How an $800M Company Grows through Influencers and Content

Special thanks to Ipsy's Spencer McClung and to 500 Startups for their contributions to this case study.

Ipsy is a vertically integrated beauty company, covering all ends of the consumer funnel from discovery through its media properties and creator relationships, to sampling with its monthly subscription beauty bag to commerce through its site and app. The company is valued upward of $800 million based on last year's series B and the growth the business has seen since then. 

Ipsy’s a fascinating case study because the company seeded its growth with influencers and content. When I spoke with Ipsy’s EVP of media and partnerships, Spencer McClung, at a 500 Startups event in Los Angeles, we dug into how Ipsy (which is part of the 500 Startups portfolio) has scaled its influencer-driven content marketing -- and kept it affordable and defensible -- in the hyper competitive space of makeup and beauty.

Table of Contents

1. What’s Your Ideal Acquisition Channel? Ipsy’s Multi-Layer ‘Fit’ on Youtube
2. Ipsy’s content & influencer strategy: Bring it in-house
3. The Customer Awareness Lifecycle and content’s ROI
4. How Ipsy sources influencers
5. Influencer compensation structure and talent liquidity
6. The right company stage for content investment

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What’s Your Ideal Acquisition Channel? Ipsy’s Multi-Layer ‘Fit’ on Youtube

Ipsy’s subscription product is its monthly Glam Bag, a cosmetics sampler that ships out to over 2 million paying subscribers per month. Glam Bag generates $10 per monthly subscriber, and Ipsy is on track to ship to over 2 million people each month. Based on these numbers, the company's revenue looks to have surpassed $300 million ARR. 

An Ipsy Glam Bag, as reviewed by beauty blogger Natasha at

An Ipsy Glam Bag, as reviewed by beauty blogger Natasha at

Ipsy’s content network brings together influencers with a total of 46 million subscribers. But Ipsy is not just subscription product; the company is also a content business offering a unique and hard-to-copy solution to the billion-dollar cosmetics industry -- authentic yet high production review-style content with hundreds of millions of measurable impressions.

All of this is fitting, but no less surprising: Ipsy was anchored by a powerhouse influencer to begin with. 

Michelle Phan uploaded her first video in 2007, got 40K views within the first week. Today, that video has over 11 and a half million views.

influencer marketing

Three years later, Ipsy founders Marcelo Camberos and Jennifer Goldfarb knew that they wanted to bring on board a partner to anchor what they hypothesized would become their biggest growth loop, content. Michelle had a substantial built-in following to an existing content brand, all on top of a critical discovery and sharing platform for product’s target demographic.  

As an acquisition channel, YouTube is nearly unmatched. It boasts over a billion users around the world watching over 40 minutes of video content per session. For Ipsy, it was a powerful and robust channel to bank the company’s growth on.

Spencer McClung shares the backstory:

“Michelle and the founders got together and said, ‘Hey why don't we try promoting this subscription makeup service to your subscribers and let's see what happens.’ 
She put it in a video one day about 4 and a half years ago, and the next day they had thousands of orders. That’s how they knew they knew they were onto something.”

Since that beginning, the company has remained strongly creator-focused. McClung says Phan continues to mentor creators and look for ways to give back to them on a regular basis, and that this investment into individuals is part of the company’s secret growth sauce. 

“She will take the time to sit down with individual creators and coach them on growing their audiences, on getting nervous, on whatever is pressing for them. Many of the most influential creators are very young and still finding their feet. Developing that kind of relationship with them, and truly seeking to help and give back, are something that Michelle is passionate about. She’s been in their shoes.” 

Sometimes there can be limits to a brand that's define or driven by a single influencer, as useful as it is to count on the advantages of a built-in audience. And yet, Ipsy has been able to leap past the limits of Phan’s powerful personal brand by having an influencer who sways the influencers

Ipsy’s content & influencer strategy: Bring it in-house

A cornerstone of Ipsy’s content strategy is to seek out influencers with their own personal brands, audiences and traction in the wild west of YouTube, and bring them into the fold via Ipsy Open Studios, the company’s in-house creator program. 

The in-house creator program also turns out to be the company’s most effective technique for diversifying its reach beyond the tall shadow of Michelle Phan.

“It was an early idea from Michelle, and it stemmed from her own experiences in the early days of being a creator and not having all the resources that she would have liked,” explains McClung. 

Open Studios has become a selling point of its own, and Ipsy uses it as a way to reach more creators in Los Angeles where the media program is based, as well as in other locations around the world. Open Studios gives influencers access to Ipsy’s top-of-the-line production resources, as well as access mentoring and community building activities. 

An Ipsy Open Studio space captured by beauty influencer Tiffany at

An Ipsy Open Studio space captured by beauty influencer Tiffany at

The program allows the company to build a group of in-house creators that are dedicated to the business, says McClung of the approach. Influencers continue to create their own content and editorial outside of Ipsy, without much nudging from the mothership that employs them. 

“If you have a creator that is completely or overly dedicated to your business, it becomes inauthentic, and causes a breakdown in organic growth.” 
The company’s philosophy is to make sure that we’re supporting the creators by giving them resources and ways to grow their businesses independent of Ipsy so that their audiences are real and their audiences really are following them because of who they are.” 

In the beauty industry, mentorship and apprenticeship are familiar concepts. The idea of apprenticing yourself to somebody who’s slightly ahead of you and then doing it all under the protective wing of a brand as a brand rep is a recognizable template from the very industry that Ipsy is simultaneously bolstering and disrupting.

Ipsy has created a modernized, and more distributed, model of what the beauty industry is already doing. Many beauty content creators already have a work background in the traditional beauty industry. They've worked in stores, or they've been a stylist or a brand representative. Ipsy chose to iterate on what was a recognizable format for how their target influencers were already interacting with beauty brands. 

Production space, shared by beauty influencer Tiffany at

Production space, shared by beauty influencer Tiffany at

The Customer Awareness Lifecycle and content’s ROI

Many companies, especially at the earlier stages, are driven by a need to demonstrate relatively quick ROI to their content efforts, and can tend to push harder on brand to try to get there. While it’s tempting to put the company brand front and center within content -- whether that’s influencer content or other content marketing -- this is a mistake. 

Most customers don’t start as customers; they start as people looking for information around a general problem. The job of content marketing is to sharpen their awareness around that problem and then to offer trustworthy information about possible solutions (but not necessarily branded ones). Finally, in the last stages of customer awareness, when leads have been nurtured and qualified by the previous stages, content introduces a product -- whether that’s a specific eyebrow pencil or a SAAS tool.     

influencer marketing

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“If you're going to work with creators in an authentic way, you have to defer a lot of your own calls on what you think is best. 
To measure whether it’s working, we have our checklist of things that we want to fulfill for brands, and then we let our creators run with it. Sometimes it may not work, but it usually does. The results are typically great and the brands are ecstatic, but we hold the line at letting the creators find the best way to integrate specific products into their content.”

Instead of pushing for advertorial, Ipsy’s media team looks to foster matches between brands and creators that are initiated by the creators themselves. In other words, influencers pick the products they actually like, test them out, and create content around the experience.

The beauty business, says McClung, is by its very nature brand-driven. You can’t talk about makeup and beauty without talking about brands, and that’s without any sort of dedicated sponsorship component. According to McClung, beauty influencers have a lot of products around them as part of their content creation, so finding organic matches between influencers and brands happens easily. 

In any given month, McClung’s team works with up to one hundred different beauty brands under their three lines of business. Ipsy runs its monthly Glam Bag subscription business, featuring brands, but also has an e-commerce and flash sales business that that presents another opportunity for brands to get involved. Finally, the company’s YouTube influencer network -- the content backbone of Ipsy itself -- is also a canvas for brands, as in-house stylists get to pick a brand they like or are curious about, to be the subject of their next video.

McClung is adamant that advertorial, however subtle, is the death knell of content. 

“It always backfires. The audience won’t yell and scream about it, but they will sniff it out and quietly go away. 
We have a pretty complicated process of matching the brands with the creators and making sure that it's real and natural in order to prevent this.”

How Ipsy sources influencers

Ipsy Open Studios is proof that the company is not just a subscription e-commerce, or a flash sales e-commerce, or a brand studio, but also a content business. For a content business, finding its content creators, making sure they’re successful, and funding that success are critical steps to get right. 

Ipsy strategically targets influencers who are on their way up, who create great content, but aren’t yet superstars. McClung’s team looks for influencers with between 50,000 to 150,000 subscribers on YouTube to indicate early traction. This level of reach lets the team dig into the analytics and see what's happening with their audience in terms of growth, retention, and engagement. At that stage, says McClung, you have enough data to figure out whether there’s “something that’s really special there or not” and yet you don’t yet have a big expensive superstar on your hands.

As individual influencers grow their reach, brands begin to call them directly -- and that’s probably too far for Ipsy. They’re looking for the sweet spot where there’s initial traction, a strong growth rate, but perhaps not an extraordinary topline figure just yet. The company also looks for content quality, and a match with the existing Ipsy brand: “Could this person be a good spokesperson or partner of ours?”

Influencer compensation structure and talent liquidity

If you're investing in creators -- mentorship, production resources, and the reach and community of the Ipsy network -- and you’re successful with that investment, how do you make sure your equity doesn’t walk out the door? McClung says that the key is in aligning the company’s interests to the interest of the influencer, and understanding what’s most important to both sides. 
He says there have been two key ways in which Ipsy ensures alignment and defensibility of their influencer content organization. 

It starts with how you structure the relationship itself. While there are many different ways to structure the relationship, from one-off paid deals to equity sharing, one-off paid arrangements encourage a more transactional, and short-term, relationship. By contrast, equity arrangements encourage alignment with long term interests because the influencer is literally a bought-in shareholder of the business. The emphasis on equity goes back to the founding team itself. Michelle Phan is the company’s anchor influencer, first and biggest content creator, and a part owner of the business. 

The other way that Ipsy has worked on talent retention and defensibility is by investing in their own process as much as they invest in the individuals themselves. As a company, you may invest in building up an influencer from a modest 30,000 subscribers up to a much more impressive 300,000 subscribers. Even if the influencer walks out the door, a smart company will have honed and perhaps codified their growth process along the path from 30,000 to 300,000. In that case, the company retains intellectual capital -- the growth learnings that can be reapplied to new content and influencers.

McClung suggests that companies should expect some influencer talent liquidity.

“The important thing is to find the sweet spot for your company. As the size of the creator you’re working with grows, and depending on how you’ve structured your relationship, it may become more expensive to work with them. So, maybe you don't need to work with really big creators. Maybe you just work in your sweet spot range and as your creators get bigger and out of your price range, you let them go.” 

The right company stage for content investment

Despite (or maybe in addition to) all of their existing content efforts, Ipsy continues to invest more in content and influencers as a core growth strategy.

"I don't necessarily think you should wait until you're a large company to do that. Early in the lifecycle of your company, if you’re considering working with influencers as part of your mix, then just getting started is better than waiting," says McClung.

Ipsy enjoys a business model that’s highly profitable on the subscription side -- $10 bags shipping out to over 2 million monthly subscribers. Thanks to this strong revenue stream, the company is able to re-invest those profits into their studio side. Thanks to their studio business that's been up and running for several years now, they can continue to support the subscription business with content, creating a self-renewing growth loop for the business. 

Doing content isn't just a luxury, says McClung, it's a part of the greater growth vision for Ipsy:

We can pivot those assets, which we're doing pretty significantly right now going into next year to produce content that simply sort of entertains and delights our audience because we think its important that we graduate from a product business to a community. In the near future, we want Ipsy to be community of beauty enthusiasts and lifestyle enthusiasts, not just a product or subscription company, and we're channeling our resources towards that.
It’s great to run a successful and profitable subscription business, don’t get me wrong. But being a product-based company only is limiting. We have a much bigger vision of where to take the company, and content is core to that vision.”

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