We are all aware that advertising is the main monetization strategy of the social media platforms. Facebook, Google, and YouTube all rely heavily on their ad sales and ad ecosystem to generate revenue.
Up to this point, the model for running ads on a social platform was quite simple: you create an ad-exchange, allow your users to purchase ad placements at different rates, and those ad placements would then be injected into the feed of users.
The model is straight forward, highly scalable, and fully controllable as a result of it being programmatic. Simply put, if you wanted to advertise on Facebook, you had to go through Facebook, and Facebook had full transparency of every transaction made.
A new world vs. an old model
When the platforms matured, a new model began to sweep across the social landscape, the follower model. Though YouTube had subscribers, Facebook had its fans, and Twitter had, well, followers early on, the talent pool was limited to a handful of celebrities who made the early acclamation to social media, and a few viral sensations.
As YouTube continued to mature, you had lots of talent emerge, but that ad buying was still done programmatically, and YouTube and their ad partners, were for the most part simply selling pre-roll ad spots on content creators’ pages.
As the follower model over took social, talent started to emerge from all directions. No longer were there a handful of celebrities or creators, but now there were thousands. And, as new follower-based platforms like Instagram and Vine emerged, new creators began to emerge before the platforms themselves could formalize their ad model.
Social sponsorship was no longer a tiny ad spend, but was quickly chipping away at advertisers’ digital budgets due to the new available supply of influencers on the market.
Blurred lines: Why monetizing influencer posts isn’t so straight forward
Unlike an ad exchange, the platforms have no visibility of the actual transactions that happen between influencers and advertisers. Even more challenging, assuming that a platform was able to sift through and identify influencers when they talked about a brand, how could they decipher if that influencer got paid to feature that brand?
Even more challenging, how could that platform know exactly how much that influencer got paid and verify the amount? The social platforms have successfully fulfilled their mission of empowering the individuals, and in doing so have made their revenue model moot. Now they are competing with their own users to monetize their own platform!
Don’t kill your golden goose
The seemingly simple response to this would be for the platforms like Facebook to push their own ads harder, and take preventative measures against the influencers and parties acting on their behalf to keep them from excluding the platforms from the transaction.
However, its not so simple. The major platforms like Facebook, YouTube, Twitter, and Pinterest are not the only social platforms out there. Everyday, new social platforms emerge, so the influencers have other options. Most importantly, we are living in an information economy and content is the currency that this economy relies on.
A platform, like Facebook, Instagram, Vine, Twitter, or Snapchat is only as valuable as the content that it hosts. Influencers, are professional content creators and are the ones creating the highly valuable content that us consumers consume. To block, or inhibit an influencer from creating content on your platform is the equivalent of killing your golden goose.
It’s a mad mad multi-platform world
All of this begs the question, why don’t the platforms just manage the influencers themselves? Well, unless the platforms want to get into the near impossible to scale and not-so-clear cut business of talent management, then managing influencers isn’t a viable option.
Even if it was, that would mean that the platforms would have to monetize and manage influencers profiles on other competing social platforms. It is easy to see how this strategy comes apart.
Harmony in monetizing a democratized ecosystem
I believe that empowering individuals is a good thing, and that if incentives are aligned everyone can win. For example, if Facebook took an approach of leveraging influencers and their agents to conduct sponsored posts, by giving the brands a higher ROI through a new feature, then they can use that extra value created and influencers and brands would gladly pay.
For example, if Instagram allowed for links to be placed in influencers’ captions, which would give brands a more direct path to a purchase and therefore a higher conversion, I strongly believe that influencers and brands would gladly pay for that feature on a per click basis or a flat fee. Either way, Instagram would be able to leverage its users to generate revenue the way they like to generate revenue, programatically. In that case, partners could now sell ads on behalf of Facebook and influencers.
Eric Dahan is the CEO and Co-founder of InstaBrand, one of the leading mobile influencer platforms that connects brands with millions of people in an authentic and meaningful way across all social media channels.
Image courtesy of Shutterstock.