For years, brands have been operating in a black box when it comes to compensating influencers in their campaign partnerships because there are no set guidelines or benchmarks when it comes to influencer fees nor do most organizations have sophisticated measurement models in place for influencer marketing.
Before the pandemic, influencer marketing spend was expected to reach as much as $15 billion by 2022, but the latest predictions from industry experts say that influencers should expect to make 30% less than last year due to massive marketing budget cuts.
For marketers focused on getting the biggest bang for their buck, how can they know if they’re under or overpaying their influencers?
One of the most common errors a brand can make is investing in the wrong partnership, which can be costly to both your budget and overall reputation.
This can lead to poor engagement in content by not reaching the right audience or key consumer, or can become completely misaligned if the influencer isn’t properly vetted. With influencer fraud rampant and growing, followers or comments can easily be bought.
However, digging deeper, these metrics alone don’t provide the marketer with enough insights to make informed decisions, leading to wasted investment.
On average, brands paying based on CPM vs. CPME are overpaying by 262%, according to data from Traackr on paid content from 1,000 Instagram influencers from January 1, 2019 to April 15, 2020.
Based on a traditional CPM model (the amount a brand would pay to reach 1,000 people), the average post cost was $2,158.
However, if the brands had been using a CPME model (the amount a brand would pay to generate 1,000 engagements), paying based on content performance, the average cost per post (CPP) should have been $643.
The CPME model is preferable because it rewards results and disincentivizes vanity metrics like potential reach.
While overpaying is a common issue, undervaluing influencers is also pervasive in the industry. Brands could be underpaying, or under leveraging, influencers who are adding value and deserve to be more highly compensated.
With no guidelines or established process for evaluating investments, this can go unnoticed. Of the same 1,000 Instagram influencers, 122 would have been underpaid based on their content performance (569 influencers would have been overpaid by at least 100%).
Looking at YouTube influencers, the situation is even more striking. Among the most active sponsored influencers, the average CPM per sponsored video was $9,735, while the CPE model would have resulted in an average cost per video of $4,417.
This indicates that on average, brands paying based on CPM vs. CPME are overpaying by 572%. Of the 1,000 YouTube influencers, 136 would have been underpaid based on their content performance. A staggering 662 influencers were overpaid by at least 100%.
By rightsizing payments to influencers who aren’t delivering value, marketers can reallocate funds to influencers who are truly moving the needle and compensate fairly.
For many brands, influencer spend is unchartered territory. However, there are key factors in misaligned influencer investments:
Once marketers have created criteria for evaluating influencers to work with, they can come to the table in a better place to negotiate compensation based on performance and not on an inflated rate card.
Additionally, as brands continue to work with these influencers, there will be a baseline to compensate them based on historical performance across campaigns, rather than audience size, to inform future budget decisions, and ultimately, build a strong influencer marketing management program.
Pierre-Loic Assayag is the CEO and co-founder of Traackr, a platform that builds influencer relationship management technology enabling brands to effectively manage, measure and scale influencer strategies, while cutting through the noise on social media. He is passionate about turning powerful ideas into reality using technology. As marketing is being re-invented, Pierre-Loic co-founded Traackr as a way to ease the transition for the modern marketer.
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