The Business of Social Influencer Marketing

Have you ever scrolled through your Instagram feed only to find it cluttered with sponsored posts from the celebrities that you follow? Or, have you ever seen a staged Snapchat with paid product placements? If yes, then you’ve experienced social influencer marketing.

Social influencer marketing has been relevant for a few years now, but what started as celebrity endorsements has now manifested into a billion dollar business, according to an article by eMarketer.  You no longer have to be a celebrity to get paid to endorse a product or service. The only thing that you need is to have a large following and the ability to use your influence through social media.

So…how does this all work?

Sponsored posts can come in many forms. One form that I’m sure most of us are familiar with are pictures posted on Instagram. Usually Instagram users will follow a common theme, whether it is fashion, fitness, or lifestyle, among many other interests. There are fashion bloggers who promote retailers or a brand by modeling in the clothing and taking and posting pictures of themselves on Instagram. One ready-to-shop content platform called LIKEtoKNOW.it makes “beautiful and original, mobile-first influencer content actionable for millions of socially-inspired shoppers worldwide.” The platform partners with both retailers and influencers. Social media influencers can use this platform to be compensated for promoting a certain brand or product. Compensation include collaborations, content licensing, and other sponsorship opportunities.

For example, Jean Wang is a Boston-based fashion blogger who utilizes the LIKEtoKNOW.it platform in her Instagram posts. With 452K followers on Instagram, Jean uses her social media following on Instagram to work with brands.

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Michael Phelps, who has 3.3M on Instagram also takes part in social influencer marketing.

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Another form of sponsored content can be in the form of product placement on Snapchat. Perhaps one of the most well-known person to do this is DJ Khaled, who the Washington Post has named “The King of Snapchat.” Brands can also sponsor a celebrity on Snapchat to underwrite a series of videos. A common sponsorship relationship involves getting a celebrity to feature a brand in their Stories. Read more about how brands work with social influencers through Snapchat here. In addition to Snapchat, YouTube is yet another social media platform where individuals have the opportunity to monetize their social media influence.

How do brands determine how much money to spend on social influencer marketing? How much money can you really make as an influencer? 

How much an influencer makes depends on his or her social media presence. A top Instagram influencer can make up to $150,000 for one sponsored post. In a study conducted by Whosay, a marketing firm, social influencers were split into five tiers based on total number of followers. The amount of money that one is paid to endorse a product or service depends on these tiers:

  • Tier 1: Icon
    • Median followers: 7.4 million
  • Tier 2: Trailblazer
    • Median followers: 2.8 million
  • Tier 3: Influencer
    • Median followers: 853,000
  • Tier 4: Micro Influencer
    • Median followers: 221,000
  • Tier 5: Super micro Influencer
    • Median followers: 50,000

The research found that influencers in Tier 2 have the highest engagement rate for branded content. Included in this group are celebrities like Nick Cannon and Mia Hamm. While they don’t have the most followers, they have more followers and influence than most people with social media accounts. Brands looking to work for social media influencers are best off working with those in the Tier 2 category because they have an engagement rate of 28%. This simply means that 28% of the people who see branded content from someone like Nick Cannon will engage with the post. While the exact earnings of social media influencers are not readily available, companies and brands look at factors such as the number of followers and engagement rates.

Mediakix.com predicts that influencer marketing will become a $5-$10 billion market by 2020. Back in 2015, Yahoo Tech estimated the costs of sponsored posts on Instagram:

  • $700-$900 per post for Instagram with over 100,000 followers
  • $2,000–$3,000 per post for Instagram with at least 500,000 followers
  • $50,000 per big-brand collaboration for Instagram with 1 million followers or more

OK…so why am I not in this business, you might ask? The simple answer is that most of us don’t have a huge following on our social media accounts. Those who are looking to enter this business will find it increasingly hard as the market gets more saturated. And it’s hard. Many people who attempt to get into the business are full-time students or have full-time jobs. In order to successfully attract a following and develop an unique brand, countless hours are necessary, and most people simply do not have the time or motivation to work so much outside of their main priorities.

Social influence marketing going forward…

What started as an experimental marketing practice is now a “mini-economy.” Because the world of social influencer marketing is so new, many worry if this form of marketing will remain sustainable. For example, regulators are cracking down on disclosures of paid relationships. In addition, those who are involved in social influencer marketing need to be wary of which companies to promote and which companies to stay away from. For many, it has taken years to build a unique brand. Social influencers need to be selective in order to avoid offending any followers or receiving backlash. Finally, many try to get into this business, but few succeed. Just as social media and digital business are constantly changing, social influence marketing will undoubtedly evolve in the next few years. It’ll be interesting to see how influencers and companies adjust to changes in the digital world.

 

6 comments

  1. Interesting article about how the marketing business is changing in the midst of social media. Most of the articles I’ve read relating to this topic always talk about the point of view of the influencer and how much money they make (or how much companies make), but it would be interesting to see how much of this ultimately turns in dollars spent at these companies. However, I’m really shocked at the figures you have, never thought this market could be this huge!

  2. This was a great read! Personally, as a huge fan of travel, I’ve always been jealous of the travel accounts I follow who get free perks all the time. This whole rising trend reminds me a lot of product placement in movies and tv shows– just the social media version. For me, it definitely makes people’s social media a little less authentic. If I know they’re being sponsored or even encouraged to post a certain product/place I have to question how real their recommendation is. At the same time it’s a great way for brands to get their products out there. Hello Fresh and Blue Apron have been capitalizing on the rising popularity of food posts. It’s also interesting to me how subtle (and not so subtle) different people are. Some tag everything in the caption, some in the picture, etc. For me, the less obvious it is that it’s sponsored the more authentic the post looks. I would be curious to know if these sort of specifics are outlined in the terms/contracts ever.

  3. I also wrote a blog post about influencer, but in the beauty industry. I think it’s an interesting approach to marketing that companies have truly started investing in, especially of late. I’m curious to see how long organizations will be able to get away with these types of sponsorships/influencer marketing before regulations and laws start to become enacted. (More than just #ad, which in some instances, isn’t even required.) I’m a brand ambassador for Pandora Jewelry, and they’re going even smaller than super micro-influencers to promote their products on Instagram. They’ve “hired” 40 college students around the country to work with specific Pandora retail stores by posting content on their social media channels, but most of us have less than or around 1,200-1,500 followers. I wonder how many other companies might begin to rely on even smaller, more relatable influencers/ambassadors as regulations become enacted. Only time will tell!

  4. Interesting post. What’s perhaps most interesting is that we’ve seen a shift from social media only influencers to more traditional celebrities using social media to do endorsements. But, this really isn’t all that different from a generation ago when celebrities did commercials. Has just the platform and the content changed?

  5. I’m curious how effective this form of advertising is compared to other channels of marketing, like TV commercials or internet ads. I would expect them to be more effective since companies are able to target a narrower demographic, and don’t need to put money into actually developing the ads. I wonder how this will affect companies that rely on advertising revenue if the ROI from sponsored advertising on Instagram is higher than other channels. Do you think Instagram will ever start taking a cut of the profits from influencers for facilitating their content?

  6. Your point about the saturation of the market is a really good one, and I wonder how the influencer population is distributed across the different interests/industries commonly promoted through social media. My guess is that there would be a few heavy hitters here, and while now it seems most influencers (non-celebrity) have at least a basic interest in the things they’re promoting, I wonder if more people will start to find niche/untapped fields to become “experts/enthusiasts” in, just to take advantage of the financial opportunity in influencer roles.

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