Kardashians herald the age of Instagram billionaires

By Alex Webb,

Kim Kardashian West might have made her name on reality television, but she has made her fortune thanks to Instagram. The irony is that, while she drives a vast amount of traffic to the Facebook Inc.-owned social media platform, the photo-sharing app itself doesn’t make much of a cut.

Forbes now reckons she’s a billionaire. Let’s set aside the assertion that it’s “official” for a second — it is, after all, just an estimate and the magazine previously revoked her sister Kylie Jenner’s billionaire status. However you slice it, West is a fabulously wealthy woman. And she’s built that fortune by parlaying her fame into a media brand that helps her sell products, not just through sponsored Insta posts, but also items from KKW Beauty, the makeup label she founded in 2017, and Skims, the shapewear line she launched a year later.

Also read: Kim Kardashian is a billionaire, says Forbes

Kardashian West’s success shows not only the scale of the opportunity for Instagram but also how slow the app has been to capitalise on it.

As my Bloomberg News colleague Sarah Frier chronicles in “No Filter,” the definitive account of the rise of Instagram, the Kardashians have used the platform to hoover up money that the tabloid media industry once would have made from her image.

Back in the 1990s, when the paparazzi were in their pomp, pictures of celebrities going about their daily lives — so-called “Just Like Us” snaps — could fetch $15,000 a pop from tabloids and magazines such as Us Weekly and People, according to the BBC. The publications would in turn sell advertising space alongside those images and rake in a hefty profit.

Thanks to social media, the Kardashians were able to cut out the middle man. Instagram let the family post images that they controlled and allowed them to essentially sell their own advertising space to brands. “They’re a strange hybrid of media channel and content creator rolled into one,” says Nik Speller, strategy director at the agency Influencer in London. The upshot is that Kardashian West can make $1 million per sponsored post, while paparazzi now earn just $5 to $10 apiece for “Just Like Us” snaps.

The Kardashians’ use of Instagram is extremely valuable to the platform — Kardashian West drives a huge amount of engagement from her 213 million followers to whom Instagram can show ads. Testament to their importance was Kylie Jenner’s questioning in 2018 whether people used rival Snapchat any more: Her tweet erased $1.3 billion in market value from parent company Snap Inc. in a single day.

Yet Instagram extracts little direct value from what the Kardashians actually post. Facebook doesn’t get a cut of any sponsored post, nor of the products sold as a consequence. This is one reason why, in 2019, Facebook launched Instagram Checkout. It let users click on a brand linked in a sponsored post and buy it right within the app. Facebook would get a 5% cut of any purchase, though it hit pause on those fees early in the pandemic.

That was a shrewd move to drive adoption of Instagram Checkout at the very moment that more retail shifted online. And crucially, it let Facebook better understand when users buy a product — valuable information that lets its advertising business better compete with Amazon.com Inc.’s growing ad offering.

Also read: Kim Kardashian's Skims brand valued at $1.6 billion in latest funding

Now the company needs to focus on getting more influencers to sell through Instagram Checkout. Although KKW Beauty sells its products through the service, Skims does not. In 2018, KKW Beauty generated $100 million in sales. But the sale of a stake in Skims is what tipped Kardashian West’s net worth over $1 billion, according to Forbes.

If even a fraction of the other six million accounts that have more than a million followers were to use Instagram Checkout to sell products, it would quickly become a very compelling part of Facebook’s business. Analysts expect the company to generate $108 billion of revenue this year.

Kardashian West managed to subvert the old compact between advertiser, publisher and paparazzo. Facebook might regret not having done more to get its cut too.