- Advertisers have sliced budgets for influencer sponsored posts in recent weeks to save on costs and avoid appearing tone-deaf during the coronavirus pandemic.
- But while sponsored content has long been a predictable (and essential) source of income for digital creators, the industry has matured well beyond branded posts, and the influencer economy won’t be destroyed by the economic downturn.
- As live sports and other major media events have shut down, social-media engagement is hitting an all-time high, positioning influencers to take center stage.
- Merchandise, direct-to-consumer products, and content production are just a few of the alternative revenue streams that influencers and marketers have been leaning into as sponsored-post opportunities disappear.
- Business Insider spoke with professionals across the industry to better understand how influencers are earning a living during the pandemic and what the future has in store for the industry.
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The influencer economy isn’t going to turn to dust, despite recent reports predicting its demise.
Last month, Vice declared that the coronavirus had “killed the influencer market — maybe for good.” Wired wrote that the influencer economy was hurtling toward its first recession. And The Guardian questioned whether the influencer lifestyle would survive the pandemic.
But while the decline of advertising has hurt the influencer business in the near term — as it has the media industry as a whole — creators and marketers are proving more resilient and adaptive than some expected during the economic downturn.
Many creators have shifted their focus to alternative revenue streams that have allowed them to continue to earn a living and shown in the process how much the influencer business has expanded in recent years.
The creator industry now includes a slew of non-ad-revenue opportunities, including merchandise sales through companies like Fanjoy, e-commerce affiliate revenue through platforms like RewardStyle, recurring subscription income through services like Patreon, and a variety of other categories.
Many of these moneymaking opportunities are smaller than the sponsored-content deals that have characterized the industry since its inception. But together, they paint a picture of an influencer business whose revenue has become more diversified in the past few years, mirroring broader changes in digital media.
But the biggest factor that shows why the influencer industry will endure is simple: Consumer demand is strong — in fact, stronger than ever.
Influencer-marketing agencies that facilitate deals between advertisers and creators said they had seen a recent spike in social-media engagement. And some of these companies are still hiring at a time when large pockets of the ad industry have had to lay off or furlough employees.
“It’s definitely not going to be the end of influencer marketing,” Ricky Ray Butler, the CEO of the influencer-marketing agency BEN, said. “Musicians and other celebrities are now acting like influencers, seeing what the buzz is about on platforms like TikTok. Content creators should be creating more now than ever before, even if they are making less money. The creators that are innovating today and connecting with their audiences will be remembered.”
Advertising rates are down, but some creators are still finding deals
The influencer-advertising business has certainly been hurting in recent weeks.
Once social-distancing measures began to take effect in the US in March, influencers said many sponsorship deals were postponed or put on pause as in-person events and paid travel opportunities evaporated. Many creators also saw their YouTube ad rates decline dramatically.
The ad-revenue drop isn’t unique to the influencer economy, as several of the major ad holding companies have resorted to layoffs and furloughs.
But some categories of brands, like gaming, tech, and home essentials, are still booking deals.
The gaming company Electronic Arts recently worked with the YouTube star David Dobrik (17 million subscribers) on a campaign for his YouTube channel in which Dobrik used a T-shirt cannon to give away checks of up to $10,000 and merch to fans outside their homes.
But the picture is grim. Brands that have continued to run influencer campaigns during the pandemic are still adjusting to less favorable economic conditions by reaching out to influencer agencies to renegotiate payment terms.
“Everyone’s deferring payments everywhere,” Vickie Segar, the CEO of the influencer-marketing agency Village, said. “When you’re in a crisis situation, your job is to have liquidity and hold liquidity.”
And it’s clear that brand deals are down in a massive way.
Sponsored content on Instagram fell from representing 35% of influencer posts in mid-February to 4% of creator content in mid-April, according to the marketing-analytics firm Launchmetrics.
“We’ve seen an across-the-board reduction in overall advertising spend,” Neil Waller, the CEO of the influencer-marketing agency Whalar Media, said.
That might have been a death blow to the industry a few years ago, but many influencers have diversified far beyond advertising revenue.
Direct sales can stabilize income when ad budgets falter
The overarching trend that has diversified the creator industry is the rise of direct revenue from fans. Influencers have turned their followers into paying customers by selling products, offering courses, and delivering exclusive content on subscription platforms.
Even before the coronavirus, merch sales had been a main source of revenue for some top creators whose content is not particularly friendly to advertisers — like Dobrik, whose custom merchandise makes up the majority of his income, he told The Wall Street Journal in March.
As a whole, merch sales have increased in recent weeks, according to Chris Vaccarino, the founder and CEO of the prominent influencer-merchandise company Fanjoy.
The YouTube creator Preston Arsement, who has almost 30 million total subscribers across nine channels, said his merchandise sales had tripled since the coronavirus outbreak and made up for a decline ad revenue (though he said brands in the food and gaming categories were still running deals).
Other influencer-led direct-to-consumer businesses like fitness programs and workout apps have surged in sales.
The fashion influencer Audree Kate Lopez, who has nearly 30,000 Instagram followers, relied on brand campaigns as a large source of revenue, but rather than waiting for deals, she has been working on relaunching an online course for college students, Fashion Fundamentals, as a new way to earn extra income.
Even without a new business venture, creators can maximize their earnings by making use of some services, like the membership platform Patreon and the personalized video-shout-out app Cameo.
Viewers are still willing to pay for content and products from their favorite creators, which shows that the demand is still high, and even growing.
For instance, the lifestyle influencer Katy Bellotte (177,000 Instagram followers) launched a Patreon account on May 1 as a way to offer her followers more content while earning extra revenue. Her account offers three monthly memberships for up to $5, and she already has 864 paying patrons.
Since March, Patreon said 70,000 creators have joined the platform, and the company has seen a 20% month-over-month growth in the number of users paying for content for the first time.
Marketers and influencers are experimenting with new formats
As sponsored-post opportunities dry up, many influencers are trying new formats that are surging, like livestreaming and e-commerce.
Live-video marketing on social-media platforms has long been a revenue driver for Twitch gamers and other streamers who have pitched brands on their sizable recurring live audiences. But as interest in live content spreads to other social-media platforms like Instagram — which traditionally has focused on posed photos and videos — more influencers and brands have been experimenting with the format as a marketing opportunity.
“People are more apt to spend 30, 60, or 90 minutes on an influencer or branded livestream, whereas they’re typically only engaging with a static photo on a feed for a couple seconds,” Ellie Jenkins, an influencer-innovation manager at Mavrck, said. “That long-term engagement is really powerful for brands.”
As brick-and-mortar shops shut down, several influencers and marketers have also turned to affiliate-link revenue, a subcategory of e-commerce marketing in which creators add referral links to social posts to get compensated for any converted sales on the products they promote.
Again, the rise of these revenue streams relies on the demand for the content influencers produce, which is high despite the meltdown in the advertising market.
Influencer-marketing agencies are still hiring, even as they’re forced to pivot to new revenue streams outside sponsored posts
Agencies focused specifically on the influencer business have remained fairly stable in recent weeks as the major ad holding companies have had to resort to layoffs and furloughs to weather economic fallout from the coronavirus crisis.
Five out of seven influencer-marketing agencies surveyed by Business Insider for this story had yet to lay off any employees during the coronavirus pandemic. The two agencies that did report layoffs said they affected less than 5% of their total workforces. And some influencer-marketing companies are still hiring, though often with a focus on essential positions only.
“There is still plenty of activity and plenty of planning for the future, but we expect to see a large revenue drop across the board in Q2,” Whalar’s Waller said.
In some cases, influencer agencies have picked up new business by connecting brands with influencers as content creators at a time when production studios are unable to set up on-site photo or video shoots.
“We’re definitely still seeing that the ability to use influencers as a content-production studio for everything from digital to TV assets has been an area of rapid growth and interest,” Waller said.
The influencer-marketing agency Obviously told Business Insider in March that it had seen a 33% increase in the number of brands looking to hire influencers for content creation since the pandemic began. Its clients reported a “creative cost reduction” of over 50% on average when working with influencers as content creators, the company said.
“We have taken on even more content production,” Village’s Segar said. “It’s yet another opportunity for brands to take risks from a traditional approach and see how more modern cost-efficient approaches (i.e., leveraging creators for production) can work.”
The strength in these influencer-marketing businesses shows they believe their long-term bet on the space is still intact.
Viewer demand for content across all platforms spikes
Viewers are hungry for content customized to their needs at home, including workouts on Instagram Live, home schooling with science experiments on YouTube, and livestreams of top gamers on Twitch.
TikTok just broke a record for the most app downloads in a single quarter, and Instagram influencers have reported a large bump in user engagement on the app’s Stories and Live features. Google reported a year-over-year spike in YouTube viewership during its first-quarter earnings call last week.
“Our watch time has increased across the board,” Alphabet CEO Sundar Pichai told investors. “Viewership on YouTube has increased significantly compared to last year too.”
Arsement told Business Insider that his viewership on YouTube almost doubled in March, rising from 310 million views in February to 550 million views by the end of the month. Even the channels he hadn’t uploaded new content to were seeing spikes in views, though his ad rates had dropped by over 50%.
Social media has taken center stage in recent weeks, giving influencers and marketers the opportunity to take advantage of a larger and more engaged audience.
“We’re seeing an extreme increase on the consumption of social content,” Segar said. “Consumer behavior has changed. As a marketer, it is our job to monitor and react and hopefully get ahead of consumer behavior. What brands are realizing is even though they’re not going to drive sales during this time, having a presence in social during a crisis when people are looking for a community gives you the opportunity to be a part of that support system.”
Many influencers, especially those in categories like travel, will likely feel the pain from a contracting ad market for months to come. But it’s clear that though the industry might look different, it won’t collapse. The consumer demand is strong and not going anywhere.