Oprah – World’s Greatest Product Endorser?

Weight Watchers was a company on the ropes when Oprah decided to invest their stock. A Duke University study found that the average Weight Watcher member spends an average of $377 per year on its products and services and only loses five pounds. There are numerous dieting apps (MyFitnessPal and iTrackBites) that are similar to Weight Watchers and either cheaper or free. To compound the challenges, some doctors have been knocking Weight Watchers for the company’s focus on points instead of nutrition.

Weight Watchers was in trouble:

Weight Watchers has been around for over 50 years and operates in over 30 countries, but until recently, its future was not looking bright. Revenues and attendance at meetings had dropped over 35% over the past 4 years. The drop in revenues meant that the company could not afford the advertising necessary to keep bringing clients in the door. There was fear that the company would default on a major debt payment next April and its stock was a favorite among short sellers. Short selling is similar to buying “Put options”.  It is a way to bet against a company. It is like the opposite of investing in it. You sell short by borrowing shares of stock through your brokerage firm, selling the borrowed shares, and then promising to buy them back (hopefully at a lower price) to repay the loan. In this case, 11.6% of Weight Watchers stock was shares that were shorted.

Then … in walks Oprah. Bye Bye, short sellers. Last week, Oprah invested $43 million for a 10% stake in the company. The stock skyrocketed 132%. Oprah’s stake is now worth $110 million (not a bad week, even for Oprah). She also has options to buy another 5% at a price that is now “in-the-money” (below the current share price). This is a great example (to the short sellers) of investment risks that you don’t see coming as discussed in our post from two weeks ago. It is also a great example of the power of a great brand (Oprah’s, not Weight Watchers).

The Oprah effect:

Oprah’s ability to turn people and products into overnight successes is legendary and was the topic of a CNBC Special in 2009 called “The Oprah Effect” (see trailer or buy episode on Amazon). When Oprah mentions your product as one of her “favorite things,” look out. Her proverbial seal of approval helped launch products from Spanx to Amazon’s Kindle. In addition, she has discovered and promoted professionals who have quickly become celebrities in their own right and now have their own shows (Dr. Phil, Dr. Oz, Rachel Ray). A recommendation of a book on Oprah’s Book Club often means a million additional sales for an author. To put that in perspective, less than 1% of all authors ever sell 2,000 copies of their books. An analysis by two economists at the University of Maryland found that Oprah’s endorsement of Barack Obama in 2008 was responsible for between 420,000 and 1.6 million votes.

Oprah embodies the American dream:

Regardless of your politics, it is tough not to admire Oprah as the world’s greatest endorser. She was born to a single teenage mother in rural Mississippi. Despite poverty and a tough childhood, she went on to host and produce the highest rated TV talk show of its kind for 25 years. She owns several companies and has been called “arguably the world’s most powerful woman” by CNN. She also is the only person to make the list of Time Magazine’s Most Influential People in the World 10 times.

So today’s insight is: If you are trying to sell a product, or rescue a company, you need Oprah on your side. By the way, if anyone reading this knows her, can you have her mention our book. 🙂