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

I literally woke up to some big news in E commerce. So we're going to analyze it and tell you how it affects you, because it does. This is big for online business owners. So it's time for Capitalism Special Report.

This is Ryan from capitalism.com and we're going to 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 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 is officially a billionaire. Now. What's interesting about both of these case studies, besides the billion dollar 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 exact 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 most underpriced areas to get attention from influencers, 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 assigned 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 into 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 customers. 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. When 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 poll 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 are 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 are 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@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 ecommerce billionaire. Spoiler alert. They're even younger than Kylie Jenner. Enjoy.