The Economics of Influencer Marketing: How a Targeted Approach Seals Major Deals

Twitter’s announcement that they have now acquired Niche, the influencer network for social video stars, drew praise and criticism from news outlets and social media commenters.

Twitter’s announcement that they have now acquired Niche, the influencer network for social video stars, drew praise and criticism from news outlets and social media commenters.

Some viewed it as a great opportunity for Twitter to generate a new revenue stream—particularly for Vine, which has struggled to become profitable without direct advertising. Others viewing the acquisition as a shift of power toward Twitter, putting the focus on creating brand content rather than creative influencer marketing.

Regardless of what side of the coin you’re on, there’s no arguing that this power move gave more credence to influencer marketing as a viable strategy for brands, advertisers, influencers and social networking sites.

With all of the conversation about how Niche can help Twitter and vice versa, one largely ignored question was what impact the acquisition would have on influencers now managed under a large media entity rather than a more targeted network.

It’s an important question to ask as influencer marketing is poised to grow exponentially in 2015, and the acquisition is an early indicator of the role social video and influencers will play. However, while deals mean more opportunities for influencers to tap into more resources, get access to bigger brands and increase their overall influencer status, it’s crucial that the purity of influencer/brand relationships not be lost, economic integrity be maintained and influencers be appreciated for their creativity and network.

One cautionary example regarding influencer relations is international YouTube influencer network Mediakraft, which recently suffered some backlash when a large number of influencers reportedly left the network due to dissatisfaction with contracts and compensation. Coincidentally, around the same time, Mediakraft CSO Jan Schlueter left the company, though some close to the company say it was not connected. Network influencers felt they did not receive the support they’d been promised upon joining the network. The story made huge waves abroad and there are some universal important lessons to learn from Mediakraft’s mistakes.

I spoke with Schlueter to get some insight into their missteps and how to avoid them. The biggest mistake that Mediakraft made was not educating their community of YouTubers on the business of influencer marketing, namely economics and ethics. For young influencers, many of them teenagers, earning $20,000 a month is a far cry from a minimum wage salary at the local burger chain. As a result, some YouTubers took the money and the opportunity Mediakraft provided for granted.

One YouTuber, “LeFloid,” said that networks like Mediakraft say they will bring influencers and YouTubers together, but in reality the only thing they care about is the profit. They aren’t really interested in supporting and helping smaller YouTubers get more media attention; they’d rather just to use them to boost their own value.

One might say, sure, this is one person’s account, and it needs to be qualified, considering any disgruntled employee would have some gripes with the higher-ups. However, the network received a lot of negative public attention from many social media entrepreneurs who used their influence to talk back to the platform that once leveraged their voices.

This is what happens when networks grow too fast and lose sight of priorities, sacrificing the moral of influencers for attention of brands. Don’t get me wrong. Brands are extremely important, but they’re interested in working with quality influencers. If you get influencers, you’ll get brands.

Although influencer marketing is very profitable, it’s also a fairly new territory with a lot of players unaware of how the game goes. Clarifying the contracts and agreements between influencers, as well as brands, helps manage expectations and ensure all parties are fairly compensated, keeping influencers, brands and networks safe.

Ultimately, the power lies in the hands of the community and any new platforms, networks or tools that leverage its influence should do so without subtracting from its authenticity or value.

Taking a more targeted business approach—one that prioritizes the creativity and reach of influencers as well as the specific needs of brands—is an option that has yielded great success for our influencer network, thus maintaining a harmonious balance between happy influencers and happy brands.

Keeping influencers pleased is a downplayed asset in network influencer marketing, but it should be of the highest order, as having direct relationships with influencers can strengthen the quality of campaigns and enrich content. Influencers who really understand and have a connection with brands make a bigger, more authentic impact on consumers, creating a win-win situation for everyone.

This year, we’ll continue to see social platforms expand into bigger media companies and create talent for brand advertising. Video in particular will become a major focus, with platforms like Vine, Instagram and Snapchat taking over the reigns of more text-based social networking services.

While this will create a host of new creative opportunities for brands to get their message out through influencers and native advertising, the influencer marketing space will become more competitive and crowded, resulting in more networks and agencies to help manage them.

Influencer networks give social media stars an opportunity to leverage their influence and work closely with brands, while providing brands an opportunity to connect with niche segments of their consumer-base through a variety of influential channels.

What will be perhaps most effective for brands, advertisers and influencers is tapping into a specialized network that understands the nuances of influencer marketing and skillfully facilitates this mutually beneficial relationship between influencers and brands– one that prioritizes creating compelling content, not ads. The day influencers become just another number in reach statistics is the day influencer marketing becomes direct advertising, which is notoriously unpopular on social media.

Francis Trapp is CEO of Brandnew IO, the world’s leading technical platform for Instagram marketing. The Brandnew platform enables advertisers to run global influencer marketing campaigns and additionally delivers key insights via Instagram analytics.