How do influencers make money and how much are they making?
One of the most common questions I’m asked is, and something I discussed with a reporter for a recent article on Highsnobiety, is – how much do influencers make? How much does a Youtuber make? How much does an instagrammer make, etc?
How much money an influencer makes is not a simple question to answer. There are some influencers who make tens of millions of dollars each year, and while they capture the headlines, they are in the minority.
In this post I hope to shed some light on how influencer generate revenue, and what avenues they use to make money.
WHY INFLUENCERS ARE ABLE TO MAKE MONEY
Jake Paul has gone on record that he is going to be a billionaire. I doubt he’ll be a billionaire, although he’s already extremely wealthy; however I have no doubt that some influencer at some point will become a billionaire.
8 of the top 10 most recognizable celebrities amongst teens are youtube stars. These influencers are building (and selling massive businesses). Many are NYTimes best sellers, they’re dominating the box offices. We live in an era where the most engaged athlete in the world (on social media) is a gamer on Twitch.
The scale at which these creators are building audiences is incredible – on Youtube alone there are well over five thousand YouTube channels with at least a million subscribers.
Despite the assumption that being an ‘influencer’ is easy – its not, and even influencers who build large followings can make missteps leading to drastically reduced profits.
There has been a great deal of negative press geared toward YouTube as a result of ads running against content that no brand would want to be associated with – including terrorist videos. As a result, a number of Fortune 500 brands have boycotted the site which has lead to more bad publicity and, undoubtedly, impacted YouTube’s bottom line.
Due to these concerns around brand safety YouTube has clamped down what videos they monetize, and as a result a number of influencers on YouTube have seen their revenue decline dramatically. As part of a number of initiatives to ensure brand safety YouTube has stopped running ads across channels with less than ten thousand subscribers. YouTube has also begun automatically (via an algorithm) demonetizing videos it deems may not be brand safe, and has hired tens of thousands of people to review and vet content. As a result of these measures a number of channels have seen their ad revenue decrease (and in some cases virtually dry up) – resulting in the nickname, ‘The Adpocolypse’.
WHAT PLATFORMS ARE INFLUENCERS MAKING MONEY FROM?
The platforms influencers invest in building an audience on will impact how much money they can make (and where that revenue will come from).
Currently, Instagram is huge for brand placement/brand deals. However, the platform itself doesn’t actually pay influencers a portion of the ad revenue generated by the site. Many influencers, even those with only a few thousand followers, are generating revenue via brands looking product placement integrations. A recent study estimated that there was over $570 million spent globally by marketers for influencer marketing on Instagram last year.
A number of platforms such as Famebit, Reelio, etc have created marketplaces where the long tail of influencers can promote brands in exchange for product or money.
YouTube has consistently been one of the more in demand social networks for influencer marketing. The platform is unique, with ads are run automatically and creators getting a percentage of the ad revenue they generate off their viewers (for channels with over ten thousand subscribers).
The way YouTube ads work is something like this:
- Ad revenue is split 45/55 in favor of the creator
- Most creators generates $2-3 CPM’s
- Generally around half of those views are monetizable
- If part of an MCN, then a percentage is paid to the MCN
It is worth noting that select creators are pulled into ‘Google Preferred’ and their inventory is sold direct by YouTube at a much higher CPM.
I personally have noticed that YouTube lends itself to creating deeper connections between viewer and content creators (something I’ve written about extensively here). As a result, YouTube influencers tend to be able to build up their own brands much easier than other platforms – the connection they have with their audience tends to be much stronger, which allows creators on the platform to better convert viewers to sales.
Twitch is also quickly growing as a profitable platform for influencers. The platform also pays influencers a portion of the ad revenue they generate from viewers, and Twitch streamers can generate brand deals. However, I think Twitch is potentially one of the most ‘creator friendly’ platforms because it has a built in subscription model where they can collect monthly dues from their most dedicated viewers. As a result Twitch is providing a lot more steady income for influencers.
There are other platforms influencers cultivate audiences upon and are monetizable. Blogging was really the first ‘digital influencer’ platform and is still a popular one. There are pinterest influencers who are paid to pin content by the top brands, and recently Musically has grown in popularity – creating a Vine Like resurgence of short form content influencers. Other platforms include Snapchat, YouNow, Tumblr, etc. With the exception of YouNow influencers are not being paid a portion of the ad revenue they’re audiences generate.
YouNow is worth noting because influencers can monetize through a newly launched cryptocurrency, as well as viewers buying digital gifts, of which the influencer gets a portion of the sale price.
Overall, I feel as though YouTube and Twitch are probably the most powerful and sustainable influencer marketing platforms for two reasons:
1) Creators are able to generate revenue from ads and/or subscriptions
2) Content tends to be longer form which leads to deeper connections between viewer and creator. Viewers feel as though they’re much more than ‘just a fan’, that the relationship is akin to a friendship.
Many YouTubers regularly ‘vlog’ and share personal details about their lives – viewers see their friends, family, pets, homes, and even the creator’s ups and downs. Much of the same information is commonly shared on Twitch as a result of so many hours streamed.
AVENUES FOR INFLUENCERS TO GENERATE REVENUE
Regardless of platform, or platforms, influencers build a following upon – once they have an audience there are a number of avenues available to them to monetize their fan base. I’ve written about influencer monetization a bit in the past, and while the assumption tends to be influencers only generate money through brand deals, in actuality there are a number of options out there. Notably, display ad revenue and brand sponsorships are quickly becoming a smaller piece of the revenue pie for most creators.
Outside of direct platform ad revenue, here’s some common ways influencers generate money:
-Appearances and tours
-Building companies
-Merchandise
-Patreon
-Affiliate links/sales
-Writing books
-Making movies (Direct to consumer & studio films)
-Developing apps
APPEARANCES AND TOURS
Much like bands go on the road and sell tickets to concerts to generate revenue, more and more influencers are touring (whether
or not they’re musically inclined) and charge fans to come join them. Most recently YouTuber power couple Trisha Paytas and ason Nash will headline a show dubbed Trisha & Jason Are In Love – according to Tubefilter, “tickets begin at $20, though all-access VIP seats are available for $250 — including a pre-show pizza mukbang (or binge-eating session) with Paytas and Nash, exclusive merch, a photo, and autographs. $60 and $150 ticket options are also available.”
Trish and Nash are hardly alone – vlogger Tyler Oakley launched they wildly popular “Tyler Oakley’s Slumber Party” tour featured Tyler entertaining audiences in various skits and interactive audience segments. The Digitour has been ongoing for nearly a decade and featured a number of musician influencers touring together and performing. Influencers with older demographics have even been celebrity guests at nightclubs – for example Dom Mazzetti of BroScience fame hosted ‘Girls Night’ at a nightclub in Orlando.
BUILDING COMPANIES
Some influencers have tapped into their vast, and highly engaged, audiences to help launch major companies. Michelle Phan, a well known makeup and beauty YouTuber built a beauty subscription service to launch iPsy which has raised $100M. Director/Vlogger Casey Neistat went so far as to build his own Snapchat like social network, Beme, which he sold to CNN in a deal reportedly worth $25 million.
MERCHANDISE
Virtually every major influencers is selling T-shirts, hats, hoodies, etc. Merchandise has become so big many influencers have begun to expand their product lines beyond simply promoting their channels and built out full fashion lines. Tubefilter did a great post covering influencer clothing lines here.
It is worth noting merchandise can expand well beyond clothing, with many influencers have expanded to a variety of products. For example fitness influencers are selling supplements, workout gear, and even fitness program. YouTuber/surfer Ben Gravy even collaborated with Catch Surf to create his own signature surfboard. Whatever and influencer is interested in, odds are they’re productizing it somehow.
PATREON
Patreon has quickly become an alternative platform for influencers to generate revenue. Patreon is a platform that empowers creators to run a subscription content service – It allows artists to receive funding directly from their fans, or patrons, on a recurring basis or per work of art. A number of creators are using the platform to ensure a steady stream of income and enticing fans to subscribe (and donate) but providing exclusives only for Patreon users.
AFFILIATE LINKS
Amazon has an affiliate program for influencers to promote any products posted to Amazon. They generate a percentage of sales revenue with any referral resulting from the traffic they drive.
BOOKS
From Lilly Singh to iJustine, Tyler Oakley and countless others influencers have been flooding the book market – over the last five years, over a dozen major YouTubers have hit the NYTimes best sellers list. Influencer book deals have become so common that the publisher at Atria launched Keywords Press, a partnership with United Talent Agency to showcase digital influencers.
MOVIES
Influencers developing movies really kicked off with Camp Takota in 2014, starring the ‘holy trinity’ of Hannah Hart, Mamrie Hart, and Grace Helbig – the straight to digital movie kicked off a wave of influencer driven movies. Today, with the advent of YouTube Red, influencers starring in movies has become commonplace. A few other examples include The Vlogumentary, Smosh: The Movie, and The Thinning.
Perhaps, most notably John Green, one half of the VlogBrothers, co-founder of Vidcon, and YA author has had several of his books optioned and produced into major motion pictures. One book of his – ‘The Fault in Our Stars’ which was made for just $12 million and opened number one in the box office with a $48.2 million opening weekend. TFIOS went head to head with Tom Cruise’s Edge of Tomorrow, the same weekend, and beat out the sci-fi thriller that cost 15 times as much to produce.
THE ROLE OF FTC AND DISCLOSURE GUIDELINES
Regardless of who an influencer may work with it is incredibly important for them to know that they must disclose any relationship they have with a brand – this is the law.
According to the FTC:
An endorsement must reflect the honest opinion of the endorser and can’t be used to make a claim that the product’s marketer couldn’t legally make. In addition, the Guides say, if there’s a connection between an endorser and the marketer that consumers would not expect and it would affect how consumers evaluate the endorsement, that connection should be disclosed. For example, if an ad features an endorser who’s a relative or employee of the marketer, the ad is misleading unless the connection is made clear. The same is usually true if the endorser has been paid or given something of value to tout the product. The reason is obvious: Knowing about the connection is important information for anyone evaluating the endorsement.
Transparency between an influencer and their audience is critical. If an influencer is being paid or given free product they must make their viewers aware of this relationship. Historically, what qualified as disclosure was a bit murky – influencers didn’t know whether simply saying that a brand provided them with free product, if it had to be written, etc.
Luckily, platforms have since stepped in to help standardize things. Facebook, Instagram, and YouTube have all developed tools to simply automate disclosure.
WHAT’S NEXT FOR INFLUENCERS?
Like I said at the top of this post – I think we’re not far off from seeing the first influencer billionaire. Digital influencers have a direct line of communication to fans and their rapidly exploring monetization models. With their lean, startup-like approach, where they are acting as talent, distributors, and producers they’re able to move swiftly and potentially outpace much larger corporations. Furthermore, with the rise of ecommerce and a multitude of monetization opportunities they’re able to launch brands quickly, generate revenue, and apply learnings to get better and better at making money.
