Celebrity appeal is not a user experience

Last week was a bad one for startups failing to deliver on their lofty, celebrity-stuffed promises to disrupt digital media.

First, there was Quibi. The mobile-video startup led by Jeffrey Katzenberg and Meg Whitman decided to forge ahead with their launch on April 6, in the middle of a pandemic. With almost $1.8 billion in funding, they hoped that bite-sized content from a star-studded roster (Jennifer Lopez, LeBron James, Chrissy Teigen, etc.) would cut through the noise and boredom of quarantine.

But within a week, Quibi dropped below the 50 most-downloaded apps in the iOS App Store. To date, it’s attracted only 2.9 million installs, even after opening up a free 90-day trial. Katzenberg’s defense in the New York Times is T-shirt-worthy: “I attribute everything that has gone wrong to coronavirus. Everything.”

Then there was Luminary. The paid podcast app launched in April 2019 with $100 million in funding, featuring exclusive podcasts from personalities including Trevor Noah, Lena Dunham and Guy Raz.

But like Quibi, celebrity appeal was not enough to support Luminary’s unproven model. As Bloomberg reported, the company has been burning through over $4 million a month so far in 2020 on just $500,000 in monthly revenue, and has a mere 80,000 paying subscribers after a year of operation.

The struggles Quibi and Luminary are facing feel uniquely 2020. But they also speak to a pitfall that startups have actually faced for years: Mistaking celebrity appeal for user experience.

There are countless examples of music and entertainment startups that relied too much on A-list talent for fan acquisition and retention. In many of these cases, fans didn’t end up caring enough on a deeper level to pay for a service that offered little added value in the way of access to said talent. Or, celebrity appearances failed to make a product “sticky” due to a lackluster user experience (hereafter UX).

Here are some examples of these companies that preceded Quibi and Luminary:

• Tidal, the Jay Z-owned streaming service, held a notorious press conference on its launch day in March 2015. A-list artists including Beyonce, Nicki Minaj, Madonna, Usher and Jay-Z himself took the stage, espousing Tidal as the “future of music.” But several publications called the event “tone-deaf,” due to the lack of smaller, indie artists onstage and the empty, vague statements about a promise to compensate artists more fairly. Tidal later tried courting users with exclusive content such as Beyoncé’s Lemonade and Kanye West’s The Life Of Pablo — but both of those projects are now available elsewhere, and the novelty of celebrity that surrounded Tidal’s early days seem to have waned. The service currently ranks #18 in the iOS music app charts, below Audiomack, SiriusXM and Smule, and does not appear among the top 200 free iOS apps. (Interestingly, Bloomberg reported that Luminary was “aiming to secure distribution deals with phone and media companies” to speed up its subscriber acquisition. Tidal has resorted to a similar tactic, relying on telco bundles with Sprint, Vivo, Telenor, MTN and others for subscriber growth. The primary danger with this tactic is ending up with too many “zombie users,” or registered accounts that are never logged into by their owners.)
• Shots, a selfie app, launched in 2013 with backing from Justin Bieber and Floyd Mayweather. But competition from Snapchat and Instagram slashed Shots’ entire user base by two thirds. The company shut down its original app in 2016 and has since adopted a traditional studio model, making content for personalities like Lele Pons and Anwar Jibawi.
• Dubsmash, the short-form video company, first catapulted into the mainstream as a lip-sync app thanks to unpaid promotion from the likes of Jimmy Fallon and Rihanna. But as I reported for Forbes, the app’s retention rates during its peak years in 2015 and 2016 were only around 5%. “We were just a creator utility, and were struggling to find a daily use case,” Suchit Dash, President of Dubsmash, told me at the time. The company had to lay off more than 80% of staff and move to New York to start from scratch. To their credit, they’ve since rebuilt a solid foundation on TikTok-like challenge videos that are not celebrity-dependent and now bring in over one billion video views a month.

When do celeb partnerships go wrong?

As illustrated in books like Zack Greenburg’s A-List Angels, celebrities are often powerful partners to tech companies. From a startup’s perspective, the primary benefits of celebrity partnerships are clear: Coveted access to otherwise inaccessible cultural gatekeepers, as well as lower customer acquisition costs (assuming the celeb brings their fanbase along for the rise).

But again, celebrity appeal in and of itself is not a UX. It’s a good tactic for user acquisition — but that’s only the first step. As Zach Katz, CEO of music-tech venture-capital firm Raised in Space, told me during a panel last year: “You’re actually turning us off by thinking we’re going to be like, ‘Wow, you have Nicki Minaj or Cardi B trying your new thing.’ It shows us how disconnected from reality you are. It has to be a real business.”

There are a few other situations in which over-reliance on celebrities is a bad idea:

Lack of prioritization. One common scenario I’ve seen with music apps is that a celebrity will make one post about them on social media as part of an endorsement deal, but then move on to the next thing. This leads to a sudden spike in downloads for the app, but then little follow-up engagement or commitment from the celebrity and their fans. These deals are ineffective because the prioritization between the talent and the startup isn’t mutual.

Film producer Keith Calder addressed this issue in relation to Quibi: “It’s ALWAYS better to be the top priority project for upcoming talent than the lowest priority project for big established talent.”

(Ironically, in its advertising, Quibi tended to promote its service as a whole instead of highlighting any particular show or celebrity. Hence the deprioritization was also twofold: Stars were not prioritizing Quibi, and Quibi was not prioritizing its stars, either.)

Expensive bets and market overconfidence. Even in the increasingly risk-averse Hollywood establishment, it’s commonplace for film studios and record labels to spend months or even years spending lavish budgets on content behind closed doors, without being able to test it with the public before launch. In contrast, in tech, if you stay in stealth mode for years and launch out of the blue without multiple rounds of user testing first, that’s seen as a mistake.

Both Quibi and Luminary launched new content and new software apps at the same time. I think both also assumed they could treat their tech like they treat their content — pouring millions of dollars behind a fancy launch, instead of having the discipline to test and iterate on the core product first without burning through content costs. (Case in point: As Bloomberg reported, “offering the most money in the market was a key part of Luminary’s initial sales pitch to podcast producers.” Their pitch to consumers, and regarding product rather than money, was less clear.)

This attitude also potentially demonstrates overconfidence in one’s understanding of a given market, which often accompanies an establishment background.

A mathematical argument for focusing on emerging talent

I decided to create a super simple mathematical model to illustrate my argument beyond one-off case studies.

I tried to simulate two situations on opposite extremes. On one end, I imagined an app that wants to attract users through partnerships with top-level artists. Each of these artists has a social audience of 50 million and a 1% fan conversion rate, and command a $1 million average fee for brand endorsements. The app itself also has a 30-day retention rate of 20%, in part due to a lack of focus on UX. (20% might seem low, but it’s actually normal for mobile apps.)

On the other end, I envisioned an app that wants to work with emerging rather than major artists for user acquisition. These artists each have a smaller social audience of 500,000, a higher fan conversion rate of 5% and an average brand partnership fee of $50,000. Due to a better UX, this app also ends up with double the 30-day retention rate (40%).

I wanted to see how much it would cost for these apps to achieve a retained audience of 500,000 users after 30 days off of talent partnerships alone. The results are below, and illustrate a marked difference in outcomes:

No worries if you don’t understand all these numbers. The main takeaway here is that the app that focuses only on major celeb partnerships and has a lower user-retention rate has to spend twice as much to get the same number of regular users as the app that focuses on emerging-artist partnerships and has a higher user-retention rate.

Moreover, the former app will end up with only five artists on a $5 million talent budget. In contrast, the latter will end up with 50 artists on a lower, $2.5 million budget — a much wider, less risky net.

Yes, the second company might have to work harder to reach out to and convince 50 emerging artists versus just five A-list artists. And yes, this model oversimplifies how the real world works. But the point is that it’s often better to build a long-tail foundation of artists who shape your product by being especially engaged over time, than to try to convince a tiny number of relatively detached and busy celebrities to post about your product once or twice.

What does a good talent strategy look like?

It’s worth highlighting a few entertainment-tech companies whose talent partnership strategies did work. Almost all the examples below focused on indie and emerging artists early on. It wasn’t because they couldn’t afford major celebs, but rather because they want to focus on perfecting their core use cases first.

Cameo

Cameo, a platform for fans to book personalized video messages from over 30,000 celebrities, is a prime case study for the importance of mutual prioritization in startup partnerships with talent.

As Marker reported, Cameo intentionally focuses on D-list rather than A-list celebs to drive its growth. The company’s co-founder/CEO Steven Galanis has a four-quadrant framework for evaluating the best kind of talent the platform, with willingness to engage on the X-axis and fame on the Y-axis:

Galanis’ ideal quadrant is the bottom right — talent that’s less famous, but more willing to engage. This category of talent is more likely to prioritize and invest in Cameo as much as Cameo invests in them, bringing more fans into the fold long-term.

This lines up well with my own mathematical model. Namely, I also found that artists who are less famous (read: less expensive) and more willing to engage with a given startup are more effective for user acquisition than those who are more famous (read: more expensive) and less willing to engage.

Cameo’s focus on the bottom-right quadrant of willingness vs. fame also vastly widens the pool of potential talent with whom they can partner. As Galanis told Marker: “If a person has, say, 15,000 Instagram followers, that counts as famous. If a person ever made an NBA roster, or appeared a couple of times on a sitcom, or performed a week at the local comedy club, or had a mildly popular YouTube video, or done anything that was paid attention to by a group outside their own friends and family, that counts, too. Fame is in the eye — and more to the heart of it — the wallet of the beholder.”

Wave

Wave is one of the biggest “virtual concert” startups today. The company has produced virtual, animated, interactive shows with the likes of Imogen Heap, Lindsey Stirling, Jean-Michel Jarre and Tinashe, and recently announced partnerships with major music companies including Roc Nation and Warner Music Group to expand their A-list talent roster.

But before working with top celebrities, Wave was TheWaveVR — a VR app for social music raves, focused on indie and DIY electronic music scenes.

TheWaveVR’s core product centered around designing and hosting DJ sets and parties in VR, in part through integrations with 3D art tools like Google Poly. As I reported for Billboard in 2018, many of its most loyal users also had more niche music tastes — expressing interest in subgenres like electro swing, vapor twitch and liquid funk, rather than just mainstream pop or hip-hop.

Celebrity appeal wasn’t required for Wave to nail its UX — nor was it required for investors to get on board. “People are not going to go out and buy a new headset just because some big-name artist is putting on a VR concert next week,” Alice Lloyd George, former principal at RRE Ventures and former board member of Wave, told me back in 2018. “I think it’s about getting the tools, UX and experiential aspects right, and about catering to our existing user base and making sure they love the product.”

After achieving a certain level of growth, it made sense for Wave to pursue more celebrity partnerships, as the company is doing now.

Postmates

Delivery app Postmates offers a different kind of case study around talent partnerships.

The company launched in Los Angeles in 2014, and intentionally framed its brand as an upmarket offering, targeting local creative and affluent users. In other words, celebrities started out as customers, rather than partners. As Forbes reported, this approach enabled Postmates to achieve a roughly 40% market share in L.A. by the end of 2019.

Only in recent years has Postmates paid celebrities like Post Malone, The Chainsmokers and Kylie Jenner for endorsement-type partnerships. But one crucial point that the company’s co-founder/CEO Bastian Lehmann made in his Forbes interview is that celebrity partnerships only work when you already have significant traction — not when you’re most desperate for it.

“You don’t want to have Kylie Jenner amplify your messaging when you have 4% market share in L.A.,” said Lehmann. “It’s a lot cooler if you have 45%. Everybody sees it and is like ‘I get it.’”

To bring it back to Quibi, Luminary, Tidal and countless other examples across music, entertainment and tech: Celebrity partnerships without traction tend to be just as fickle as stardom itself.