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The app Cameo, once a unicorn and a pandemic-era distraction, has seen much of its valuation evaporate. The connection-economy darling rose to fame as an app that let users pay for customized messages from celebrities. At its peak in 2021, Cameo\u2019s valuation reached $1 billion before plummeting 90% early this year.\u00a0<\/p>\n
And it just got worse. Last week a consortium of 30<\/a> state attorneys general fined Cameo<\/a> for not properly disclosing when celebrities were paid to endorse a certain product. However, Cameo\u2019s financial situation meant it couldn\u2019t afford to pay the $600,000 penalty levied by the suing states. Instead the company will only have to pay $100,000, according to the settlement agreement.\u00a0<\/p>\n During the settlement Cameo submitted audited financial documents from 2021 and 2022 that showed it couldn\u2019t afford the payment. Cameo also provided more recent financial information from October 2023 that further proved it had fallen on hard times.\u00a0<\/p>\n Cameo\u2019s bleak financial outlook spared it from having to pay the full penalty. However, if the company were to break the rules again it would be forced to pay the remaining $500,000, which \u201cwould presumably send the company into bankruptcy,\u201d said Jennifer Arlen, director of a program on corporate compliance and enforcement at NYU Law.\u00a0<\/p>\n Under the terms, the states placed Cameo on a three-year probation period. A move like that by the attorney general is \u201cabsolutely\u201d intentional and meant to stop repeat offenders, Arlen added.\u00a0<\/p>\n \u201cIf you have owners of a company that violate the law get caught, then willfully violate it again, then that\u2019s a very strong signal that they\u2019re simply not going to comply with the law,\u201d Arlen said. \u201dSo you shouldn\u2019t protect them from the consequences of that.\u201d<\/p>\n Cameo did not respond to a request for comment. When reached for comment a spokesperson for the New York Attorney General\u2019s office pointed Fortune<\/em> to a statement issued the day settlement was announced. \u201cFor 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,\u201d said New York Attorney General Letitia James.\u00a0<\/p>\n Cameo\u2019s harsh financial picture makes it the latest in a line of former unicorns<\/a> to have hit hard times. In March 2021, Cameo was flying high, with a soaring valuation of $1 billion<\/a> on the back of a $100 million Series C<\/a> funding round. Major investors like SoftBank, Google<\/a> Ventures, Kleiner Perkins, and even skateboarding legend Tony Hawk all lined up.\u00a0<\/p>\n Cameo pitched itself as an alternative to talent agencies and managers that could help celebrities connect with their fans directly, while cashing in on their fame.\u00a0<\/p>\n \u201cWe exist in an entirely different world today\u2014one in which talent actually want to connect more deeply with their fans, and fans expect unprecedented access to the talent they admire most,\u201d Cameo CEO Steven Galanis wrote in a blog post<\/a> after the Series C round. \u201cThis funding will help us create the access and connections that will define the future of the \u2018connection economy\u2019 on a global scale.\u201d<\/p>\n However, by March of this year Cameo\u2019s Series D resulted in a cramdown round<\/a>\u2014a type of financing for troubled companies\u2014that saw its valuation plummet 90%<\/a>. Cameo managed to raise $28 million at a valuation under $100 million.\u00a0<\/p>\n The recent settlement stemmed from one of Cameo\u2019s new ventures called Cameo Business that gave celebrities on the platform the chance to endorse products and business, not just send personal messages. Videos on this part of the platform failed to properly disclose that they were paid endorsements, according to the settlement agreement. The settlement accused Cameo of doing little to ensure that celebrities using the platform to promote certain products were following all the requisite rules, according to Randi Singer, a partner at law firm Sidley Austin\u2019s commercial litigation practice.\u00a0<\/p>\n \u201cIt doesn\u2019t appear that Cameo had any guidelines or guardrails in place with respect to endorsements,\u201d she told Fortune<\/em> in an email. \u201cBrands\u2019 requests were limited only by the terms of service and community guidelines and the celebrity\u2019s own discretion.\u201d\u00a0\u00a0\u00a0\u00a0<\/p>\n Singer also notes that the celebrities themselves didn\u2019t post the advertising content, they just made the videos for Cameo\u2019s users. If that had posted it on their own social media profiles they may have been \u201cmore likely to be careful about disclosing any material connections or benefits,\u201d she says.<\/p>\n As part of the agreement, Cameo will have to \u201cclearly and conspicuously\u201d label any endorsement videos as such and provide celebrity endorsers with terms of service that states they must follow all applicable laws to use the app.\u00a0<\/p>\n In its early days, investors were enamored with its easy-to-understand business model. Users would pay a fee to a celebrity in exchange for a video with a personalized message and Cameo would take a 25% cut. For a while business seemed strong, especially during pandemic lockdowns when people were stuck at home. A birthday message from Bo Jackson went for a minimum of $450. A pep talk from Caitlyn Jenner cost $2,500 a pop.\u00a0<\/p>\n More than the big names, which did join at the outset, Cameo became known for having a plethora of barely famous actors, athletes, and reality TV stars. \u201cMy D-list celebrity might be your favorite person in the world,\u201d Cameo Galanis told<\/a> the Wall Street Journal<\/em> in 2021 shortly after the startup raised $100 million. \u201cWe\u2019re tapping into this. The definition of fame has totally changed.\u201d\u00a0<\/p>\n People could get videos from various Real Housewives<\/em>, cast members from The Office<\/em>, and retired WWE stars. For a while those lesser names paid the bills for the company. But eventually Cameo struggled to recruit enough A-listers to satisfy its lofty valuation. The novelty wore off and sales started to flatline<\/a>. Investors soured on what appeared to be a passing fad<\/a>.\u00a0<\/p>\n The state attorneys general, aware of Cameo\u2019s precarious financial state, sought to protect themselves. Should the company go bankrupt it would have to pay the remaining $500,000 of its fine within 91 days.<\/p>\n<\/div>\nWhat happened to Cameo?<\/strong>\u00a0<\/h3>\n