When you think of the most basic definition of an influencer — a person whose recommendations and opinions influence other people’s behaviors — Morgen Schick DeMann fits the bill. A former makeup artist and Tom Ford model for 30 years, DeMann doesn’t have the most followers in the beauty world. Her Instagram has a little over 14,000 subscribers, and her TikTok has about 110,000 subscribers. But the people who follow her listen, and they listen with their wallets.
“I sell out in minutes when I am on HSN. We buy lots of units — 10,000 to 15,000 units — and they’re coming from my posting the link on Instagram,” DeMann told TheWrap. “When I post something, 10,000 to 12,000 people buy them. I see the numbers in real time.”
It’s that direct influence that makes DeMann the perfect fit for VideoShops, an affiliate retail platform that’s specifically designed to fix several cracks in the creator-driven affiliate e-commerce business — particularly with small creators who don’t have the reach to set up affiliate accounts with the biggest names in the industry. Though it just launched publicly in August, the company has already raised $42 million in seed funding and is home to 50,000 seller storefronts, 3,500 merchants and over 500,000 products.
Affiliate marketing has become a major driver for brands, and the business is only growing. In 2024, eMarketer forecast that affiliate marketing ad spending in the U.S. would grow at a double-digit annual rate for the next two years and exceed $15 billion in 2028.
Though creators and influencers are a major driver for brands, the infrastructure around affiliate retail — someone such as a podcaster getting paid to promote a retailer’s products — can lead to clunky results and rarely account for the needs of smaller creators. Those creators are largely driving the monumental growth opportunities in the industry, but when it comes to brand partnerships they’re often being left behind.
“[Affiliate linking] was really built for brands and for the 1% of the people that had influence and could get approved by those brands,” VideoShops co-founder Nicole Winnaman told TheWrap. “We were on a mission to disconnect all of the affiliate linking, which is how we ended up building the entire retail engine on VideoShops.”
The result is a platform with no barrier to entry that eliminates the headache of bouncing all over the internet searching for different products. A creator can list all of their favorite beauty and wellness brands on their VideoShops page, which lets their followers purchase whichever products they select from VideoShops’ native checkout. Even better? Creators get paid their cut the same day a sale is made.
That stands in contrast to major players in the space like LTK and ShopMy (valued at $2 billion and $1.5 billion, respectively) who typically have followers requirements and simply redirect shoppers to brand and retailer websites. It’s a move that’s fine when a creator is talking about their favorite mascara but becomes overwhelming and cumbersome with a creator’s “Get ready with me” look, which can involve nearly two dozen different products and accessories.
Imagine being able to go into your trendiest friend’s bathroom and purchase the products she swears by that second. And that friend gets a cut of the sale. That’s VideoShops.
“It really highlights the people who are not trying to be famous or using their fame to now have a product line, which I know from being on HSN for 25 years. J.Lo went on three times and then couldn’t sell anything. It happens all the time,” DeMann said. “I’m the opposite. I’m leveraging my experience and how I’m walking through life.”
How VideoShops works
While working at another affiliate-focused company, Abra Potkin and Winnaman noticed gaps in the market, and they pivoted to fix what they saw as a broken system. The pair never intended to make the company that would become VideoShops. In 2018, the duo founded NOWwith, an entertainment company that created affiliate links for celebrities instead of creators. It was a big gamble for both of them. At the time, Potkin was vice president of talent and strategy at Verizon’s Oath Studios.
But as they became more acquainted with the world of affiliate retail, their focus changed. By 2021, the had closed an $18 million seed round, quit their full-time jobs and had big names like former Twitter CEO Dick Costolo and Greycroft co-founder Dana Settle among their investors.
The way VideoShops works is anyone is able to open up their own shop on a browser. Keeping it browser-based was intentional as Potkin and Winnaman wanted to eliminate as much friction for the potential buyer as possible. That meant creating a new app to download was out of the question. That VideoShops lives on browsers also means it’s easy for creators to add a link to their shop on their preferred social media channel.
“It allows the audience to have their shop in the places they want,” Potkin said. “If today it’s on TikTok, amazing. If tomorrow they want to be on LinkedIn or Discord or the new platform that pops up or simply send an SMS to their friends, they have that ability.”
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A VideoShops store owner then creates a page, which includes their name, as well as a brief description. They can then create their own “shelves,” a list of products they want to tell the world they enjoy. Those shelves can be as generic as “Haircare” or as specific as “My Makeup Routine for Prom.” Store owners also have the option to upload a video to each shelf, and they can then search through VideoShops’ list of over 440,000 products.
Many of the brands being sold on the platform offer discounts to the buyer. Those discounts are set by the brands, which have direct relationships with VideoShops. Discounts can also be adjusted by brands on a store owner-by-store owner basis. The base discount starts at 10% but it can go as high as 50%, so if a brand notices that a creator is especially great at getting people to buy their product, they can give that creator a bigger discount, which in turn will give that creator a bigger commission. Those commissions average 15%.
“They see formerly anonymous people that are actually moving the needle for them and driving a lot of sales,” Winnaman said. “They can manually up their commissions.”
VideoShops takes an 18% cut on every transaction on average. That 18% accounts for the 10% seller commission, 5% platform fee and a 3% credit card processing fee, per the company’s pitch deck. Once someone buys a product from a creator’s store, that creator is sent money via Venmo that day. In contrast, a larger player like LTK would pay out the commission on a weekly basis only after a creator has sold $25.
It even works when you buy products from yourself. As an experiment, I purchased two First Aid Beauty products via VideoShops, which would typically cost me $62 on Sephora. But on VideoShops my total came out to $52.70 — a 15% discount thanks to the company’s partnership with FAB — and the company then sent me an additional $7.91 as my cut of sales commission.
An outdated affiliate retail market
As the creator economy has come to be more valued, a great deal of that growth is expected to come from macro, micro and nano influencers. These are all creators who have 1 million or fewer followers. Specifically, a macroinfluencer is typically defined as someone who has 100,000 to 1 million followers; a microinfluencer has 10,000 to 100,000 followers; and a nanoinfluencer has 10,000 or fewer followers.
In the earlier stages of the creator economy, brands and researchers commonly believed that partnering with the creators and influencers with the biggest followings would yield the highest return. The logic makes sense. If you can get Alix Earle to promote L’Oréal, it stands to reason that some viewers among her 12.4 million followers would buy the product. But as the creator economy has evolved, creators with lower follower counts and higher engagement rates are proving to be the better bet for brands, especially as younger generations prioritize authentic recommendations.
“What we’re seeing is creators really feel that they are media properties in their own right. Even mid-sized creators have followings that are larger than lots of media companies, and they have people who really buy into things,” Ruth Mortimer, global president of Advertising Week, previously told TheWrap.
VideoShops was created to address that changing dynamic.
“To be constantly sharing out there and inspiring your tribe to go buy and yet never be able to be rewarded for that because you didn’t have X amount of users, it didn’t feel fair,” Potkin said.
The platform also solves for a challenge on the brand side. It may be relatively easy to set up a digital shop, but standing out is a massive obstacle for smaller brands. And while investing in creators and influencers is relatively cheap for brands used to working with celebrities, those costs can be detrimental to small business owners. Winnaman’s own candle company folded because of that very problem.
“With this you’re de-risking all of these brands by saying, ‘Hey, you’re able now to turn your customers, have them earn with you and give them the tools to turn on the storefront,’” Winnaman said. “We’re not just building the commerce tools. We’re building entrepreneurs just by letting them in and giving them the tools to be able to get out there.”
