously, as well as competition from future entrants into this space. There are ways for Cameo to expand into different sub-verticals under the 1:1 product type, but that does not guarantee sustainable explosive growth. That being said, I think that this niche of active monetization has a lot of value and underserved needs that are incredibly ripe for capture, and Cameo is well-positioned to do so.

Harvard ’20. Writing about tech and media.