Celebrities Will Drive the Next Wave of Ecommerce Startups

By Jeremy Liew , written on June 22, 2012

From The News Desk

In my last guest post I explored why ecommerce startups come in waves, and looked at three separate periods when large numbers of ecommerce startups got to scale. In each era, a new scalable and inefficient customer acquisition channel emerged, spawning the growth of each wave of new ecommerce startups. But once service providers emerge to make the channel efficient, the window closed for new startups.

So what is the next scalable, inefficient customer acquisition channel? It's being fed by celebrities and their newfound ability to connect with their fans via social media. In the past, celebrities were only able to communicate with their fans through traditional media. This was limiting, because it was a one-way dialogue, with no opportunity for fans to respond to or interact with them. But today, thanks to Facebook, Twitter, Tumblr, and Pinterest, celebrities can talk directly to their fans, and can share the products they like, love, and even produce.

Celebrities have been used in marketing campaigns for a long time. That is not a new idea. But what has changed, is that celebrities can now directly drive customer acquisition, not just provide a brand halo. A photo of Tiger Woods wearing a Rolex in Fortune magazine doesn't make you want to go out and buy a Rolex right away. It does drive positive brand association though. But when Jessica Alba talks about the non-toxic, chemical-free diapers that The Honest Company* makes, and urges her fans to use chemical-free products for their own babies, she is driving direct customer acquisition. That is a powerful change.

Guthy Renker understood this when they worked with Jessica Simpson to build ProActive into the juggernaut brand that it has become through direct response infomercials. But the internet has made this a whole new ballgame.

The top tweeters are almost all celebrities.

Today, companies like Shoedazzle* (Kim Khardashian), The Honest Company* (Jessica Alba), and Beachmint (Kate Bosworth, the Olsen Twins and others) are all directly working with Hollywood celebrities who curate and promote their products. OpenSky and Ahalife have taken a marketplace approach, letting people from movie stars and celebrity chefs, to magazine editors and celebrity trainers, curate lists of products that they love.

Some celebrities are actively embracing this opportunity on their own account. Gwenyth Paltrow has developed a strong following through Goop where she endorses products, hotels, food, restaurants and other things she loves on a daily basis through her blog and email.

It is worth noting that celebrity is also starting to change its meaning. Microcelebrities like mommy bloggers are now endorsing products, and become trusted guides for consumers.  Michelle Phan, whose YouTube channel has almost two million subscribers and is the top beauty channel on YouTube, encourages her fans to sign up to MyGlam, a monthly beauty products bag. Anyone that has built an audience can drive customer acquisition. You don't have to rely on A-listers.

This market is still inefficient and exciting. The big companies are still mostly focused on brand based celebrity endorsement, and that leaves new opportunities for fast moving startups.  We are still in the early stage, but there are already some companies emerging to help make the market efficient.  For example, Adly has created a marketplace where advertisers can get celebrities to Tweet about their products. But the window is well and truly open for commerce companies to break through using celebrity as their scalable customer acquisition channel.

Speaking of social networking, if you found this interesting, follow me on Twitter @lightspeedvp.

[Disclosure: Those marked with an asterisk are Lightspeed Venture Partners portfolio companies.]

[Image via Shutterstock]