The Ryan Reynolds Success Story (He’s Different)#

You know Ryan Reynolds, right? Famous actor. But behind the movie magic, he’s actually a super sharp investor who’s made bank with two big business sales, pulling in nine-figure sums before he even hit 50.

• Aviation Gin: Back in 2018, Reynolds bought a piece of Aviation Gin. We’re not sure exactly how much, just that it was a minority stake. The brand itself had been bought in 2016 by a New York company called Davos Brands from the original distillery, House Spirits Distillery, out in Portland.

  • Reynolds used his fame – his superhero status, you could say, referencing his role – to really push the gin.
  • This star power worked wonders. Sales jumped from 15,000 cases a year to a huge 96,000 cases a year, according to a finance firm called Jeffries.
  • Now, the liquor market is tough. It’s full of old, well-loved brands people stick to. Plus, fewer young folks in America are drinking as much, maybe choosing healthier lifestyles or saving money. So, getting a 540% increase in sales over just three years in a market like that? That shows you just how powerful a dedicated influencer, a celebrity, can be for marketing.
  • A huge liquor company, Diageo, noticed. They already own massive brands like Johnnie Walker, Smirnoff, Baileys, Captain Morgan, and their own gin, Tanqueray. They saw the potential and just bought Aviation Gin outright in 2020 for a whopping $610 million. Reynolds, who apparently loves marketing, cashed in.

• Mint Mobile: Reynolds didn’t stop there. In 2019, he reportedly bought about a 25% stake in a phone service startup called Mint Mobile.

  • He did the same thing: used his platform, his audience, to boost their customer numbers.
  • Then, he sold that company too! This time to another industry giant, T-Mobile, for over $1.25 billion (that’s one and a quarter billion!).
  • With his stake, Reynolds likely pocketed over $300 million before taxes from that deal alone, all within just five years.
  • Put it together: Reynolds leveraged his fame to make north of half a billion dollars from these business deals, on top of all the money he made acting. Yeah, he’s done “pretty well in the business.”

It’s Not Just Ryan Reynolds#

Ryan Reynolds is just the latest big name to sell a business for a crazy amount of cash.

• George Clooney had a tequila company he sold to Diageo too, for a cool $1 billion.
• Dr. Dre had Beats by Dre.
• Jay-Z had Tidal, which he sold to Block for $302 million.

Celebrity businesses aren’t new, but with the rise of the internet and influencers, they’re becoming way more common.

Why Influencers Need Businesses#

Here’s the thing: Social media influencers often have a harder time turning their audience’s attention directly into money compared to traditional stars like actors or musicians. Why? Because accessing their content – a tweet, an Instagram post, a TikTok – is usually free. People who pay to watch or listen to something are just more valuable customers than those who consume it for free.

• Sure, YouTubers can run ads through Google AdSense or get sponsorships. But based on current ad rates on YouTube, a creator would need about 5,000 views on a video to make roughly the same money as selling just one movie ticket.
• And YouTube is actually the most profitable social platform for influencers. Instagram, TikTok, and Facebook do have ad-sharing programs, but the rates are super low – maybe a few cents per thousand views. A TikToker might need over a million views to make the same revenue as one movie ticket.
• Now, yeah, a movie is way longer than a short video, and they have huge budgets. But making online content isn’t free either! Independent creators are spending more and more cash just trying to get noticed because there’s so much competition.

So, what do influencers do? They get into the business of business.

The Influencer Business Model#

The idea is simple:

1. An influencer creates their own product.
2. They use their massive audience to promote it for free.
3. This gives them a huge advantage over other companies that have to spend big bucks on traditional advertising.
4. This model really only works well for certain types of products: high-profit-margin consumer goods where companies usually spend a ton on marketing anyway. Think liquor, fashion, cosmetics, or everyday products you buy often (fast-moving consumer goods).
   • For example, Gatorade spent $59 million just on marketing in America in 2021, according to their company reports.
   • If someone like Logan Paul or KSI (with their Prime energy drink) can get similar levels of name recognition without shelling out that kind of cash on traditional ads, their business is going to be way more profitable and worth more money.
5. Products aimed at other businesses (business-to-business) or products that don’t need much advertising don’t get much benefit from being run by an influencer. Their main edge is the free advertising, so if the product doesn’t need it, the edge is lost.

If you look closely, you’ll see there’s not a huge variety in the types of businesses influencers start. And that’s actually the first of several big problems.

Let’s dive into why, even when they sell for billions, influencer businesses are often terrible investments.

(Quick interruption here - this video was made possible thanks to HubSpot!)

(Okay, back to it. This video is focused on influencer businesses specifically, but there’s way more to the whole “Creator Economy” world. If you’re curious, I gotta suggest you check out a report called “The Business of Creators” by HubSpot. There’s a link in the description to download it for free. It’s really the go-to source if you want to understand how this whole creator thing works. It digs into how creators make money, why they create, how they grow, and what their business models look like. I learned a bunch from it myself, even having my own audience! For instance, did you know about 59% of content creators found that offering consulting or coaching was their most profitable way to make money? I didn’t! I’m using what I learned from it to improve my own content businesses, for both “How Money Works” and “How History Works”. They used data from over 300 content creators who focus on marketing and business, so you know the insights are real and based on how people actually run their businesses. If you’re a creator, thinking of becoming one, or just found this video topic interesting, I really recommend grabbing this free resource. Again, it’s made by HubSpot, who sponsored this video.)

Problem 1: It All Rides on the Influencer#

The first major issue is that the business is completely tied to the person. If the influencer is the brand, you have a single point of failure. This makes the investment super risky.

• If the influencer stops being involved, the brand loses its free marketing edge. When Diageo bought Aviation Gin from Ryan Reynolds, part of the deal was that Reynolds had to stay on as a spokesperson for 10 years. Why? Because Diageo’s team knew that without Reynolds pushing it, Aviation Gin might just become another fancy gin brand fighting for space in that crowded market.
• It gets even worse if the influencer goes off the rails – think “going full Kanye” and destroying their public image. If the brand is the person’s image, and that image tanks, the brand is in trouble. Adidas famously ended up with $1.3 billion worth of unsold shoes after splitting with Kanye West (Ye).
• But it doesn’t even need to be that dramatic. Even successful influencer businesses often have shorter lifespans than regular companies.
• Sometimes, the success of the business can even annoy the fans! Nobody really likes feeling constantly advertised to, and the idea of their favorite person “selling out” can really turn fans against them. This happens more often with certain types of celebrities, especially in music genres that pride themselves on being outside the mainstream.
• Ryan Reynolds actually got a lot of flak from fans after selling Mint Mobile to T-Mobile. Fans loved Mint because it was a cheap alternative to the big, often disliked phone companies in America (alongside companies like The Weinstein Company, EA, and Monsanto - yeah, they’re that disliked). Reynolds built trust by promoting Mint as this cool alternative, and then fans felt betrayed when he used that trust to make $300 million by selling it to one of the “bad guys.” He even joked about it, saying he needed to “Fill whatever hole I have inside my soul which possesses me to emphasize external success over quieting an inner child futily craving some sort of illusory acknowledgment from my now deceased father.”
• It’s not just the fans who might lose out; Reynolds himself might find it harder to pull off this kind of business move again if his audience trusts him less.
• The company suffers too. Normally, when a huge phone company buys a small one, customers barely notice. But because Reynolds was so involved, the Mint sale became big news, and some people are even leaving Mint just to make a point.
• It’s worth remembering Reynolds was only a minority owner in both Aviation Gin and Mint Mobile. He might not have even had the power to stop these sales, even if he wanted to. Which brings us to the next problem…

Problem 2: The Influencer Doesn’t Own the Business#

Often, the influencer isn’t actually the main owner of the company selling their product.

• Look at Prime Energy, the drink by Logan Paul and KSI. It’s actually majority-owned by a distribution company called Congo Brands.
• The internet famous guys, Logan Paul and KSI, each own 20% of the business. The other 60% is controlled by the distributor.
• Why? Because bringing a food or drink product to market is incredibly complicated! You need approval from the FDA, you have to find someone to make the product, and then work with distributors in tons of different places. While I’m sure Logan Paul and KSI are smart deep down, even if they did have the skills to manage all that, it would take up way too much of their time. Honestly, their time is better and more profitably spent doing things like screaming into a microphone, boxing, or selling digital art (NFTs) to their young fans.
• It makes sense for them to partner with a company that has experience, can put up the initial investment, and handle all the tough operational stuff.
• Most other influencer businesses work this way too, using experienced distributors or partners.
• Let me use myself as an example here for a quick self-promotion. I recently started selling some merchandise to give people a fun way to support the channel. Instead of finding suppliers, setting up a warehouse, and shipping things myself, I signed a contract with a company called Spring. They handle the website, making the stuff, taking payments, and shipping everything out. They just take a cut of the money from whatever I sell. So, yeah, that hoodie might have only made the YouTuber like six bucks!
• I knew there was a risk with that setup. If the quality of the product goes down, people won’t blame Spring, they’ll blame me.
• When influencers don’t own the company selling their product, they can lose control over the brand’s direction. They might end up stuck promoting a product they no longer believe in or being forced to defend business decisions they didn’t agree with.
• Remember back in November 2010 when the Kardashian sisters launched a prepaid debit card called the Kardashian Card? It was a terrible financial product! It had crazy fees, like almost $100 ($99.95) just to open it. Then there was a monthly fee ($7.95**), a fee to close it if you had money left (**$6), and even a fee ($2) if you paid a bill online with it. The sisters didn’t create the card or the fee structure; they outsourced that to a company called University National Bank. But they were the ones who had to deal with all the bad press.

Problem 3: Too Much Competition#

New social media platforms keep popping up, giving more and more people attention. But many of these people can’t easily turn that fame into cash directly. Since influencer brands really only work in a few product categories and markets (like cosmetics, fashion, certain foods/drinks), influencers are starting to compete with each other.

• It’s hard to find a beauty influencer with a million-plus followers who doesn’t have their own makeup line.
• Same with finance influencers – many of them have courses on things like flipping houses or trading Forex.
• As more influencers pile into these same markets, they risk overwhelming their potential customers with too many choices. This can actually push customers back to traditional, well-known brands.
• Some people even actively look for products not tied to any celebrity or influencer because they want to avoid that whole scene or they think celebrity-backed products aren’t as good as products from dedicated brands.

Problem 4: The Products Aren’t Usually Very Good#

Let’s be honest: most new businesses fail, and most new products brought to market aren’t as good as the existing popular ones. Since most businesses aren’t started by celebrities, the chances that a truly great product that can beat the competition would happen to be founded by a celebrity are pretty slim.

• Unlike a bad product that just doesn’t have a celebrity name attached (which would likely just fail quietly), an influencer product might stay alive even if it’s not great, especially if it’s expensive, thanks to powerful marketing.
• Take Beats by Dre headphones. They used to be the top dogs in premium headphones and portable speakers. People liked the look, and if you wanted good headphones but didn’t know where to start, a product developed by a famous music producer seemed like a good bet because, hey, sound quality is subjective!
• Beats headphones were usually about 50% more expensive than similar headphones from companies like Bose, Sennheiser, and Sony.
• Beyond the price, the products often had poor build quality and sound profiles that really boosted the bass, which the average Beats buyer often mistook for high-quality sound.
• Despite this, Beats totally outsold those established brands, sometimes by 10-to-1, between 2006 and 2014, when Apple bought them for $3 billion.
• Today, that heavy marketing for Beats has kind of backfired. Many music fans who care about their image don’t want to be seen wearing them anymore. Why? Because it’s now pretty well known that they’re often considered an inferior product that was marketed heavily to people with money who didn’t know much about sound quality.
• Beats now has similar sales numbers to product-focused headphone companies like Bose and Sennheiser. Those brands have become popular with the same crowd who ditched their bright red Beats because Bose and Sennheiser are now seen as the choice for people who really know about music and sound quality.
• Apple probably doesn’t mind too much, though, since their own headphones (like AirPods Max) pretty much dominate the market for people who just want easy-to-use Apple headphones to listen to music.

Problem 5: Business Leaders Should Be… Boring?#

There’s actually a fifth reason, but it’s a whole other topic. Basically, sometimes the best leaders for businesses are the less flashy ones. If you want to know more about why “good CEOs should not be visionaries,” you should check out another video I made about that.

(And again, a big thank you to HubSpot for making it possible for everyone to get this kind of information!)