The Influencer Marketing Ecosystem, Challenges and Outlook

Manatt Digital

Over the past couple of years, social influencer marketing has received a lot of attention and dollars. A recent report states that 73% of marketers use influencer marketing and 43% plan on increasing spend in the next year. Its growth is driven by a number of factors. Influencers have developed one-to-one relationships with consumers—something that brands did not have. From direct interactions and feedback, influencers have access to deep insights into their communities and the know-how to develop engaging content, an asset increasingly critical for brands. Influencers are also much more cost-effective than celebrities, although the costs are steadily rising.

The scope of influencer marketing initiatives, and the tools and processes they employ, vary based on a brand’s overall strategy. A study by influencer marketing company Linqia states that 46% of brands run two to five programs per year; 30% spend $25,000 to $50,000 per program and 25% spend $50,000 to $100,000. Most programs are cross-platform, but Instagram has seen the biggest traction with influencers and brands. Marketing solutions range from self-service software platforms to agencies that provide PR and turnkey influencer services, and many employ a combination of both. Both agencies and brands have community managers who help cultivate direct relationships with target influencers. For other activities involved, dozens of solutions use proprietary algorithms to help brands identify the right influencers across social platforms, manage and share media assets or guidelines, execute compensation, and track and measure performance. The newest entry to the market, Facebook recently launched Brand Collabs Manager, which allows brands to search for audiences (on Facebook, for now) by parameters such as demographics and interests, and recommends creators based on those criteria.

While some use a campaign-based approach, engaging different influencers over time on short-term projects, others build longer-term or deeper partnerships with influencers, and some do a combination of both. Fashion e-commerce company Revolve attributes more than $600 million of its $1 billion in revenues last year to influencer marketing, which has been core to its strategy. The company sponsors lavish trips and events for influencers, who in turn post content of themselves in Revolve apparel. Whereas many of Revolve’s partners have millions of followers, more brands recently have focused on “microinfluencers”—those with a relatively smaller audience base and more intimate, engaged followers and/or niche focus areas.

Revolve is a great case study for the power of influencer marketing; however, few brands have seen the same level of success. The Association of National Advertisers found that only 36% of marketers saw their efforts as effective. One major challenge faced by brands includes measuring ROI, especially as the costs of influencer partnerships continue to rise (a single sponsored post can cost up to $5,000, with bigger influencers charging multiples more).

Perhaps the biggest challenge the market faces today is identifying and mitigating fraud in influencer marketing campaigns. Earlier this year, Manatt advertising expert Jesse Brody wrote about a company that allegedly sold fake followers; he cautioned advertisers on “equating the number of followers with the ability to influence.” In an effort to win ad dollars, many social accounts have engaged in tactics that include buying followers and using bots to grow audience size. Bots that automate account creation, following, commenting and liking make up a significant portion of social media engagement. Over 50% of engagements on Instagram posts tagged as #sponsored are fake, according to anti-fraud company Sway Ops.

The ecosystem is evolving as the various players respond to these issues. Twitter has been purging fake accounts from its platform. It suspended more than 70 million fake accounts in May and June and was deleting 1 million accounts daily in July. Big advertiser Unilever declared it will stop working with any influencers found to have used bots or fake followers. The renewed awareness may spur other brands to revisit their strategies and partnerships, improve due diligence processes, and redefine success metrics. The market is evolving, and the tools, tactics and strategies must evolve with it.