The following is a guest post from Gil Eyal, CEO and co-founder of HYPR Brands.
We now live in a world where Snap uses influencers to promote its products on Instagram Stories, the very same feature that Instagram cloned from Snap and used to overwhelm its now-declining potential competitor. Aside from the fact that they used a competitor's platform, Snap's approach was fairly standard.
Snap hired social media star Luka Sabbat to promote Snap Spectacles on Instagram. The relationship was covered by the now standard industry "Pay and Pray" model where brands pay influencers in advance without tying the compensation to any concrete performance metrics.
Sabbat, who has slightly more than 1.5 million followers on Instagram allegedly never bothered to fulfill his end of the deal despite being paid $45,000 in advance. So far, there hasn't been any indication that he intends to return the payment or explain why he thinks he should be able to keep it — highlighting a predicament many brands face these days.
In this case, Snap's agency is suing Sabbat in an effort to recover what they paid him and additional damages. This is hardly the first or last time that a large, powerful brand paid an influencer in advance only to find the influencer was less than enthusiastic to perform their obligations. YouTube star Bethany Mota was recently sued by Studio 71, one of the most prominent multichannel networks, for failing to perform her obligations in a campaign for a skincare product.
There are thousands of similar cases where brands paid influencers in advance. Sometimes the influencers never do what they promised. Other times, they do a lousy job or produce no results (or worse, fake results).
Why are well-known brands like Snap willing to take on all the risk when dealing with influencers? Shouldn't influencers be knocking on their doors?
There's a fundamental misunderstanding about the common practice of paying influencers in advance. Contrary to popular belief, influencers are not celebrities, and they are easily replaceable. If we think about this in broader business terms, we could say that when Walmart negotiates with suppliers, it dictates the terms because there's an endless list of suppliers who want to sell to Walmart.
Early influencer marketing technology focused solely on connecting brands and influencers. Companies spent millions building rosters of opt-in influencers in a conscious effort to sign the biggest names and show brands that they're a gateway to the most coveted names in the space.
The result was a significant conflict of interest in the industry, with platforms and brands battling it out for the big name influencers without bothering to check whether these influencers had a relevant and engaged audience. The platforms were incentivized to glorify the impact of these big names in order to get brands to pay as much as possible, in advance, and continue to feed the monster with a list of opted-in influencers that just might go to another platform if they didn't generate enough business. Naive brands bought into this concept despite the fact that activating influencers required a lot of work and was very hard to measure. All the while, niche influencers with dedicated audiences that could do a lot more for less were overlooked.
Thankfully, the industry is changing. We have millions of aspiring influencers with big audiences in their specific niches. There is still an information gap. Brands don't know how to find most of them and end up choosing the obvious influencer options that typically come with a steep price tag.
In 2013, there were several thousand influencers to choose from. Today, there are millions. These influencers may not all have huge followings, but they have dedicated audiences that follow them because they're seen as subject-matter experts. Imagine the composition of the Fat Jewish's diverse audience. Now imagine the audience of the guy who does Kim Kardashian's makeup. People interested in makeup are following that guy. But there are thousands of other people who reach the same audience with similar messaging. Unlike Kim Kardashian herself, who is a celebrity, that person is temporary and interchangeable.
Amazon has been an interesting thought leader in the space, with a program that allows influencers to opt-in and promote products. What makes the program unique is that the influencers don't get paid unless they perform, which is a 180-degree shift from the "pay first, ask questions later" model that dominates the space. It's driven by Amazon's understanding that influencers want opportunities and are willing to share in the risk.
I suspect that over the next few years we will see a shift in the way influencers are activated and compensated. As brands are able to identify the right targets and their alternatives, we'll see a shift to a model that's focused on smaller, more niche influencers who have a dedicated, uniform audience interested in specific subjects. Maybe most importantly, it's the audience that really matters, not the influencer.