An Insider’s Look into the Influencer Marketing Industry
Recently, I had the pleasure and honor with working together with one of the leading influencer marketing technology companies, OpenInfluence, one of eight leading platforms that were chosen by Pinterest to become official influencer marketing partners. The culmination of my work together with OpenInfluence was the co-creation of an ebook looking at how AI is revolutionizing influencer marketing. You can download a free copy here.
With that in mind, I have a very special guest for today’s podcast, Eric Dahan, co-founder and CEO of OpenInfluence. I wanted to have a conversation with Eric to give you an insider’s look at the influencer marketing industry today and cover those questions that I often get asked from clients and marketers as well as the top issues facing influencer marketers today. Listen below while Eric and I have an insightful conversation about influencer marketing and feel free to read a summary of the interview below.
The Comparative Power of Influencer Marketing
Neal: Brands struggle with their marketing mix and never invest enough in new marketing initiatives. Compared to other marketing channels, how powerful is influencer marketing and does it have the potential in certain industries to be the most powerful channel for different brands out of all the ways they can spend their marketing budget?
Eric: Influencer marketing is extremely powerful. There’s a reason why it has taken off organically. The early adopters have mainly been direct to consumer E-commerce brands that have built their business solely off of influencers. I like to think that the ad industry does a really good job of vetting new channels and new forms of marketing. They start off with experimental budgets which become test budgets and then bigger test budgets until that new marketing channel has shown to be able to generate strong returns and consistent scalability.
These early adopters in the E-commerce and fashion industries built their businesses on influencer marketing at a time when the metrics weren’t as clear and the industry wasn’t as mature as it is today. They were able to roughly track what that lift and return was because it was converting into sales. Fast forward to today and there is a lot more granularity in how we can measure the effectiveness of an influencer campaign and individual influencers.
Influencer Marketing as a Mainstream Marketing Channel
Neal: It sounds like you are saying we are almost at the emergence of influencer marketing as a mainstream marketing channel because of the availability of data, past ROI and success stories.
Eric: I think the reasons why influencer marketing is so successful are pretty straightforward. There’s so much information out there and so many ads out there. We are being bombarded by ads wherever we go. We run into entire series of banner and click ads on websites. There are ads in the New York City subways, there are ads and billboards everywhere. We have become really good at tuning out of advertisements so it makes sense that content integrated into an influencer marketer’s feed resonates more with us. It has social validation, the integrated content is of much higher quality than normal ads and it converts a lot higher. Through trial by fire, influencer marketing has now become aligned with budget for virtually all advertisers, for some it is core to the business and for others, a key part of the marketing mix.
What Type of Influencers Should a Brand Work With?
Neal: We can assume that everyone listening to this already has an influencer marketing program or has invested in influencer marketing because the data shows this. The next question often comes about the types of influencers bands should be investing in, working with, or aligning with. There is a lot of different terms such as ‘micro influencers’, the ‘power middle’ and celebrities. How do you help brands define what type of influencer-in terms of following-they should work with? Or is their a different approach to answering this question?
Eric: There is no one size fits all strategy. On a very simple level, you have three components
- The Message
- The Messenger
- The Audience
All three things have to align to resonate and be effective. The first step is understanding what a brand wants to say and who they are trying to reach. From there, it comes down to selecting the right messenger/influencer to deliver that message.
Picking the right type of influencer depends on what is being communicated to which type of audience. As to the type of influencer, whether they are a celebrity (short tail influencer) or a micro influencer (long tail influencer) depends on the more specific goal.
You should work with celebrities if you want to build cache and have an ambassador for your brand. The issues with that is the high expense and risk. We have seen countless brands partner with celebrities only to suffer the blowback of scandal.
Micro influencers are touted as being the most effective and there is a lot of truth in that. They have higher engagement rates and a tighter core audience. They are less expensive to work with on a cost per post basis.
People new to the industry don’t understand the amount of work needed to engage with Micro influencers. Typically, a lot of that work is on the brand side such as approving, liaising with influencers, contracting influencers, and ensuring quality control. A lot of this can be automated but not everything. Sometimes, depending on your strategy and what type of content you want to create, you can end up paying micro influencers a lot more on cost per view and cost per engagement.
The real sweet spot is in the ‘mid tail.’ This tends to be the standard for a lot of brands. The ‘mid tail’ are influencers that are not necessarily celebrities but have outgrown micro influencer status and provide better cost per metrics. A rule of thumb for ‘mid tail’ influencers is anyone with 50,000-500,000 followers on their primary platform.
Neal: Marketers want to look for shortcuts and formulas but a holistic approach is best when looking for influencers
Eric: Lets take about an automotive brand. There’s no such thing as a ‘automotive influencer.’ Yes, some do talk about cars but realistically, the way pick up trucks are marketed differs from marketing vans. In this context, the influencer sets will be different and so will the social platforms used. You must figure out the audience, what is being communicated and then the messenger comes last.
What is the Low Hanging Fruit to Improve Your Influencer Marketing?
Neal: I think we have already seen the potential for mistakes that brands make when engaging with influencers or when creating or managing influencer marketing campaigns. In your opinion, having worked with countless influencers and engaged with campaigns, what is the low hanging fruit you see that you think brands can improve upon?
Eric: One of the most common mistakes brands make is they focus more on talent and names rather than metrics. A lot of decision making is still subjective, i.e, ‘I follow these influencers. I want to work with them.’ But who says: ‘Which influencer, based on metrics, will perform best for my brand?’ ‘Which influencer has the best metrics on a cost per standpoint or conversion standpoint for my audience?’
Another mistake made by brands is thinking influencers are programmatic ad units or Uber drivers. They believe the influencer will pick them up, take them from point A to point B without any problems. Influencers are personalities and there’s a lot of moving parts and there is always subjectivity when it comes to content creation.
Lack of planning for the process will lead to backtracking and doing ten times the work. a big part of what we do at OpenInfluence is accounting for the parts of this process that can’t be automated. It is better, for example, not to automate content approval. We make sure this process is easy as influencers can upload multiple pieces of content according to a brief which we and our clients can go through, approve and further comment on with last minute tweaks and adjustments.
Lets say we are doing an ad for Under Armor and the influencer is drinking a Starbucks. We don’t want the focus in this content to be on a Starbucks cup, we want it to be on the Under Armor clothing so our team will airbrush it out of the image.
What About the Role of Influencer Marketplaces?
Neal: I know you have a very strong opinion on influencer marketplaces. If you Google search ‘influencer marketing’, you are bound to run into these marketplaces. These databases often limit influencers to five categories which rarely include business. Why do you think they do this? Is it a best practice and what do you advice brands who spend a lot on these marketplaces when they could be missing out on the big picture due to the way they work?
Eric: I’m not a fan the influencer marketplaces model. I don’t feel they generate value for advertisers. My co-founders and I have a background in economics and we love dynamic marketplaces and being able to extract efficiencies with transparency.The issue we find with a lot of influencer marketplaces is their pricing is all over the map. They allow influencers to overcharge customers and over-anchor pricing rather than helping to drive pricing down and increase demand from advertisers. The right approach is identifying the right influencers and shopping from them so they compete with each other for opportunities. This drives cost down and pushes value up.
Another issue I have with many of these companies is how they categorize talent. Influencers are categorized into beauty, fashion, automotive, or business etc. This is fine if you have a finite set of influencers but once we start scaling, we encounter a ton of issues. One issue is subjectivity. If we were to categorize the influencers internally, different people on our side would categorize the same influencers differently.
Influencers may have a business blog but they may also have a pet or be into sport. Depending on the most recent content these influencers post, coordinators looking at this content will categorize them differently. It can be just as subjective when we categorize influencers. When we gave out our categories to influencers, every influencer was high luxury, fitness, food or pet influencers or of a similar bias. There are ways to tweak and narrow down this categorization but overall, it is very sloppy.
Business can mean a thousand different things. If I am looking for an influencer who specializes in a specific business, I will have to get through a lot of noise to find you, Neal. I may to plow through 5-10,000 profiles, most of which are irrelevant and still not get a sense of who they are. A lot of these platforms have a Rolodex approach, using basic head shots and stats. At OpenInfluence, we have removed all the subjectivity and noise from the bios. We look at, and analyze individual keywords and content to make our influencers pop up at the top of search lists due their relevance in a category.
Neal: In the interest of fairness to marketplaces CEOs I have worked with who have successful case studies of how their clients generated ROI-for those brands who have only worked with marketplaces-while they might have had success, they should definitely look at the other way of working with an OpenInfluence to see what the differences in ROI might be which might surprise them.
Eric: There are marketplace companies that perform well. We started as a marketplace early on. We have evolved because of inherent shortcomings in this model. A lot of marketplaces have their way of retrofitting and overcoming these shortcomings and there are ways to generate ROI. We believe, however, in thinking ten steps ahead and holding ourselves to a higher level of accountability than the marketplaces.
The Supply and Demand Relationship with Influencer Marketing
Neal: This is definitely food for thought. We hope our listeners/readers have already downloaded and read ‘Influencer Marketing: How Artificial Intelligence is Revolutionizing the Influencer Marketing Industry.’ and will begin to fully understand what Eric is talking about. We talk in this ebook about friction between supply and demand and marketplaces. With this friction of supply and demand, what do marketers need to know about it? And where should they focus their efforts going forward?
Eric: In any industry, supply and demand are the driving forces that determine pricing and market dynamics. Historically, the talent business has been a supply driven business. This means talent has been the main customer and the one holding a lot of power. What does that look like? That looks like a handful of talent agencies representing all the celebrities out there. If you want to work with a top tier talent, you go through a talent agency. While the the model of talent agencies is excellent for the talent they represent, in today’s world, the emergence of social media has opened the door to millions of influencers. This means a huge increase in supply. This has allowed for a shift in demand for advertisers. Advertisers can now dictate what they want which has led to a shift from management and representation business to media buying business.
This has also allowed for a big shift away from selling cache to selling/buying against metrics. Talent is no longer procured because they are a big name. In today’s world, individuals names are not as important as metrics. This interchangeability gives advertisers a lot more choice about who they work with. There are now thousands of influencers to engage with. This is why influencer marketing has emerged now and not 10-15yrs ago.
The Data-Driven Approach to Influencer Marketing
Neal: So, as that supply and interchangeability grows, the only way to choose influencers going forward is based on the data.
Eric: Influencer marketing is not commoditized like programmatic ad units. There is no real set price. Its not like selling or buying gold on a marketplace with a clear set percent. Influencer pricing fluctuates.
Influencers may drastically change their prices depending on other opportunities. It may depend on their relationship with your terms.
Influencers are people who don’t have a cost structure. They don’t have a specific or limited inventory. It’s important to remember you are paying for content, not ad placement. There is a qualitative aspect to the content creation. Everything falls subject to market forces at the end of the day.
Neal: We hope this advice has helped to expand our listener’s horizons and think differently about influencer marketing. As budgets grow, you will see significant impact by following Eric’s advice. I highly recommend reaching out to OpenInfluence (https://openinfluence.com/) to take your influencer marketing to the next level or just to reset your entire program. I hope you enjoyed this show and stay tuned for the next one. Wherever you are in the world, make it a great social day!
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Neal Schaffer is a leader in helping educate executives and professionals on social media as well as in implementing successful social media strategies for businesses.
Social Media Author, @RBSExecEd & @IMI_Ireland Educator, Keynote Speaker. New #influencermarketing book: https://t.co/Z9bWWfapJ6
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