Influencer marketing is one of the most thrown about buzzwords of the past five years, writes Tom Mulraney, with outsized media coverage putting it front of mind for many businesses; not always for the right reasons.
Google search for ‘Fyre Festival’ if you don’t know what I’m talking about.
Or better still, watch the Netflix documentary on the same topic which covers how some of the world’s biggest models, all with millions of Instagram followers, promoted a festival that its organizers singularly failed to deliver.
It is scary stuff and a cautionary tale of the horrors that can flow from an over-hyped social media campaign.
In reality though, influencer activity is still considered a relatively niche area of marketing, forecasted to reach $10 billion total value by 2022. To put that figure in context, worldwide digital ad spending is expected to be in excess of $333 billion in 2019, and that is only the digital half of the total advertising market that includes print, TV, cinema, outdoor and radio.
Influencer marketing is undeniably on the rise though, particularly in the luxury goods industry where consumer purchases are largely driven by status and emotion. Done right, it promises heightened brand awareness, better engaged customers and ultimately more sales. In recent times though, these potential benefits have been overshadowed by controversy. From fake followers to high costs and low returns, many question the effectiveness of this strategy. Others worry that it might do more harm to their brand’s image than good. It doesn’t seem like the trend is going to die out anytime soon though.
It could be argued that there is nothing new to the influencer trend, it is simply a repackaging and digitising of techniques that have been since the dawn of capitalism. Pre-internet, it went by a different term: word-of-mouth. Essentially, someone you knew used a product or service and then personally recommended it to you based on their experience. These types of endorsements were (and still are) hugely valuable to brands because they tend to deliver real outcomes that can often carry more credibility than traditional advertising.
These days, the advent of social media has exponentially amplified the potential reach of these recommendations. When people have a good experience with a product or service, they go online to let others know about it, either through their own social media channels or those of the brand. After all, why just tell one friend at a time when you can tell all of them simultaneously? Along with a load of strangers too.
This is what’s known as Earned Media – publicity gained through promotional efforts other than paid media advertising. Inevitably though, it has also given rise to an entirely new Paid Media stream we know as influencer marketing.
According to Wikipedia, influencer marketing “identifies the individuals that have influence over potential buyers, and orients marketing around these influencers.” These influencers can range from people with a few thousand followers on social media to a few million, depending on the market niche they operate in. Whatever the case, more and more brands are clamouring to work with them, with decidedly mixed results.
So, what makes influencer marketing such a challenging and inconsistent medium to work with? There are numerous possible answers to this question. The four points that seem to come up most often are lack of transparency; uncertainty around pricing; the challenges of measuring return on investment (ROI) in a coherent and consistent way; and, the ability to meaningfully scale influencer marketing activities.
Compared to a few years ago, the general understanding of influencer marketing has improved significantly. Sophisticated analytics tools now make it possible to interrogate an influencer’s audience in more detail, from the geographic make-up to the level of engagement. In theory, this should make it possible for brands to determine if a collaboration will result in exposure to the right target audience. The reality, however, is far more complex and agencies are exploiting this knowledge gap to rake in huge fees for campaigns of questionable value and not inconsiderable risks.
For a start, it’s well known that a number of services exist that enable the purchase of followers (real or artificial) on various social media platforms, along with comments, likes, and so on. As these services grow in their sophistication, it is becomingly increasingly difficult to differentiate between genuine and fake audiences, particularly because the two are often blended together.
Making this process even more challenging is the fact that the influencers themselves may not be aware (or choose to be wilfully ignorant) of how much of their following is actually real. That’s because, in order to appear legitimate, these bots, or robo-accounts, as they are sometimes called, often follow and engage with popular, genuine accounts. Given that influencers are generally rated on the size and engagement level of their audience, they have little incentive to weed out these impostors. Which is why many brands don’t rely on them to provide accurate information about the legitimacy of their followings.
This doesn’t mean the brands aren’t asking the question though. According to Zine’s 2019 Influencer Marketing Report, 93% of brands surveyed reported they engage in some form of audience vetting and 73% do so completely manually without the use of technology or third-party reports. This can be an arduous and time-consuming process, and one that delivers far from perfect results. For example, just because an influencer has a high-concentration of followers in a specific geographic location (i.e. India), doesn’t necessarily mean these followers are fake. It’s all still very arbitrary.
Another ongoing challenge in this growing field revolves around pricing. There is no industry standard for influencer fees, and it is likely to stay this way. The reason for this is that a number of factors come into play when negotiating mutually agreeable terms, ranging from the size of the audience to the specific industry and the ability of influencers to engage with a valuable and hard to reach audience. Some markets, such as fashion have a high volume of influencers, allowing brands a breadth of choice and therefore more negotiating power. In more niche industries, however, it can be a different story. Watches sit somewhere between the two, depending on whether we are talking high volume fashion watches or top end mechanical masterpieces.
Likewise, many of the influencers themselves don’t know what to charge for their services. They’re also wary of promoting brands or products that may not resonate with their audiences or reflect their ideals. After all, their value is derived from their integrity and their ability to connect with their followers in a meaningful way. It’s a fine line to walk between paying the bills and selling out. Many influencers have found themselves on the wrong side of this line due to inexperience, poor judgement, or sheer greed.
As brands look to invest more money into their influencer marketing budgets in 2019 and beyond, they are confronted with an increasing urgency to demonstrate a strong ROI. A process that is anything but straight-forward. Just as there are no industry standards for pricing, it seems there is also significant debate around what metrics should be evaluated and how they should be measured. On the one hand, brands are heavily focussed on engagement and direct sales when it comes to measuring success. Influencers, conversely, argue that the value they deliver is more intrinsically tied to the quality of the content they produce and the level of awareness they generate amongst the brand’s target audience. Tracking the real impact of the latter on actual sales is extremely difficult, however.
It’s entirely feasible that a post on Instagram by a popular influencer may change or shape a consumer’s perception of a particular brand, but this may not translate into an actual sale until months later. Or possibly never at all. But perhaps they in turn will recommend the product to a friend who will become a buyer. That is, after all, the nature of word-of-mouth marketing.
At relatively low volumes, i.e. working with a handful of influencers, it is possible to just about manage the above three issues. However, many believe that achieving scale is necessary to fully optimise an influencer marketing strategy. The reason for this is because it is generally a hit and miss approach. For every one influencer that delivers outstanding results, many others will fail to make any impact at all. And unfortunately, there is no easy way to predict which way things will go. It is a modern day version of the old joke that everybody knows half of their advertising spend is wasted, they just do not know which half.
On the face of things, wanting to scale the strategy seems reasonable. Yet, when you consider how labor intensive the identification, vetting and negotiation processes can be on an individual influencer basis, it quickly becomes apparent that effectively scaling up this approach across hundreds, or even thousands of influencers, is anything but straight-forward.
This doesn’t seem to be deterring marketers though. In the same 2019 Influencer Marketing Report from Zine, 83% of respondents said they’ll increase their influencer marketing budgets in 2019. 49% of those said they plan to put that budget increase towards micro and mid-tier influencers. This means more vetting, more analytics collection and thus more resources needed to see campaigns through.
At the same time, some brands are choosing to continue working exclusively with a few dedicated influencers who have a proven track record of engaging their target market. In the short term this strategy may prove fruitful, yet there is also the risk that these captive audiences will quickly become bored.
Whatever approach you choose to take, one thing is for sure; influencer marketing can no longer be ignored. If done well, it can deliver meaningful results in the form of heightened brand awareness, engaged audiences and ultimately increased sales. Of course, it can all go horribly wrong too.
About the author: Tom Mulraney is a 10-year veteran of the watch industry. He is the publisher and editor of The Watch Lounge, a digital magazine with a unique take on the world of luxury watches. www.thewatchlounge.com