This post originally appeared on Entrepreneur.com - #Growing Your Business
The action-camera company grew fast, and crashed hard. Now it’s trying to pick itself back up — by thinking a lot smaller.
15+ min read
This past August, 40 influencers from 19 countries left their homes with camera in hand. Their mission: Film themselves from the moment they stepped out the door, onward to the airport, and en route to the remote Western Australia town of Broome. They’d charge into the ocean, do bike flips, and ride camels on the beach. And then they’d race to stitch the footage together into a montage and submit it for a contest by 11:59 p.m.
The next morning, the influencers are surprisingly bright-eyed, sitting in a conference room, waiting to learn who made the best video. “I know you guys are curious to know who got the award,” says Devon DiPietro, head of community at the action-camera company GoPro, which organized the event. “But there were so many good submissions that we’re not ready to announce it yet.”
The influencers nod. They know they’re good. So does GoPro, which is why the company spent a lot of money bringing them here. With any luck, the influencers will now help the company make a lot of money.
This big bash in Broome is what GoPro calls its Creator Summit, and it’s the pinnacle event in an ongoing effort to fix its business. GoPro never had trouble with exposure — the brand’s name is synonymous with first-person action footage. But it’s had an on-and-off relationship with profitability. In 2014, its stock topped out at $93.85. Then the company stumbled, and it lost more than $700 million between 2016 and 2019. This year, its stock price dipped below $3.50. If you’d invested $10,000 at GoPro’s peak, you wouldn’t have enough cash to buy its flagship camera. (It goes for about $400.)
Now GoPro is going through the same process countless companies do at every stage of business: It’s rethinking exactly who its target audience is — and how to appeal to them. That’s why, over the next four days, the influencers GoPro has brought to Australia will ride boats and Jet Skis, snorkel through a flooded mangrove forest, and swim with sharks. They’ll take mud baths, buzz the coastline in floatplanes, and document a schedule of activities GoPro believes its core users thirst for. The company foots the bill and has put up an additional $10,000 in prize money to reward these influencers during an array of challenges. In return, the creators will post 566 times, generating 30 million impressions and 1.8 million social engagements.
Will that generate revenue? It just might. “You’re seeing a real turnaround in their core business,” says Andrew Uerkwitz, a senior tech analyst at Oppenheimer & Co. “They’re actually going to turn a profit this year.”
But first, the influencers need their validation. A little later this first morning, DiPietro finally announces who made the best video. “Congratulations, Nick Pescetto!” she says.
Pescetto, an Italian influencer with gorgeous sun-fried dreadlocks and a quarter-million social-media followers, steps up to accept his award. With one hand, he shakes DiPietro’s hand. With the other, he holds a GoPro, rotating it between his own grinning face and the applause of his peers.
Image Credit: @davidoc by @chrisrogers
“Everybody likes to see the champ fall from grace,” says GoPro founder and CEO Nick Woodman. “It’s ‘We love you! We love you!’ And then you slip up and they’re on you with daggers, stabbing you to death.”
If it’s not immediately clear, GoPro is the Julius in this allegory. Before the brand’s assassination, it was widely held up as a shining example of entrepreneurial glory.
The origin story is well-told. In 2002, during a five-month surfing trip through Australia and Indonesia, Woodman, then 26, began fidgeting with a strap that would allow him to rig a waterproof camera to his wrist. If he could document his time in the barrel — what surfers call the inside of a wave — it might help him go pro. (Get it?) So he raised some money from his parents, put in $30,000 of his own savings, created a 35-millimeter camera with a strap on it, and sold his first unit in 2004 for $19.99.
A natural salesman, Woodman drove up and down the coast, pitching his camera to surf and skate shops. They understood the appeal. “Before GoPro, unless you had a photographer following you around, nobody had footage of themselves doing anything active,” says Woodman. “It was always the before and after photos in the parking lot.” Growth was steady, thanks to trade shows and athletes using the cameras, but the real pop came in 2006 when GoPro launched its first digital camera. Sales topped $800,000. As the cameras improved in functionality, so did profits. In late 2009, it sold a camera called the HD Hero that brought in
$64 million over the course of 2010.
The following year, GoPro raised $88 million in venture funding and was valued at $400 million. When it went public in 2014, it had 25,000 specialty retail accounts. “Those were the good days,” says Todd Ballard, GoPro’s chief marketing officer. “It felt like everything we touched turned to gold.”
In truth, it was a lot of fool’s gold.
In the company’s IPO documents, GoPro acknowledged that virtually all of its revenue came from selling cameras and accessories — but instead of calling itself a consumer electronics company, it claimed that it could become an “exciting new media company.” It had secured Xbox and Virgin America as distribution partners, and it was working on original content that it hoped to monetize with advertising, sponsorships, and increased camera sales.
“People were like, ‘Damn! That’s a great idea!’ ” says Uerkwitz. It got GoPro a lot of attention. GoPro declines to reveal specifics on how much it spent on its media division, but “it was a pretty big spend,” says Woodman. “We had a very large team of filmers and editors,” including sports, lifestyle, and reality-style scripted divisions. The year before the company went public, GoPro’s operating expenses were $263 million. In 2016, it spent $835 million — three times as much. But no serious content was released with any regularity. The project flopped.
Meanwhile, as part of a growth promise to investors, GoPro launched entry-level cameras designed to steal market share from point-and-shoots and DSLRs. “We started getting greedy as an organization,” says Ballard. “It drove us to think, How do we get soccer moms to buy our cameras? How do we get everybody to buy our cameras?”
That’s not to say this is an inherently bad strategy. Companies need to grow, which can mean expanding their audience. In books and podcasts, LinkedIn cofounder Reid Hoffman advises founders to ignore the needs of their early, core customers in favor of appealing to their future “scale customers.” And when the extreme racing company Tough Mudder looked to expand its offerings, appealing beyond its hard-core base to attract everyday athletes, it approached the project carefully — but determinedly. “What I didn’t want to be seen doing was somehow diluting the brand,” says Tough Mudder cofounder and former CEO Will Dean. So he acted slowly, introducing new, easier races at the same time he introduced harder, more extreme races. For inspiration, Dean turned to a Harvard Business Review case study on Porsche, which went through this same issue. In 2003, Porsche launched the midpriced Cayenne SUV to attract its own soccer moms, and some high-end drivers got grumpy. Porsche had to convince its core fans that the brand would still deliver on their expectations of exclusivity — which it did in part by taking some of its earnings from the SUV and investing it in making new, expensive sports cars.
But GoPro wasn’t as delicate. Scroll back far enough in the company’s Instagram feed and you’ll find evidence of how it approached its mass-market effort — through photos of sunsets, sleeping cats, and babies eating cookies. None of this attracted the soccer moms, but it did push GoPro’s core user away. Even Woodman lost interest. “I stopped paying attention to our own Instagram feed and YouTube channel,” he says. “I thought they were lame. If you’re a 22-year-old who’s really getting after it and you’re seeing this type of marketing, you’re like, Is this my brand?”
In 2016, GoPro released a $1,099 drone called the Karma, but it was bedeviled by reports of battery problems and crashes. It seemed like a metaphor.
Image Credit: @geoffgulevich of @dberrecloth
The GoPro decline came fast. It laid off 450 people in 2016. Rumors swirled that the founder and CEO was unable to carry his company. “There was a period where it really bothered me,” he says about the headlines. “It was like, Can you guys get off it now?”
But GoPro had a reason for hope. Even as it bled cash, it still owned the action-camera market. Since going public, the company has sold at least 4.3 million cameras annually. No other company has come close. “Sony tried and failed, Garmin tried and failed, Xiaomi tried and failed — and those three companies are all much larger than GoPro,” says Uerkwitz. (Today, GoPro captures roughly 95 of every 100 dollars spent on action cameras in the U.S.)
So it kept developing cameras. In the spring of 2018, it was preparing to launch a new one called the Hero7 Black. This camera would improve upon previous editions with a seemingly magic feature that turns shaky camera footage — the kind you get by mounting a camera to a surfboard or a helmet — into a buttery-smooth motion picture. It was an impressive technological leap, but when Woodman reviewed the proposed marketing, he hated it. “It was super safe and boring,” he says.
Chasing the mass market was threatening GoPro’s identity. It had been ignoring its core customers in favor of what LinkedIn’s Hoffman would call “scale customers” — but what if its extreme sports users actually were its scale customers? That’s when Woodman had an epiphany. “Nick was like: ‘Dude, we’re not doing this anymore,’ ” says Ballard. “ ‘We need to go back to what we stand for.’ ” The company wouldn’t be about appealing to broad audiences or making so much of its own content. It would be about enabling the most adventurous people on the planet to capture — and share! — their own accomplishments. It would double down on them.
Back in 2015, GoPro had launched an awards program that encouraged users to submit videos and photos for a chance to earn up to $5,000. GoPro then used the best stuff in its marketing and social media. The strategy was more cost-effective than paying an in-house media team to capture footage all over the world. But more important, it created a community of travelers, producers, and athletes who began to see GoPro as another way to make money doing what they love. Since its launch, the awards program had paid out roughly $3 million, and now supplies roughly 70 percent of GoPro posts on social media.
The users who submit to the awards program make up what Woodman calls the “tip-of-spear” consumers — the people going into surf and skate shops 10 years ago. These were the people Woodman wanted to reengage. So he told his staff to rethink the creative launch of the Hero7, as well as everything that came after it. “That was a pivotal time,” says Ballard. “We needed to hear that from him.”
Prior to this revelation, GoPro’s most recent camera was launched with a nearly five-minute marketing video opening on a couple running hand-in-hand through a park. The camera’s technology was not discussed.
By contrast, under Woodman’s new (but old!) direction, the fall 2018 launch of the Hero7 featured fast music and quick cuts. Users received a full technology rundown in two minutes: stabilization, voice-command features, the ability to speed up and slow down footage. You see a rocket blasting away from Earth and motorbikes hitting dirt jumps while graphics like “HDR” and “1080p240” flash across the screen.
The marketing campaign was coupled with GoPro’s biggest award incentive yet — a million-dollar challenge that produced one superhot sizzle reel shot entirely on the Hero7. From 25,000 customer submissions, GoPro chose 56 award recipients, and the average payout was just under $18,000.
During its first week on sale, the Hero7 became the fastest-selling GoPro ever. In the first half of 2019, the company earned 2.2 million new social media followers, a 41 percent increase compared with the first half of 2018. In June, GoPro’s YouTube channel set a single-month record with 46 million unique views.
Woodman was right. Now it was time to dig in deeper. The company invested more heavily in an insights-and-analytics team — which, unlike before, could now explore the needs of its narrowly focused users. GoPro was going to learn exactly what they wanted. And then it would do whatever it could to please them…including taking 40 of them to Australia.
Image Credit: @fredfalco
The Australia trip is an influencer’s dream — the camera equipment, the beach, two pools, a yoga studio. Between the on-camera explorations, GoPro hosts breakout sessions on Photoshop, video editing, and personal branding. And then, on the last day of the summit, the group is brought together inside a coffee shop, in front of a deli case with a crocodile’s head inside. For the first time in days, they’re told to turn off their cameras. In advance of this moment, they’ve all signed NDAs.
This is GoPro’s big payoff for the trip. It’s about to reveal two new cameras: the next-level Hero8 Black and the 360-degree Max.
“The Hero8 is a nod to everyone here,” says Jeremy Hendricks, a GoPro senior product marketing manager. “It’s a nod to the pros.”
At first, the new camera looks just like the old one. It’s a black box. But then Hendricks unfolds a pair of concealed tabs, which extend from the bottom of the camera like stumpy legs.
The influencers immediately understand. With previous GoPros, in order to clip the camera to a helmet mount or extendable selfie stick, users had to first snap it into a finicky plastic frame, which had tabs on the bottom. But now, with the Hero8 update, these tabs will be built directly into the camera — there when you need them, hidden when you don’t. “You guys!” says Hendricks. “No more frames!”
Hendricks is confident in his delivery, because those flip-out tabs solve for a pain point specifically identified by GoPro’s insights and analytics teams. The influencers erupt.
“Folding fingers!” says Tim Humphreys, a pro snowboarder. “Keep talking dirty to us!”
GoPro sure will, because when people like Humphreys love GoPro, more seem to follow. After three years of losses, the company is expecting 6 to 9 percent growth in 2019. But it still has a lot of work to do. Core users are once again sweet on the brand, but investors are still sour. After a second-quarter earnings call during which the company reported international growth, margin growth, and a million new social media followers, GoPro’s stock price actually dropped.
“You have to remember that there were multiple years of mis-execution, and investors got burned,” says Nikolay Todorov, an analyst at Longbow Research. “These guys have done quite a good job at stabilizing the ship. But it’s going to take some time for investor sentiment to shift.”
The stock recovered, but then in October it dropped again — this time 20 percent — when GoPro reported a late-stage production delay on the Hero8. The camera was originally slated to launch in the third quarter but instead was bumped to the fourth. That’s crippling for a company that pins almost all its success to one flagship product — and indicates that despite all the lessons GoPro has learned in the past few years, it’s still got work to do.
What investors want in a consumer electronics company, according to Uerkwitz, is a deeper bench. Garmin, Apple, Logitech: They all have diverse product portfolios. But GoPro’s previous efforts to diversify crash-landed (sometimes literally). So what the company needs to do is hold the line, hit its targets, and wait for investors to come around.
Woodman understands this. “We’ve got to deliver consistent profitability and growth,” he says. GoPro has more than three years of product launches mapped out, and its immediate goal is to simply continue blowing the minds of its core users. Then, who knows? “If we identify a big enough market opportunity, absolutely we’ll go and build additional hardware,” says Woodman. He takes a pause. “But you’ve got to be really careful that you don’t spread yourself too thin.”
So for now, GoPro just wants to geek out. Back in Australia, Hendricks walks the influencers through a suite of modular accessories that will snap onto the Hero8 to provide lighting, a shotgun microphone, and a rotating screen that allows vloggers to see themselves talking into the camera. He shows off its new stabilization capabilities, HDR upgrades, and functionality that allows users to speed up and slow down footage on the fly. The influencers ask questions and speculate about the creative ways they’ll deploy the new features. And when the presentation is done, they exit the coffee shop and walk right onto the hovercraft — a literal hovercraft — waiting for them outside.
They turn their cameras back on. Everyone has work to do.