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Hi Folks 👋,
Welcome back to Consumer Startups. Today, I am doing a special collab with my dear friend Ali from First1000. Check out our first collab here - we covered the founding story of OnlyFans (by far the most comprehensive one on the internet).
If you have not yet subscribed to First1000, make sure to subscribe here 👇. It’s like the Harvard Business Review, but way more fun to read.
Today’s case study is on Cameo:
Steven Galanis is no stranger to the entertainment world 🕺🏻.
Perhaps the journey started when his grandma Yia Yia dropped the 7-month-old baby Steven into Magic Johnson’s lap during their trip in Hawaii - iconically, the trip took place just after Steven finished first in Chicago’s Sweetest Baby contest…
Steven was a mini-celebrity in both high school and college. In high school, he was the goalie on the state-winning hockey team and the class president. At Duke University, he rose to even higher stardom when he started throwing a weekly party that had over 10K people at its peak. Guess what... Duke only had 6500 undergraduate students enrolled 🤯.
After college, Steven opted to pursue a more traditional route of working in finance and took a job as an options trader at the Chicago Board of Trade, where he learned the fundamentals of supply and demand and the intricacies of a marketplace (which would come in handy later on).
His ties to the entertainment world didn’t end even when he was working as a trader. On the side, he worked as a TV producer and created multiple TV series with his Cameo co-founder Martin Blencoe, whom Steven met through his big-shot Hollywood producer uncle, George Furla.
👶🏻 The Birth of Cameo
Around 2015, Steven started a new job at LinkedIn while Martin began to pursue his passion of being a sports agent with the angle of helping athletes land more deals in the entertainment world.
Martin had one NFL client, Cassius Marsh, a backup defensive player for the Seattle Seahawks. Cassius didn’t have any major endorsements nor did he have any exposure in the entertainment world. However, it was this D-list celebrity that inspired the idea behind Cameo.
On October 5th, 2016, Martin asked Cassius to send his friend a short personalized video congratulating him on the birth of his son. The friend was ecstatic after seeing the video. Martin later showed the clip to Steven who immediately saw potential in that 13-second video.
“I was obsessed with the idea of what this could be. I hopped on a plane to Los Angeles that weekend and we scribbled down ideas for three days.” - Steven
Steven and Martin continued to think more about the idea, and a few months after, they decided to go all-in on the idea while also bringing on board another co-founder Devon Townsend to the tech team.
Steven quit his job at LinkedIn and later even convinced his former LinkedIn boss to be their first investor, who led the $500K seed round (probably a few million $$ in today’s 🔥 market).
This is part of the email Steven sent to his LinkedIn team the day he left:
“I'm very excited to take this opportunity, exactly two years from my first day at LinkedIn, to announce my “Next Play.” As many of you know I've been working hard for the past few months on a start-up I co-founded. My company, Baron App LLC (aka "Project Powermove") seeks to become the global marketplace where fans can purchase experiences with their favorite athletes, actors, and influencers.
Picture on-demand customized video messages from your favorite stars as well as personal experiences (imagine booking Mark Grace to come to your house for a Cubs watch party or booking a round of golf with John Daly). The plan, for now, is to finish our seed round this quarter and be up and running at 1871 by Feb 1. I hope you all drop by when I'm ready for you!”
🏗 Building Cameo
They realized one truth about the current state of the celebrity universe - there are more famous people than ever before and they are more famous than they’ve ever been due to the rise of technologies and media.
Many of them are famous within different niches but not all of them have the means to easily monetize from their fame. This insight led to the strategic positioning of Cameo - helping the long tail of D-list celebrities like Cassius Marsh to make money.
Initially, they had a broad vision for the platform - a marketplace for fans to book custom experiences from celebrities.
“For X amount of money, you could pay to do Y activity with Z person. For one price, you could go fishing with them or FaceTime or get a phone call or tweet or anything you could imagine.” - Steven
Nevertheless, they decided to focus on personalized shout-out videos. Even though celebrities were interested in getting paid, their main motivator was to connect with their fans. The team couldn’t stop thinking about the simplicity of Cassius’s video and the friend’s over-the-top reaction.
Chasing the right niche
The broader marketplace for fans was not obvious in the early days. When Cameo first started they struggled to find the right balance between audience and activity.
The idea: help any celebrity perform any activity (Facetime, lunch, shoutout..etc) [Wide Audience - Wide Activity Set]
MVP: help any pro-athlete do any activity [Niche Audience - Wide Activity Set]
Product Market Fit: help any celebrity do video shoutouts [Wide Audience - Niche Activity Set]
This goes against much of startup advice of "going after a niche", and it's hard to rationalize why they found product-market fit in honing down on video and expanding out of pro athletes. But that is the reality (& beauty) behind startups like Cameo, they serve as a reminder to not fall victim to the survivorship bias we encounter every day in the startup world.
🤝 Acquiring their first customer
During the early days, Cameo had two things going for them in terms of distribution:
Martin had Cassius Marsh as a client. Although far from being the most visible figure on the Seattle Seahawks, he was still by all measures a celebrity.
Devon Townsend, Co-Founder & CTO of Cameo, was a Vine star, amassing over 900 million loops "or views" on Vine before it was shut down. If there is one universal truth about famous people on the internet, it's that they know other famous people on the internet.
The very first version of Cameo, back when it was just for pro-athletes, had just one talent Cassius March (Cassius March was also one of the early investors in Cameo, he put in the first $25k). Steven and Martin would lean on their only pro-athlete superstar to get their first customer.
They asked Cassius to tweet about the video he did earlier as a favor (and proof of concept) and promote Cameo. The price was $25.
The rollercoaster launch
Steven and Martin held their breath as Cassius pressed tweet, waiting for a big spike from having their first and only talent openly promote Cameo. One minute went by, then 10, then 20 then an hour, and nothing happened. There were only two active visitors on the website, Steven and Martin.
From there on, it got ugly, Cassius got obliterated online. People started calling him all sorts of (ugly) synonyms to a sellout. Cassius was beyond furious. Cameo just destroyed his biggest asset - his public image. Even Steven was questioning his job of leaving LinkedIn to pursue this shoutout platform thing.
Then, out of nowhere, a red dot showed up on google analytics, a complete stranger just landed on their website 👀.
"This person must have been on the site for 2-3 min, but it felt like 2-3 hours. And all of a sudden the dot just disappears....we were so rejected...and then my phone starts vibrating and I get a DM with a message saying 'Hey Cameo, my daughter Elaine loves Cassius March and it's her birthday on Thursday, I am trying to buy a video from your service but the payment processors doesn't work'...I texted Cash no response.... I texted Martin no response...they were just pissed at me" - Steven
It took a while to bury the hatchet. The Wednesday after Elaine's birthday, Cassius agreed to do the Cameo. It was a little unenthusiastic but Steven sent it through regardless (with a little apology for the delay). 30 minutes later...the dad sent Steven a video back...his daughter's reaction video!
After watching this video for the first time the other day, we get why Steven and Martin didn't give up on Cameo...when they only sold one video and made $25 4 months into their full-time journey.
The reaction video was more than just a milestone, it shined the light on a new value proposition they would then use to recruit pro athletes: making your fans feel special, turning the association with Cameo from a net negative to a celebrity brand to a net positive!
Acquiring their first Customers...round 2.
The reaction video helped the team to start building up their pro athletes supply, one celebrity at the time, but they never really found a true product-market fit.
Athletes could make some revenue on the platform, but it was not as lucrative as some of the sponsorship deals they would get. Ideally, the best talent for Cameo would be Famous But Not Rich folks (FBNR) and it so happened to be that Devon, the CTO of Cameo, the ex-Viner with over 900 million views knew just the right person: Cody Ko.
Cody Ko was Devon's roommate during the Vine days and was one of the top talents with over 3.2 billion views on his videos. When the platform shut down, he migrated to Youtube and had just 350k subscribers. A far cry from his reach on Vine, 350k subscribers is just enough to be famous on the internet but don't get him the big bucks (millions or tens of millions of dollars).
Devon and Cody were the first talents to launch on Cameo outside the Pro-athlete universe. The way they recruited customers was by opening up their unsolicited IG DMs and replying back to messages requests from fans dating years back asking to post about a product or wish them a happy birthday..etc with a link to their Cameo pages. Devon would charge people $1 and Cody $3, the most consistent feedback they got from those fans was that this was the best use of a dollar (or three) ever.
Little by little, they would raise their prices, and the requests did not stop. People were still buying at $5, $10, $20, and even $100.
The demand was already there, and after validating the willingness of people to pay, they went full-on recruitment mode and onboarded as many ex-Viners as they possibly could!
It was not that hard of a sell 🤷♂️.
🚀 The Cameo Flywheel
The unique dynamic of the Cameo Flywheel is that people, as opposed to the company, pay to increase the distribution of their talent. As Steven explains it - "each video is a commercial for the next video."
Here's how it works: Person A requests a video for Person B. Person B posts the video from the celebrity on their social media platforms. Then every friend of Person B watches the video with the Cameo watermark, which encourages them to request videos for their own friends/family members. It's a network effect like no other.
When you add in reaction videos, built-in discovery (on platforms like Instagram, Tiktok, and Youtube), and nostalgia, the chances of virality for each Cameo created and shared become substantially higher; the potential reach of each video is (substantially) larger than the reach of the individual sharing.
Reaction videos are particularly interesting because they are able to reach a large audience outside the direct fanbase of the talent, which increases their reach and audience over time. With a bigger audience and a stronger brand, the talent increasingly becomes more valuable and is able to charge money not just for cameos but for all sorts of sponsorships, promotions, and appearances. This is all to say that the talent on Cameo is actually getting paid to become more famous, a ****pretty sweet gig if you ask me.
Cameo joined the tres-comas club earlier this year after bagging $100M at a 1B valuation from e-ventures, SoftBank, and many other top-tier VCs. Cameo did 100M in sales last year (netted about $25M), a 4X increase from 2019 driven, in part, by their expansion to the B2B world.
Last year, Cameo formed a partnership with Sendoso, a corporate gifting platform (mostly for sales prospecting). Another cool B2B use case lies in virtual conferences. According to WSJ, the sales insights company Gong.io used Cameo to hire Chris Diamantopoulos, who played billionaire investor Russ Hanneman on HBO’s “Silicon Valley,” to promote their conference. “It’s me, Russ Hanneman,” Mr. Diamantopoulos says in the video. “And Gong is all about sales.”
6 years into the founding of the company, Cameo is coming back full circle to revisit the original idea of having a marketplace that connects fans and celebrities for custom experiences. It's kicking off the effort with the release “Cameo Calls”, an easy way for fans to book virtual meet-and-greets with their idols but that is just the beginning of Chapter 2 of the Cameo story, and we couldn't be more excited to get to witness it first hand.
See you soon 😉,
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