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New face of celebrity endorsements

David Smothers January 21, 2013

He is not as involved in music as he was in the 1990s, yet Sean “Diddy” Combs is on course to be Hip Hop’s first billionaire according to Forbes.

The rapper, who dominated the 1990 with his Bad Boy outfit, has made millions of dollars from his career and clothing line, Sean John. But it is his association with Diageo’s Ciroc Vodka that is expected to push him to the billion dollar mark.

P diddy“Diddy’s ten-figure dreams hinge on a lucrative partnership with Diageo’s Ciroc vodka. Diddy teamed up with the alcohol conglomerate back in 2007 with the aim of perking up sales for the fledgling spirit,” said Forbes.

This was not your ordinary brand-superstar association, Diddy wasn’t just coming in to endorse the product and get a cheque, no, that is so five years ago, these days, you invest in the product.

“Diageo agreed to split any profits with him; if the company ever sold Ciroc, he’d be entitled to a share of the proceeds,” reported Forbes. The rationale: Why not? The brand wasn’t selling, and Diddy was always known for having a flair for marketing.

According to The New York Times, Diddy got into a 50-50 joint venture with Diageo and he became the brand manager of the Ciroc vodka line. Mr Combs says he made the profit-sharing deal only after refusing to work solely as a pitchman.

“My brand is rocket fuel. It would take this brand 10 years to get to where I can take it in one year,” Diddy said. “I’ve gotten to the point where I don’t want to do just endorsements. I want ownership.”

In 2007, sleepy Ciroc was moving cases at a rate of 60,000 per six months, or 120,000 per year. In 2009, Diddy’s second year with the brand, Ciroc moved 400,000 cases. This year Ciroc is on pace to sell more than 1 million cases. The boom was fueled in large part by Diddy’s diligent dollar-on billboards, in lyrics, on Twitter and even through a self-proclaimed nickname, “Ciroc Obama.”

Welcome to the new face of celebrity endorsements. They are now not just the face, they are entrepreneurs.

In May, 2004, rapper 50 Cent is estimated to have bagged $100 million – after taxes – after soft drinks giant Coca Cola announced it would pay $4.1 billion to buy Vitamin Water, the bottled water company in which the “Get rich or die trying” rapper owned a stake.

Complex magazine credit the late Chris Lighty for the deal. “Not only did Lighty hook 50 up with Glacéau, but he was also the one who insisted on getting stock in the company,” reported Complex.

The Washington Post broke down how the deal was hammered.

“One of Lighty’s business acquaintances was Rohan Oza, a marketing executive who had just moved from Coca-Cola to Glaceau. He needed more than brand messiahs to convert individuals. He needed brand ambassadors to influence millions. That’s when Oza saw a commercial for Reebok sneakers in which Lighty, rather sneakily, had his artiste chug a bottle of Vitamin water,” reported the Post.

But Lighty didn’t want an endorsement deal. He didn’t want cash. “We want to invest,” Lighty said. “50 Cent would take a stake in the privately owned company, one that would graduate over time and escalate if the company hit certain numbers.”

Rap Mogul Jay-Z was approached years back to help popularise the then struggling New Jersey Nets basketball team and just like the smart fellow he is, he didn’t seek out a cheque, he wanted a stake in the team and years later, he is reaping the fruits having been the face of the Nets who have since moved to Brooklyn and changed their name to Brooklyn Nets.

Jay-Z, who cannot go two songs without letting everyone know he is an owner (he is a minority owner) of the Nets, and this has given him so much credence as the business he says he is when he rapped, “I’m not a businessman, I’m a business man.”

Forbes continues: “Ashton Kutcher’s venture firm, A-Grade Investments, is scanning for tech startups to lend seed money to, as is Leonardo DiCaprio… Another music force turned entrepreneur is Lady Gaga, who has become a major shareholder in Backplane, a platform that connects music and sports stars with their fans across various social networks.”

“Most recently Justin Bieber was spotlighted as a connoisseur of tech start-ups. The young pop singer’s portfolio consists of stakes in the messaging platform Tinychat, the social-app Stamped, the gaming outfit Sojo Studios and Spot­i­fy. The list of business savvy celebrities goes on. It’s not just glory and profit for celebrity entrepreneurs: some investor celebs wind up on the losing side of a deal.”

Ashton Kutcher best investment so far was Skype. In 2009, Kutcher was convinced by Silicon Valley heavyweight Marc Andreessen to risk some of his Hollywood cash on Skype. He did and you bet he made some good cash when Microsoft purchased Skype for more than $8 billion.

The actor, known for his penchant for older women also invests in social magazine app Flipboard, location-based service FourSquare, vacation rentals web service Airbnb and photo sharing app Path.

Dr Dre changed the business of headphones for life with Beats By Dre. He teamed up with music mogul Jimmy Iovine and launched “Beats”, which are credited for bagging the hip hop emprasario $100 million last year.

Kim Kardashian is mostly known for her sextape, love for Black men and now, her pregnancy with rapper Kanye. But few really know how much of a brilliant entrepreneur she is.

In 2007, Kardashian and three partners founded ShoeDazzle, an online shoe and accessories website. The website, according to Forbes, landed an impressive $40-million investment from venture capital firm Andreessen Horowitz. Andreessen Horowitz also happens to be invested in Facebook, Foursquare, Groupon, Skype and Twitter.

This is a lesson to entertainers who forget that Showbiz consists of two words, “Show and Business” and spend their entire lives concentrating on the show bit and wondering why they never make as much money as, say, Diddy. [via nation]

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