Wednesday, May 29, 2024

Social influencers – following the money

Top male gamer influencer Dan Middleton (aka DanTDM)

 

“Social media influencer” – it is a real job title, and many in the profession are making real money.

Some influencers make more in one sponsored post than many of us make in an entire year. We dig into how they make their money and how much, who is paying them, and whether or not the investment into someone’s influence offers a significant return.

Influencing consumers to purchase goods or services based on an individual’s elevated social status is nothing new. In the sporting realm, in 2018, tennis legend Roger Federer hauled in $65 million in endorsements, while basketball star LeBron James and golf icon Tiger Woods checked in at $52 million and $42 million, respectively.[1] But what makes social media influencers unique is that they usually are not star athletes, movie stars, or rock stars. Instead, they are often famous for being famous, sometimes with little pedigree to justify influential stats. Many make money hand over fist, just the same.

It’s human nature

Having “social influence” is the ability to change the way another person thinks, acts, or values, through exhibiting one’s own behaviour in a public arena. Historically, we have seen this with leaders who persuade through tools including intelligence, charisma, and expertise in communication. They tend to exhibit qualities that we value and see (or would like others to see) in ourselves.

Some researchers suggest that humans are predisposed to imitation because their mechanisms allow for smoother social adaptation to a naturally safer pack unit (a “herd”, as seen in many species in the wild). This presents the opportunity for individuals to observe the relative fitness of others and make decisions about things such as resource and mate availability. Who one chooses to follow and emulate is a matter of taste, and there is no accounting for taste.

The research behind influence

Rational and irrational human nature are challenging to study. In fact, the study of human nature through psychology and sociology is often considered a “soft science” because findings and assumptions are scarcely based on foundational empirical data. Some research in the area of social influence has produced interesting findings, though. Two major factors in social influence have been identified:

  • The expert effect – experienced when a supremely confident individual in a group opines on a certain issue. As you have likely observed, individuals who successfully utilize the expert effect do not have to be experts on a topic of interest to exert influence; they simply need to be confident in their delivery.
  • The majority effect – occurs when a “critical mass” of a given population shares a common opinion, and others adopt the same or similar position, based on the belief that a majority is unlikely to be wrong.

Focusing on these two effects, researchers identified something called the “tipping point”, whereby one factor will prevail over the other in driving public opinion. The majority effect overcomes the expert effect when the number of experts who occupy a social space drops below 10%. However, when the number of experts in a space who agree on a position increases to 20%, the expert effect takes over. The key phrase to consider in this assertion is, “who occupy a social space”. If one is surrounded only by those who confirm personal bias, rather than being encouraged to have an open circle and open mind, the expert effect and majority effect kick in and reinforce personal beliefs.

How do influencers make money?

There are three main revenue streams through which influencers earn without having to perform transactions with customers:[6]

Affiliate marketing

The influencer recommends the product and offers followers a “discount code” to use when buying the product. The code is tied to the influencer, and when a customer makes a purchase using that code, the influencer gets either a flat rate or a percentage of the sale (usually in the range of 5-30%). This type of marketing remuneration is often seen in blogs that review products.

Display advertising

The influencer agrees to allow a company advertisement on a blog, video, or other form of content. This type of advertising is often volume based, and the influencer earns on a cost-per-click (CPC) basis (influencer earns money each time a follower clicks on the ad) or on a cost-per-thousand-impressions’ (CPM) basis (influencer gets paid based on views of the ad by followers). Some ad networks require at least 25,000 web sessions per month (e.g. views of a blog) to sign up, and net over $500.[7]

Sponsored posts/campaigns

Under this type of advertising, the influencer agrees to promote the company’s product directly in exchange for compensation. This compensation can be based on a price-per-post model, or a price-per-campaign model. Think of this type of marketing as a commercial but without the cinematic quality. Celebrities whose social commodity is already high can earn $100,000 or more per post, while a few hundred dollars to $5,000 per post is not uncommon for mere mortals, depending on their niche, reach, and what they are promoting.

Following the money trail

Influencer marketing is no longer a new or revolutionary concept. Most of the major brands employ this method as part of a greater marketing scheme, including clothing giants Adidas and Zara, telecommunications pioneer Motorola, and mega-store Target.[8] Research shows that using brand ambassadors (influencers) as a marketing strategy works. While some brand ambassadors are paid, others are compensated through free product or services.

Influencer marketing costs are expected to reach $9.7 billion this year.[10] Eighty percent of brands utilize influencer marketing as a major part of their overall marketing strategy and plan to budget at least 10% of their marketing fund to social media influencers.[11] Further, 82% of surveyed respondents said that they would purchase a product at the recommendation of an influencer, which is important to note, because surveys done on Millennials and Gen Z show an aversion to traditional marketing strategies.[12]

One study indicated that for every dollar paid to influencers in 2019, the return on investment, on average, was $5.78.[13]

An interesting trend has been identified in a shift toward interest and, presumably, brand trust in “micro-influencers” (those with 5,000-100,000 followers), by the general public, and consequently by companies looking to market their products.[14] However, reports have identified that many in this niche are demanding more money, citing the need to hire photographers, and absorb other costs, to enhance the quality of their posts. Some research shows that for this subsection of influencers, a positive return on investment is less likely.[15]

Show me the money

Now, to the question you likely came for – how much money are they making? The top 20 earning influencers in 2020 were mostly athletes, singers, and actors, whose per-post fees were well into six figures,[16] but the next five best-paid influencers not in one of those categories also garnering considerable cash:[17]

  • Eleanora Pons (23 years old)

$144,000 per Instagram or YouTube post – 39 million followers

Net worth = $3 million

Origins: Started out doing comedy sketches on Vine

 

  • Sommer Ray (23 years old)

$86,600 per Instagram post – 24 million followers

Net worth = $3 million

Origins: Quick fitness videos on Instagram

 

  • Chiara Ferragni (33 years)

$58,300 per Instagram post – 18.5 million followers

Net worth = $10.5 million

Origins: Used to work as a model and started her own blog

 

  • Michelle Lewin (33 years old)

$33,900 per Instagram post – 13.6 million followers

Net worth = $3 million

Origins: Former Venezuelan model. Made short fitness videos on Instagram

For those wondering about non-conventional celebrity males on the list, they are there, and they are gamers (people who play video games). The top male gamer influencer is Dan Middleton (aka DanTDM), who started a YouTube channel that allows others to watch his screenplay of video games. He has more than 18.4 million subscribers to his channel and earned $16.5 million last year playing Minecraft.[18] Even child influencers are making headlines and big money. Texan Ryan Kaji, 9, earned $29.5 million in 2020, which made him the highest-paid YouTuber last year, The Guardian reported.[19] According to a Harris Poll/LEGO survey conducted in the U.S., U.K. and China, children are almost three times more likely to aspire to be a YouTuber (29%) than an astronaut (11%).[20]

Other gaming influencers are doing well for themselves.[21]

Influencer marketing is not new and it is not a fad. While celebrity sponsorship will not be going away any time soon, survey trends reveal that Joe/Jill Average can be influenced by (mostly) regular folks, and at a much lesser cost than a LeBron James or a Beyonce. Return on investment can be significant, and like it or not, “influencer” is likely to make it onto job resumes as a legitimate job title and career path. If you are one of the steadfast few who are immune to influence and scoff at those who spend significant time on social media channels, remember that seeking community, similarity, and approval is only human. In the end, we are helots to instinct.

[1] https://www.businessinsider.com/athletes-endorsements-nba-golf-tennis-2019-6

[2] https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0078433

[3] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2827453/

[4] https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0078433

[5] https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0078433#s3

[6] https://hmi.marketing/how-do-influencers-make-money/#:~:text=Known%20as%20cost%20per%20click,for%20every%201%2C000%20ad%20impressions

[7] https://hmi.marketing/how-do-influencers-make-money/#:~:text=Known%20as%20cost%20per%20click,for%20every%201%2C000%20ad%20impressions

[8] https://shanebarker.com/blog/influencer-marketing-examples/

[9]https://www.researchgate.net/publication/329830660_Evaluating_the_Role_of_Brand_Ambassadors_in_Social_Media

[10] https://www.gartner.com/en/marketing/insights/daily-insights/gillette-trims-the-social-competition

[11] https://influencermarketinghub.com/Influencer_Marketing_Benchmark_Report_2020.pdf

[12] https://www.retaildive.com/news/70-of-brands-use-instagram-influencers/506164/

[13] https://influencermarketinghub.com/Influencer_Marketing_Benchmark_Report_2020.pdf

[14] https://influencermarketinghub.com/Influencer_Marketing_Benchmark_Report_2020.pdf

[15] https://markerly.com/blog/instagram-marketing-are-micro-influencers-charging-too-much/

[16] https://influencermarketinghub.com/instagram-highest-paid/

[17] https://www.livingly.com/The+Highest+Paid+Social+Media+Influencers

[18] https://izea.com/2018/04/05/highest-paid-social-media-influencers/

[19] https://www.theguardian.com/technology/2020/dec/18/ryan-kaji-9-earns-30m-as-this-years-highest-paid-youtuber

[20] https://theharrispoll.com/lego-group-kicks-off-global-program-to-inspire-the-next-generation-of-space-explorers-as-nasa-celebrates-50-years-of-moon-landing/

[21] https://klear.com/blog/influencer-pricing-2019/

 

Brendan Rolfe
Brendan Rolfe
Brendan Rolfe is a Chartered Professional in Human Resources and business consultant for firms across Canada. He holds a degree in human psychology from UBC and a diploma from Kwantlen Polytechnic University. Brendan is a firm believer in credible data sources and spin-free news.
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