How Ipsy Beat BirchBox

Using social data to track the subscription beauty company's unprecedented rise

At some point last year, ipsy did the unthinkable: it surpassed BirchBox’s subscriber count. On its face, this reads like a classic David v. Goliath story. BirchBox, a subscription-based provider of sample-size beauty products, was started in Harvard Business School, raised tens of millions in venture capital shortly after launching, and essentially jump-started the whole subscription box craze. Ipsy, on the other hand, was a relative latecomer to the subscription box market, was started by an industry outsider, and raised and spent very little.

But dig a little deeper and it becomes clear that the rise of ipsy isn’t a run-of-the-mill underdog story at all. It’s actually something much more interesting. The story behind ipsy’s ascent to the top of the subscription box industry is really a story about the power industry influencers and a blueprint for organic audience growth

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It is a story of how ipsy’s founder, Michelle Phan, parlayed a devoted internet following into one of the country’s fastest-growing companies. It is a story of how new modes of marketing continue to outpace and re-write the old-school playbook.

Above all it is a story about the power and reach of social networks.

But before we tell that story, it’s worth explaining how we uncovered it.

 Researching the Rise of the Subscription Box Economy

At Crimson Hexagon, we are always looking for new ways to slice and dice social media data to see what it can tell us about how the world is evolving and what these changes mean for businesses. Because of this, we are constantly analyzing social data with an eye toward industry shakeups. For example, we recently released a report about the rise of the sharing economy because we wanted to see what social conversations could tell us about how the growth of upstart services like Airbnb are affecting long-standing industries like travel and hospitality.

Sensing a similar shakeup in the retail world, we decided to research the rise of subscription services. We identified the major players, researched the industry landscape, and then analyzed millions of social posts from actual people sharing their thoughts about and experiences with subscription box services.

We uncovered a lot of interesting findings, but one instantly stuck out: the rapid rise of  ipsy.

Ipsy’s Ascent

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For example, when we tracked the volume of conversation surrounding subscription services in the beauty and makeup category, we were shocked to see the unprecedented growth of ipsy.

In just a few years, ipsy had rocketed past subscription box incumbents like BirchBox and Dollar Shave Club. Indeed, the pace of conversation growth was unparalleled: none of the categories we studied — apparel, food, pet toys — showed anything remotely similar.

We started to think a lot about ipsy. Why had it grown so quickly? What has led to its dominance of the conversation on social networks? What can we learn by studying its rise?

Once we dug in a little deeper, the puzzle pieces started to come together. The first clue was the age of the average ipsy fan.

Young Love

When we analyzed the ages of people discussing ipsy on social networks, we discovered that the company has by far the youngest audience of any of the subscription box services we studied.

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A full two-thirds of the people posting about ipsy are under 25. Nothing else in the beauty category comes close to that. (In fact, BirchBox is the closest, and less than a third of its audience is under 25.) In the 18-25 category, which is a fiercely contested piece of demographic real estate for retailers, ipsy is especially dominant. 43% of ipsy fans are in this age range, more than twice as much as for any of the other 11 subscription services we studied.

 

When we looked at the other interests of ipsy fans, the youth-centric story became even clearer.

For example, here is a comparison of the interests of ipsy fans with those of BirchBox fans.

The interests of ipsy fans — Justin Bieber, Snapchat and Glee — compared to those of BirchBox fans — parenting, management and entrepreneurship — support the story that ipsy is a brand designed for millennials.

But it was the affinity listed at the top of that list that led us down another interesting path.

Through analyzing the social media conversation surrounding ipsy, we learned that it wasn’t just the service itself that resonated with young consumers, but the ecosystem surrounding it as well.

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YouTube Army

Ultimately, we weren’t just interested in the youthful demographics of ipsy’s audience — we were curious to learn how it attracted that audience. When we saw that ipsy fans were disproportionately interested in YouTube, the picture started to come into focus.

Much of the social conversation surrounding ipsy didn’t just focus on the company itself, but also the story of its famous founder, Michelle Phan.

chx-n16-020_subscriptionbox_book_v1Download the FREE Guide to learn how the subscription economy is changing retail

For those who don’t know, Phan rose to fame on YouTube for her makeup tutorials. It didn’t take long for her to become a true viral sensation, and she even landed on Forbes’ 30 under 30 list. Every week, tens of thousands of people streamed her videos to soak up her makeup tips. Before long she had 8 million subscribers and was one of the biggest stars on YouTube.

Naturally, it soon became clear that there was an appetite for Phan’s expertise beyond just makeup tutorials. She teamed up with some industry veterans — Jennifer Goldfarb of Bare Essentials and Marcelo Camberos of Funny or Die — and started selling personalized “Glam Bags” for $10 a month.

The path from internet celebrity to successful business executive is relatively uncharted, but Phan knew she had a secret weapon.

Ipsy Ambassadors

With a broad and passionate fanbase already built in, Phan and her team went all in on a very specific (and potentially risky) strategy: eschew traditional advertising and marketing in favor of leveraging her existing network of Phan fans.

According to Fast Company, ipsy is committed to expanding its already huge network of amateur beauty vloggers and content creators.

“They just have to make a few videos a month that are ipsy related; the rest is up to them,” Phan told the news source.

This network of enthusiastic ambassadors has not only helped ipsy spread the word, it has allowed them to do so on a shoestring budget.

“We don’t need marketing money,” Phan recently told Inc. Instead, she relied on her vloggers to be her marketing team, posting and re-posting ipsy-related content and getting in front of millions of consumers every week.

In exchange for their advocacy, ipsy supports this network by giving them access to mentoring, networking, and publicity opportunities. Ipsy is, in a sense, building a community instead of a company.

For this, Phan is leveraging her many years of experience as an influencer herself. Everything she’s learned — and the cachet she’s earned — she is using to support her growing legion of influential beauty vloggers, who, of course, are in turn helping her cement ipsy’s position in the market.

“I’ve built the roadmap for the past eight years for any beauty creator,” Phan told [a]list. “It’s something I had to build out, and now I want to go into the next stage of my career and mentor other creators and pave a new road.”

Building a Community

This fact — that the product is ultimately less important than the network — is the true crux of ipsy’s success, and the main thing that other retailers can learn from the company.

Today, brands of all sizes and types are doubling down on their efforts at audience engagement. They are building out their social media and audience insight teams to try to figure out who their customers are, what they’re interested in, and the best ways to engage them. Phan and ipsy seemed to crack that code intuitively. While other, larger companies play catch-up, ipsy extends its lead.

This community focus is not an accident, it is the central tenet of the company.

Marcelo Camberos, ipsy’s CEO, came from Funny or Die (another organization known for its devoted following), so he thinks about this a lot.

He told Fast Company that ipsy is built on the philosophy that an active, tightly connected community is the secret behind the company’s growth. People join ipsy for the Glam Bags, he told the outlet, but the community experience “is why they stay.”

The social data we studied supports Cambero’s belief. Ipsy has not only dominated the social conversation in the beauty subscription-box market, it has buoyed the entire category. Thanks to ipsy’s rabid fan base, the beauty category dominates the entire subscription box conversation.

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1. The Power of Influencers

Subscription services are not only about the products or the convenience of having them delivered to your door. In fact, our analysis showed that one of the most common reasons people subscribe to these services is because of the access it gives them to a network of knowledgeable, respected beauty mavens.

Between 2010 and 2015, there were more than 30,000 posts specifically praising the curated and personalized products included in beauty-based subscription boxes. Consumers aren’t just signing up to receive shipments of beauty products they would have otherwise bought in a store — they are signing up to receive products endorsed by a community of experts.

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Phan’s far-reaching brand — as well as her community of evangelists — is an extremely compelling draw for consumers. Perhaps even more than the products themselves, it is the connection to tutorials and tips that makes ipsy stand out from its competition. Without the influencers amplifying the company’s reach and adding value by selling advice and not just makeup, ipsy would be almost identical to struggling rivals like BirchBox.

Phan’s network of influencers is not available to other brands, but her blueprint for using it is. In a recent post, Mediakix wrote about how brands can adapt ipsy’s approach.

“For brands, replicating Phan’s success means first understanding how she leverages the attention of an influencer’s large audience and capitalizes on the unique relationships social media stars have with their followers, then emulating her strategy by partnering with digital stars to increase brand awareness, boost social visibility, and drive product sales,” the outlet states.

Not unlike other subscription services — like the wine service, Club W — ipsy is as much about education and self-improvement as it is about the products contained in its Glam Bags. And Phan’s collection of vloggers and influencers is central to that strategy.

2. Constant Engagement

Historically, companies had to pay to play in terms of advertising. Attracting new customers meant identifying the best places to find them, coming up with the right creative to entice them, and paying to get it in front of them.

But social media has changed this. Brands that are able to build an organic following on social networks find that they have free and unfettered access to their customers — and perhaps more importantly, the extended networks of those customers.

Since its founding, this web of fervent Phan followers has helped ipsy expand its footprint without dumping millions into traditional advertising.

3. Community Building

The last lesson may be the most important: today’s consumers crave community. Always connected, and dedicated to engaging with others like them, modern consumers make purchase decisions based more on the network around the product than the product itself. We’ve already talked about the importance of influencers, but that’s really only half of the equation — the other half is the much larger cohort of users. Users who want to not only learn from ipsy influencers, but also share their experiences and connect with like-minded fashionistas. 

Ipsy embodies this point better than almost any other company. Michelle Phan rose to fame because she herself was an avid member of the makeup   community — sharing tips and recommending products and engaging with thousands of others like her. However, she didn’t rush or cheat the process. She didn’t shill for specific products or leverage her influence for instant gratification. Instead she methodically set out to gain the trust of her fans and cement her position as a key player in the personal beauty category.

And when she decided to start ipsy, this community building started to pay off. Her devoted following was more than happy to pay $10 a month — not just for the products they received, but for the right to be part of an active (and interactive) beauty community.

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Retailers may have to work hard to attain even a tenth of the audience Phan started with, but it can be done. Following Phan’s strategy — understanding your audience, engaging with them regularly, and earning their trust by putting their needs ahead of quick profits — is in fact a repeatable model for customer growth and loyalty.

They may just have to throw out the traditional marketing playbook to get there.

 

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