The app Cameo, as soon as a unicorn and a pandemic-era distraction, has seen a lot of its valuation evaporate. The connection-economy darling rose to fame as an app that allow customers pay for custom-made messages from celebrities. At its peak in 2021, Cameo’s valuation reached $1 billion earlier than plummeting 90% early this 12 months.
And it simply received worse. Final week a consortium of 30 state attorneys common fined Cameo for not correctly disclosing when celebrities had been paid to endorse a sure product. Nonetheless, Cameo’s monetary state of affairs meant it couldn’t afford to pay the $600,000 penalty levied by the suing states. As a substitute the corporate will solely should pay $100,000, in keeping with the settlement settlement.
Throughout the settlement Cameo submitted audited monetary paperwork from 2021 and 2022 that confirmed it couldn’t afford the fee. Cameo additionally supplied newer monetary info from October 2023 that additional proved it had fallen on arduous instances.
Cameo’s bleak monetary outlook spared it from having to pay the complete penalty. Nonetheless, if the corporate had been to interrupt the principles once more it could be pressured to pay the remaining $500,000, which “would presumably send the company into bankruptcy,” mentioned Jennifer Arlen, director of a program on company compliance and enforcement at NYU Legislation.
Beneath the phrases, the states positioned Cameo on a three-year probation interval. A transfer like that by the lawyer common is “absolutely” intentional and meant to cease repeat offenders, Arlen added.
“If you have owners of a company that violate the law get caught, then willfully violate it again, then that’s a very strong signal that they’re simply not going to comply with the law,” Arlen mentioned. ”So that you shouldn’t defend them from the implications of that.”
Cameo didn’t reply to a request for remark. When reached for remark a spokesperson for the New York Legal professional Common’s workplace pointed Fortune to an announcement issued the day settlement was introduced. “For many New Yorkers, cameo videos are fun to watch and share, but consumers deserve to know when they are watching a paid ad or a real review,” mentioned New York Legal professional Common Letitia James.
What occurred to Cameo?
Cameo’s harsh monetary image makes it the most recent in a line of former unicorns to have hit arduous instances. In March 2021, Cameo was flying excessive, with a hovering valuation of $1 billion on the again of a $100 million Sequence C funding spherical. Main buyers like SoftBank, Google Ventures, Kleiner Perkins, and even skateboarding legend Tony Hawk all lined up.
Cameo pitched itself as an alternative choice to expertise companies and managers that would assist celebrities join with their followers instantly, whereas cashing in on their fame.
“We exist in an entirely different world today—one in which talent actually want to connect more deeply with their fans, and fans expect unprecedented access to the talent they admire most,” Cameo CEO Steven Galanis wrote in a weblog put up after the Sequence C spherical. “This funding will help us create the access and connections that will define the future of the ‘connection economy’ on a global scale.”
Nonetheless, by March of this 12 months Cameo’s Sequence D resulted in a cramdown spherical—a kind of financing for troubled corporations—that noticed its valuation plummet 90%. Cameo managed to boost $28 million at a valuation beneath $100 million.
The latest settlement stemmed from one among Cameo’s new ventures referred to as Cameo Enterprise that gave celebrities on the platform the prospect to endorse merchandise and enterprise, not simply ship private messages. Movies on this a part of the platform didn’t correctly disclose that they had been paid endorsements, in keeping with the settlement settlement. The settlement accused Cameo of doing little to make sure that celebrities utilizing the platform to advertise sure merchandise had been following all of the requisite guidelines, in keeping with Randi Singer, a accomplice at legislation agency Sidley Austin’s industrial litigation apply.
“It doesn’t appear that Cameo had any guidelines or guardrails in place with respect to endorsements,” she advised Fortune in an e-mail. “Brands’ requests were limited only by the terms of service and community guidelines and the celebrity’s own discretion.”
Singer additionally notes that the celebrities themselves didn’t put up the promoting content material, they simply made the movies for Cameo’s customers. If that had posted it on their very own social media profiles they could have been “more likely to be careful about disclosing any material connections or benefits,” she says.
As a part of the settlement, Cameo should “clearly and conspicuously” label any endorsement movies as such and supply movie star endorsers with phrases of service that states they need to comply with all relevant legal guidelines to make use of the app.
In its early days, buyers had been enamored with its easy-to-understand enterprise mannequin. Customers would pay a charge to a celeb in trade for a video with a personalised message and Cameo would take a 25% reduce. For some time enterprise appeared sturdy, particularly throughout pandemic lockdowns when folks had been caught at dwelling. A birthday message from Bo Jackson went for at least $450. A pep speak from Caitlyn Jenner price $2,500 a pop.
Greater than the massive names, which did be a part of on the outset, Cameo grew to become recognized for having a plethora of barely well-known actors, athletes, and actuality TV stars. “My D-list celebrity might be your favorite person in the world,” Cameo Galanis advised the Wall Road Journal in 2021 shortly after the startup raised $100 million. “We’re tapping into this. The definition of fame has totally changed.”
Individuals might get movies from numerous Actual Housewives, forged members from The Workplace, and retired WWE stars. For some time these lesser names paid the payments for the corporate. However finally Cameo struggled to recruit sufficient A-listers to fulfill its lofty valuation. The novelty wore off and gross sales began to flatline. Traders soured on what seemed to be a passing fad.
The state attorneys common, conscious of Cameo’s precarious monetary state, sought to guard themselves. Ought to the corporate go bankrupt it must pay the remaining $500,000 of its high quality inside 91 days.
