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The Race To The Bottom For Influencers
As the social media landscape has matured and successfully monetised attention online in ways TV, billboards and other traditional media could never dream of; we've seen an explotion in business growth in the social media sector. Social media started as a fun place to share stories, engage with the content you like and hang out online, but as investors wanted to see a return on capital, these platforms had to find ways of monetising their user base.
The race to extract revenue from these eyeballs was on, and the expansion of social media commoditised attention began. The first steps were through the internal monetisation through their build-in ad targetting services.
Platforms began to throttle reach to their userbase and offered advertisers access for a fee. However, not everyone wanted to advertise in this manner, and a secondary attention marketplace sprung up to support this need.
The secondary attention marketplace
Certain superusers on social media platforms were able to garner large followings or rather dedicated followings, bypassing the gatekeeping of social media algorithms. Social media platforms encouraged these content creators through privileged access to a broader audience.
For the social media apps, it was a way to encourage fresh content on the platform. Platforms like Facebook, Instagram, YouTube and Twitter now have an endless supply of content creators willing to keep their feeds filled every day.
The first movers in the influencer space, made out like bandits, could charge any crazy fees for access to their audience because the competition was few, the market was still fresh and trying to establish an ROI and yield curve, and thus many of the early deals were wildly overpaid.
There also weren't very accurate metrics to measure an influencer versus another, and these murky metrics also helped influencers bag a pretty premium for sponsored posts.
Like any gold rush, as the news about wealth for little work spread, you soon started to see anyone with a smartphone trying to be the next influencer in their niche.
When previously brands had a few to choose from, they now have a range to mix and match and build influencer campaigns. Markers who work with influencers tend to categorise them as follows.
Mega, Macro, Micro, Advocates, Referrers, and Loyalists.
The influencer market matures.
One sign of a market maturing sees it fragment into different subsets; as I mentioned above, the influencer market is no different. You now have part-timers and full-timers trying to make a living through influencer marketing, and the competition continues to heat up.
Influencer marketing has been in a bull run the last few years, brands have thrown good money after bad, and many have been burned in the process. We often hear of the cherry-picked social media campaigns that worked well, but no marketer or influencer will speak about the various campaigns that failed.
Influencer marketing relies on survivorship bias to perpetuate the myth that it's always a profitable venture for all involved like it might have been in the early years.
What influencers have yet to understand is that they are indeed entrepreneurs. No, not the flexing and hustle culture posting type that makes us all cringe.
They are rational actors who have found a gap in the market; they can apply their skills and extract an above-average return. When entrepreneurs identify opportunities like this, they rush in and cause deflation and drive prices towards zero.
An entrepreneurs motivation is to make something cheaper, faster and better than the competition, and this is starting to play out in the influencer space.
Saturation of content
Influencers of previous years were establishing niches of content; some focused on fashion, others sport, exercise, food, travel, cars or yoga, for example. The more prominent niches have attracted more influencers; you'll see many focus on the more lifestyle and consumer brand style of content as this is where the money tends to circulate.
Now brands don't care about your profile performance, and the more you sell your audience, the more saturated with ads, the less responsive your audience will become. If you're not providing entertaining content and a balance of ads, you're going to kill your audience reach and thus limits the number of effective ads you can produce.
As these limitations become more apparent, you'll see the price of influencer sponsored content trend downwards.
Budgets get stretched
This one is a simple supply and demand equation; the more influencers coming online, the more brands can stretch their budget through different individuals. The more budgets get stretched across other suppliers, the lower prices trend as competition for that income heats up.
Attention is finite
Social media platforms have pretty much peaked out in Western nations, yes they are still growing in developed countries, in Africa and the East, but for the most part, you're not going to see a massive uptick in the number of new users. So it will now be up to content creators to keep the daily users they've already acquired entertained.
However, attention is finite; people only have so many hours a day to spend on social media, and as that attention is moved towards things media like Podcasts, flash briefings, it starts to put some severe limits on the eyeball to screen time that influencers thrive on today.
As influencers compete with other mediums and other creators, it will cause deflation in the price of their posts.
Reality will set in
The limitations I've mentioned above are starting to set in; influencer marketing will eventually plateau and begin to decline in importance, budget allocation and effectiveness. As a mature channel, they will have to compete on an equal basis with the traditional digital marketing channels and be held to a strict ROI as we see with other channels like SEO, PPC and Email.
If you are going to compete for the marketing budget of businesses going forward, your cost per reach, cost per acquisition and cost per retention will need to fall in line with competitive rates that companies cannot otherwise acquire on their own.
Influencers won't only have to compete with one another based on price but also with professional marketers and their channels. Oh, having made a living as a marketer, let me tell you this is a results-based business.
As a marketer, I welcome you to our domain, but remember, you're only as good as your last campaign, and there are no exceptions.
Tilting into brands favour
If you've been sceptical of influencer marketing in its current format, then I don't blame you; I have to. I am still not entirely convinced about the bang for buck they offer at the moment. Still, as we now move into a repricing of attention to the secondary market, I think we will see fire-sale prices as influencers look to compete and are willing to sacrifice their margins to secure a steady income.
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If you have time to spare why not dive deeper down the rabbit hole and check out these posts for help on Influencer marketing:
- How To Get Brand Deals As A South African Influencer
- How To Calculate The Cost Of A South African Social Media Influencer
- Why Brands Should Opt For Thought Leaders Over Influencers
- Techniques for Working With B2B Influencers
- How To Find The Right Instagram Influencers For Your Business
- How To Find Suitable Instagram Influencers For Your Brand