How much should brands pay influencers?
Updated: Jun 17, 2018
I'm sure you see a gazillion of sponsored posts in your social media feeds on a daily basis, whether on Facebook, Instagram, Twitter, or other social networks. Do you ever wonder how much these social media influencers really get paid for their content, or if ever they get paid at all?
Many would probably argue that influencers should be paid "according to influence" but the challenge in that statement is that there is no direct and absolute measure of influence, as there are plenty of elements that constitute "influence" per se.
(I challenge you to search the entire World Wide Web and all the largest libraries in the world; if you can find an equation that will measure influence on an absolute scale, then please let me know! I promise to reward you with something I'm sure you will like!)
Here in the Philippines, as of writing, there are no strict guidelines and regulations (yet) on how influencers should charge for content, which makes the entire industry a blur for many businessmen, making them hesitant to invest their allocated marketing budgets in influencer campaigns. The million-dollar question that I get in my inbox every single day is this: How much is a fair price that brands should pay for collaborations with influencers?
If you're in the space, I'm pretty sure you ask yourself this too, especially if you deal with influencers directly, or you're an influencer/content creator yourself. You do your research, you ask around from people in the industry, but still get no definite answer with regard to how the financial implication of influencer engagement is like. You'd probably get answers like:
"She charges X pesos, so you can probably charge something close to that amount too."
"He got Y pesos from the recent partnership with brand Z. Brand Z's budget for influencers should be around Y pesos."
I hate to burst your bubble, but I'm not going to tell you exactly how. I know that our colleagues from the Internet and Mobile Marketing Association of the Philippines (IMMAP) have standardization plans for influencer marketing set to be discussed in Q2 of 2018 (I sincerely hope I can be part of this committee), but as of date there is still nothing set in stone. What I'm going to tell you in this post is a couple of factors, parameters, and an approximate range of amount for influencer compensation.
Now, let's get down to business.
Depending on the platform, there are certain parameters that determine the value of influencer posts. Much like how celebrities are engaged for campaigns in traditional media, price is always about perceived value, not actual value/cost -- which has advantages and disadvantages.
- Perceived value is how much customers would be willing to pay for a product/service, based on how much it's worth to them.
I would be willing to pay PHP 200 for a small bottle of ice cold drinking water in the middle of the steaming hot Sahara Desert because it would be extremely valuable to me in that sense.
Many of my friends are actually investing in those "black Chanel bags with gold hardware", because they perceive it to be extremely valuable. (Me? I'm OK with Kate Spade, Longchamp, and Coach! I'm not really a fan of designer stuff -- yet. :P)
A brand I've worked with before paid Kris Aquino a whopping PHP 10 Million net for an endorsement deal, because they perceive Kris Aquino to be extremely valuable. I believe they paid Jake Cuenca a little more than PHP 1 Million only that time; I'm not saying which brand this is, of course. Haha!
- Actual value is, quite self-explanatory, the true cost of production (for products) and fair market value (for services).
What are the advantages and disadvantages of perceived value being a determinant of price, then? How does this affect the brands and influencers?
Some influencers are perceived to be "more influential" and hence brands are willing to pay a hefty premium to engage them for campaigns.
Some influencers bloat their numbers to be perceived as more valuable, and therefore be able to command a higher price than what they actually "deserve."
Some brands do not perceive individuals as influential in a respective vertical, even though they really are, as evidenced by audiences engaged, actual knowledge in the vertical, and years of experience.
I talked to the CEOs/Founders of Blogapalooza's partner companies (all influencer marketing companies in their respective countries) all over the globe, as I wanted to find out how the industry is like in their region. Let me tell you this: in Southeast Asia, the influencer marketing space is extremely fragmented; there are no standards yet for the price of influencer collaborations. In the west however, it's largely accepted that a fair price to pay for influencer content is the average engagement (likes + comments) of the latest 3-5 posts multiplied by USD 0.10 (PHP 5). This is just an approximation, but to illustrate, this is how it looks like:
Take your latest 5 posts in Instagram, total the likes and comments for all the 5 posts, and then divide by 5.
Multiply this number by 0.10 (you'll get the USD value)
Multiply this number by ~50 (or the latest USD-PHP exchange rate) to get the PHP value
How much did you get? :)
If you're an influencer and you're not satisfied with this number, don't fret. If you're a brand and you think this is the absolute price that you should pay, let me tell you otherwise. Of course, average engagement is NOT the only factor that you need to consider. There are other factors like:
1. Post requirements (quality and complexity of content). Which channels will the content be placed? Some channels (such as blogs) can be more expensive than Instagram posts, as they have an extended shelf life and can be searchable even after years. How complicated is the expected content? What are the commitments needed; will the brand need the influencer to be present in a shoot? Are there other offline engagements, like attendance in events? Where will the digital content be used? Are you giving/acquiring usage rights? Do you want the influencer to be exclusively engaged to you and not entertain similar brands/competitors?
2. Celebrity status and associations. Is the digital influencer also a TV personality? Does the influencer appear in other channels apart from digital? Is the influencer highly demanded by other brands (regardless of industry)?
3. Ex-deal value. Influencer partnerships usually constitute a part-cash, part-ex-deal arrangement, calibrated based on ex-deal value. How much does the product/service cost? Of course the higher the cost of the ex-deal is (e.g., a car, the latest mobile phone, a condo unit, etc.), the higher will be the bargaining power of the brand to negotiate the amount of monetary compensation.
4. Experience of influencer. Most resources will say "age" but I'd rather use "experience" in valuation of compensation. Of course influencers who have been in the industry for awhile and have had substantial experience will cost a little higher than those just starting out.
5. Industry / Vertical. For obvious reasons as well, verticals that are "less saturated" will tend to have higher compensation averages.
6. The ratio of sponsored posts to unsponsored posts. I don't know about you, but I think an influencer that has a high ratio of sponsored posts vs unsponsored posts is just an online catalogue of products, with the same face on all. I'm not the type of person who likes being constantly sold to.
What does this mean for both brands and influencers?
Oh, quite a lot of implications (that I could reserve for another post later on), but here are some of my initial insights:
Brands need to be more prudent in selecting influencer partners. Assess carefully the influencer's audience profile, individual preferences, and current content. Take a look at their affiliations. Get to know their interests. They are real people: with feelings, affinities, natural tendencies. Some influencers will present statistics that are not at all factual to increase their perceived value; protect yourself from making the mistake of engaging influencers that will only waste your resources. You can do better than that.
Number of followers is not, and should not be, indicative of influence. Don't go crazy monitoring follower count. Sometimes so many brands are fixated on follower count to the point of completely disregarding those that fall below what they think is a good number, but number of followers should only be secondary data. In fact, based on our experience, most campaigns have better results when micro-influencers are engaged.
Influencers should decide to focus on these three (3) things: being authentic, driving conversations, and creating quality content. I've mentioned this in a previous blog post: if you're an influencer, know what you can offer, be the best at it, and come at the heart of service.
I won't go into questioning motives, but if an influencer is one who's vainglorious, self-centered, and worse, unprofessional, I don't think that influencer has real staying power, and therefore not worth investing (time and resources) in. No one is indispensable.
If you're an influencer and the brand you like doesn't like you, move on and refocus your energies to another brand that appreciates you and what you can offer. Remember, it's all about perceived value. :)
I know I missed plenty of things here; I'd love to know your thoughts! What should be included? What should be deleted? What are the things I missed? Anything around here that needs to get corrected? Get in touch with me at firstname.lastname@example.org!