The rising power of influencers on social media

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Startup Tech News by Content Engine AI

(TechCrunch Disrupt SF 2019)

Social media influencers are one of the fastest-growing segments of the tech industry, and it’s not just brands using them, it’s also startups.

It’s also a particularly growth-driven space. A number of fledgling companies, especially in the U.S., have figured out that social media influencers offer an effective way to connect with the public. More than 3.4 million native influencers are active on over 3,000 social platforms — over 60% of which are owned by major platforms, according to a report from PlatformReview.

And the margin between breakout success and decline is slim. Platform Review’s report lists revenue per user for social media influencers for 2018 at $2.09, with a trending high of $4.07 in 2017 and a low of $1.33 in 2016. As Periscope, Snapchat and Instagram show, engagement on the platform is also decent at close to 90 percent.

With popular influencers like Reese Witherspoon, Julia Louis-Dreyfus and Jennifer Lopez most recently lining up deals with big tech, it’s easy to see how big could be.

And while plenty of money has been invested in this sector, the volume of deals still pales in comparison to enterprise SaaS providers, according to PitchBook. In the first quarter of this year, private tech companies got just over $4 billion in social media influencer deals.

In the report, Platform Review notes, “it is worth noting that the trend seems a little fad-like; as both adoption and pricing are likely becoming commoditized with fewer barriers to entry. It’s certainly not a business to bet on, but there’s plenty of room to make good money.”

What makes them tough to adopt? Platform Review offers some examples, which I’ll summarize here. First is that they are sponsored — businesses will pay a premium for influencers to accept paid advertising, which means influencers can get, on average, around 10 to 15 percent of their lifetime value for a small in-kind payment. Of course, that can differ depending on the kind of sponsored exposure and a variety of other factors, as mentioned.

Second, they also vary greatly — and there are nuances among them. A socially-driven blogger could get on top of music trends, and some companies are looking to do just that. A fashion designer could focus on social trends and influencers with more influence, but others might focus on fashion icon or aspirational brands.

For startups, though, there’s no shortage of big name influencers willing to get in on the action.

For example, American Express and Snap have been talking about a sponsored social media influencer platform, according to a report from The Wall Street Journal.

There’s also another challenge: Be careful that influencers you want can be as trustworthy as possible. Even the best social media brand faces fake and suspicious accounts, and at some point they will be replaced by fake followers, fraud or other things that could misrepresent their social activity.

Besides, too many companies for startups to build fan bases themselves are highly transactional — for example, launching a brand on Snapchat, releasing an app and so on. But building a community on Instagram is more complex and time-consuming, and many take on a token role as soon as they open up. Just search @startupofficial or @brand_real and you’ll see how contentious the issues are.

So, as far as the take-up of the social media influencer trend, it’s safe to say that you shouldn’t hold your breath waiting for a large startup to figure it out and succeed with their users.

Disrupt 2018 will be in San Francisco from October 9-11. Additional coverage: Carissa Culley on the best networking events.

Content Engine

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