Aug 2, 2017 — Emma Watson, 4 min read
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In sports, there’s a common term used to describe athletes playing at a high level but for a monetary amount that’s not too costly to the team – outperforming your contract. The team loves it because it is getting maximum value for its spend. The athlete, however, begins to recognize that they aren’t making as much money as they could be based on their performance and compared to others, and starts to ask for more.
We may be seeing a similar trend play out in influencer marketing, as certain influencer groups realize their value to brands and begin to reassess what they should be charging for sponsorships. This is particularly true with micro-influencers, or influencers with less than 100k followers.
Last year, we released a research study comparing the varying engagement rates of influencers based on their follower size. The results were clear – micro-influencers had the best engagement rates and at a lower cost, were a tremendous value for brands.
Today we’re releasing new research that indicates, while engagement rates are still high, micro-influencers might not be providing the amount of value to justify their high price tags.
After collecting data composed of nearly 1,900 influencer-marketing posts from 574 different influencers on Instagram, we are able to reinforce a finding from last year – that engagement rates decrease reach (follower count) increases. What is surprising is that the return on investment actually increased with larger influencers, which is a sign that micro-influencers might now be charging too much for their services.
Influencer pricing can vary significantly based off follower size, quality of content, and more – it can really be a Wild West environment at times. We’re now seeing micro-influencers who are hiring managers to handle their campaign requests, which can drive the price up by 15-20%. Other micro-influencers are also hiring photographers to shoot their sponsored posts, again adding costs. Any combination of these extras can result in an increase in micro-influencer costs of approximately 25-30% from this time last year.
Our research model separates the data into eight different influencer categories and then uses that data to predict the average engagement ROI for different levels of reach. It’s pretty clear that the more followers an influencer has, the better deal you are going to get in terms of engagements.
One way to think of it is like buying engagements in bulk. Although there are high upfront costs to accommodate for influencers’ followings, at the end of the day you are getting more engagements per dollar with more popular influencers.
That said, there are definitely diminishing marginal returns as you approach higher and higher reach levels. When you reach 1M followers the marginal increase becomes really low, and requires a large bump in followers to increase the average ROI. So working with influencers that have massive audiences could still be quite expensive.
The Bottom Line
So now it’s time for us to answer the question that you’re probably losing sleep over. What size of influencer should you use to ensure an optimal return on investment? Last year micro-influencers were the hot commodity, but is that still the case? The answer is contingent on two things: your budget and the demographics you wish to hit.
On average, we found that for every dollar you pay you only get an expected bump of 800 more followers. Additionally, in order to increase engagement ROI by an expected three more engagements per dollar you need to increase reach by 100%. For some perspective, in order to go from 1M followers to 2M followers – which only increases the ROI from near 20 engagements per dollar to around 23 engagements per dollar – it would cost an additional $1250.
We recommend a focus on influencers that have a reach between 500K-1M to achieve best value. In order to increase breadth of reach you’ll want to utilize multiple influencers, but to get the best return on your investment you’ll want to stick within this range.
Keep in mind that this study does not take into consideration the value of the content that is created by the influencers – which is a commonly overlooked benefit of working with a higher quantity of micro-influencers – along with notion that their content tends to be more organic and genuine. We’ll be releasing more data on this in a future post.
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