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Influencer Marketing 3.0: Equity for Influence

influencer marketing

Influencer Marketing Strategy

Traditionally, brands use Google AdWords, Facebook ads, and lately Instagram ads to drive traffic. This has worked for a lot of brands, but as with most types of marketing, ROI diminishes over time. Influencer marketing has been a small % of ad spend over the past 5 years, but is slowly becoming significant, and was potentially around $5 billion in 2020

Actually doing influencer marketing is difficult and can be expensive, inefficient, or both. If you approach influencers 1 by 1 directly, you waste a lot of time negotiating, and if things don’t work out, it could be months of time lost. You could use an agency, like MediaKix, but you may be paying a premium of 30% on top of what the influencer would charge. An agency might provide a discount, but that spend would likely need to be well over $100,000, so this doesn’t work for new brands. Alternatively, you could use an influencer platform, such as UpFluence, or AspireIQ, but again you are paying a premium, and they are usually only for 1 time deals. It is difficult to develop a long term relationship with an influencer with these methods.

An alternative that I think will grow is to find a well-known influencer, that is a perfect match for your brand, and trade promotion for equity. This is something that has been common among celebrities (celebrity alcohol brands recently, anything not a movie that Ryan Reynolds does), but only emerging with influencers.

For examples, take a look at what the top YouTubers are doing, and check who the sponsors are. We covered the startup Levels recently, who appears to be trying this. 

Pros and Cons

There are Pros and Cons for both the brand and influencer.

Pros

BrandInfluencer
Exposure that doesn’t cost a lot of cashGet equity in an interesting brand, that could pay off way more than any cash payment could
Coverage for the brand quickly and efficientlyIntroduce your fanbase to something they will like/love
Develop a partnership with an influential person who is going to care about the brand long termDevelop a portfolio of brands that you can rely on for content and long-term investment

Cons

BrandInfluencer
Equity cost, if it’s a successful promotion, could far exceed what the cash cost would have beenCompany could go out of business, so the equity you were given is essentially worth nothing
Influencer doesn’t provide the kind of exposure expectedAudience doesn’t respond to the brand, or worse, actively dislikes you promoting to them
Audience doesn’t match to the brand’s valuesFuture opportunities dry up with other brands

A Professional Influencer Marketer’s Opinion

The CEO of Night Media (who manage MrBeast), Reed Duschscher, recently had a lengthy discussion about this with Blake Robbins, of Ludlow Ventures, and you can find it on their YouTube channel:

They outline a few ways to avoid some of the Cons listed above: 

Firstly, the official role of the influencer at the company should be as an advisor. Secondly, equity should be priced at an agreed upon discount to if the content was paid for. An example would be if the influencer normally charges $100,000 per video, and the deal is to do 10 videos, they get less than $1,000,000 worth of equity, as the influencer should be bringing expected growth. Thirdly, metrics should be tied to equity. Examples: 1. Get 1% for opening video 2. If you convert X amount of new fans, you get X % increase in equity. Finally, to cement the relationship long-term, a vesting schedule should be in place.

Summary

Brands should consider the equity side of influencer marketing, because getting this right could reap huge rewards for both sides The difficult part is finding an influencer that understands the potential value of equity, and matching expectations of the brand. These deals are tough to get completed, but this space will grow over the next few years. We are looking forward to watching this area of creator economics grow.

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