Performance-based pricing is coming to influencer marketing
Compensation in influencer marketing is a thorny problem. There is no established industry-wide norm, which some influencers benefited from early on by commanding huge fees. Often, the number of subscribers an influencer has means they can charge more. Recently, though, agencies have been developing more nuanced metrics for paying influencers based on engagement.
Brands, led by agencies and influencers, are coming around to the idea that smaller numbers of followers can lead to higher engagement and more cost-effective campaigns. Still they remain “star-struck” by big numbers, according to Joe Friel, director at Social Circle, an influencer marketing platform, which has developed a cost-per-engagement metric.
“We measure all sorts of engagement metrics and apply proper value attributions to each type of engagement across different platforms,” said Friel, who points out that a view on Vine will have a different weight to a view on YouTube, for instance. “This means that when we discuss prices with influencers, we can estimate the total level of engagement they will deliver and then combine this with the quoted price to work out a cost-per-engagement for that influencer.”
Friel stresses that this model is evolving, but it has already been key to the agency winning new business from Chupa Chups and Pavillion Books. “It makes people more comfortable in investing and work with influence. It’s important we are transparent with clients so they see the due diligence that goes into it.”
After six months of study, Social Circle has concluded that the industry standard cost-per-engagement in the U.K. and Europe is between 5p and 20p (between 6 and 26 cents). The price was steadily increasing and started to level out in the last couple of months. For the U.S. it’s lower at around 2p cost per engagement because more influencers mean more competitive pricing.
Influencer agency Fanbytes, which pairs clients like Disney and Adidas to influencers on YouTube and Snapchat, also bills on cost-per-engagement, and measures engagement by views rather than number of subscribers.
“We have to show influencers that it’s the audience that make you successful,” said founder Tim Armoo. “You have to live and die by views, not the number of subscribers.” For Fanbytes influencers, cost-per-engagement ranges between 10p and £1.10.
Moving from number of followers to engagement is a step in the right direction, say social agency execs. But tying this to sales is another matter. “Aligning to sales always been a struggle for new platforms,” said Social Circle’s Friel, who notes that more data on how influencer marketing impacts the bottom line is needed. Another sticking point is standardization, how a young industry can come to industry-wide formats and measurements when each agency creates their own
Although creating a measurement standard has its own set of concerns. Mike Davison, group development director at agency 1000heads, warns this could turn influencer marketing into a more transactional industry.
“There are inherent dangers in looking at commodifying influencer partnerships as the same way as a banner ad,” he told Digiday. “It’s a quantity metric rather than a quality one. A standard practice payment model may muddy the water and provide a more transactional space than one that’s more creative.”
But for some influencers, that may not be such a bad thing. “The experience varies hugely as there’s no set standard of payment,” said Beckii Cruel, a fashion vlogger with a passion for Japanese style and 120,000 YouTube subscribers. “I can spend weeks building up a rapport with a brand to then find out that they won’t be paying me anything at all, which is incredibly frustrating.”
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