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Oct. 8, 2018

130: An Insider's Look at the Influencer Marketing Industry [OpenInfluence Interview]

130: An Insider's Look at the Influencer Marketing Industry [OpenInfluence Interview]

What are the biggest issues facing the influencer marketing industry today? And how can marketers best navigate the influencer landscape? Join me for an exclusive insider's look at the influencer marketing industry in this interview with Eric Dahan, CEO of the leading influencer marketing technology company OpenInfluence.

Key Highlights

[00:24] Introduction of Podcast Guest, Eric Dahan

[01:31] How Powerful Is Influencer Marketing?

[05:16] The Types Of Influencers Brands Should Be Working With

[10:00] Things That Brands Need To Improve Upon Working With Influencers

[10:32] The Common Mistakes Brands Do In Influencer Marketing

[15:03] Influencer Marketplace Model

[15:41] The Issues With Influencer Marketplace

[21:22] Friction Of Supply And Demand

[25:01] Influencer Pricing

[27:23] Connect With Eric And Open Influence

Notable Quotes

  • I think, you know, the reasons why influencer marketing is so successful, is pretty straightforward. You know, there's so much information out there, there's so many ads out there. 
  • And so it makes sense that when you have an influencer, that you're already following, you're already consuming the content they create, when they integrate a piece of branded content with their normal content stream. It just resonates a lot better, right?
  • At the end of the day, you know, there's no one size fits all strategy, right? For a very simple level,, you have three components, right? You have the message, the messenger, and the audience, and all those three things have to be aligned, to have something really resonate and be effective. 
  • And so you know, believe me when I say, we love nothing more than dynamic marketplaces, and being able to extract deficiencies with transparency.
  • I think the right approach is identifying the right influencers, and then shopping from those influencers, having them compete against one another, for opportunities. And that's a really good forcing function for driving, you know, cost down in value up. 
  • But in today's world, with the emergence of social media, with the emergence of mobile, native social platforms, you opened the door to, you know, from a handful of celebrities, to now hundreds of 1000s and millions of people becoming, you know, influencers.
  • And so there are all these different variables that really affect and influences price, because influencers are people and for them, they don't really have a high cost structure, right, they've recovered, essentially their living expenses, but they don't have any cost of goods sold associated with what they're selling.
Transcript

Neal Schaffer:

What's up, y'all? Let's go. Welcome to the maximize your social podcast. Follow me discover the latest social media marketing techniques from the world's leading experts from top to bottom. This is the podcast where business professionals come together to master social media without all the confusing mumbo jumbo. With no further ado, turn it down. Here's your host the one and only Neal Schaffer. Hey, everybody, this is Neal Schaffer. And today we have a very special guest, Eric de Haan from open influence. Those of you that know me know that open influence. And I recently co wrote a book on influencer marketing and how artificial intelligence is going to revolutionize the influencer marketing industry. And today, we wanted to offer that ebook was a look into the future. Today, we want to look at influencer marketing in here and now and answer a lot of questions that a lot of you marketers ask about how to improve your influencer marketing programs. Eric, thanks for hopping on the interview today. Of course, thank you for having me. Alrighty, so we'll just get started here. We like to make these interviews, you know, quick and painless. Instead of dragging on for an hour, we try to keep it within 15 to 20 minutes. So I thought of a few questions based on what I often get asked Eric. And so let's just go through them and see where the conversation goes. So I guess the first question is, brands struggle with the marketing mix. And brands are always in this traditional world of whenever there's something new that comes around, they never invest enough in it. So let's look at you know, compared to other marketing channels that are out there, how powerful is influencer marketing? And does it have the potential, you know, in certain industries to be the most powerful channel for brands out of all the different ways they can spend their marketing budget?

Eric Dahan:

Yeah, yes. So influencer marketing is an extremely powerful form of marketing, right? There's a reason why it's really organically taken off. With the early adopters being a lot of the direct to consumer, ecommerce brands that have built their business solely off influencers. I'd like to think that the ad industry really does a good job actually, of vetting new channels and new forms of marketing. Right, they start off with the experimental budgets, those experimental budgets in terms of test budgets, those tests, budgets for the bigger test budgets, and so on, and so forth. Until you know, that new channel or phone marketing has been able to really convey that it not only has strong returns that it can generate, but also consistency and scalability. And so what we saw is a lot of the early adopters being in the E commerce space in the fashion space of impulsar marketing have built their business solely on it. You know, at a time when metrics weren't as clear, or the industry wasn't as mature as it is today. They're able to roughly track what though that lift was and what their return was because it was converting into sales. You fast forward to today, we have a lot more granularity and how we can measure the effectiveness of an influencer campaign, and and essentially an individual influencer.

Neal Schaffer:

So it sounds like what you're saying is we're already beyond the experiment, test pilot, we're almost at the emergence of influencer marketing as a mainstream marketing channel, correct, because of the availability of data, of past ROI, you know, success stories and what have you.

Eric Dahan:

Yeah, definitely. Right. I think, you know, the reasons why influencer marketing is so successful, is pretty straightforward. You know, there's so much information out there, there's so many ads out there. We're being bombarded by ads, wherever we go, right? We go to a website, there are a whole series of banner ads, and click ads that we run into, you know, even if you're in New York City riding the subway, there are ads everywhere, there billboards everywhere. So we've gotten really good at tuning out advertisements. And so it makes sense that when you have an influencer, that you're already following, you're already consuming the content they create, when they you know, integrate a piece of branded content with with their with their normal content stream. It just resonates a lot better, right? It has the social validation, the content is integrated as much higher quality than just a normal ad. And so you see it converting a lot higher right. And brands understood this theory that was the thesis that the industry is really testing out. And brands now have proven that thesis through essentially this trial by fire going through all the different test phases. So I would say now, influencer marketing has really become a line item budget for virtually all advertisers, some making it you know, core and front and center for their business, others just having it being a key part The marketing mix.

Neal Schaffer:

Awesome. So that's all really sets the stage, I think for the remaining questions. So, you know, we can assume that everybody listening to this already has an influencer marketing program or has already invested in influencer marketing, because that's what the data is showing us. So the next question comes, you know, often about the types of influencers that brands should be investing in, or working with or aligning with. So, you know, you have a lot of different terminology, you have, you know, micro influencers, you have the power, middle, you have celebrities, you know, when you work with a brand, how do you sort of help them define what type of influencer in terms of their, their following that they should be working with? Or do you have a completely different approach to answering that question?

Eric Dahan:

Yeah, yeah, I mean, at the end of the day, you know, there's no one size fits all strategy, right? For a very simple level, you, you have three components, right? You have the message, the messenger, and the audience, and all those three things have to be aligned, to have something really resonate and be effective. And so first, you know, the first step is really understanding what the brand, what are they trying to say? And who are they trying to reach? Right? So what's the message and who's the audience? And then from there, it comes up to selecting the right messenger being the influencer to deliver that message. And so it could range right. And it depends on the goals as well. So So, picking the right type of messenger depends on what exactly is being communicated, of course, again, back to God inside. But then, in terms of size of the influencer, whether we're talking, you know, more of a social celebrity, what we call a short tail, influencer, or a micro influencer, what we call longtail influencer, that really depends on the more specific goal. And to give you an example, you'll work with social celebrity, if you're really looking to build some cachet have someone that can really be an ambassador face to the brand. The issue is with that it's expensive. And there's also risk to your brand to brand ambassador, we've seen countless times, brands that have partnered with celebrities for endorsements, only to have the celebrity have some sort of scandal that blew back on the brand. And the micro influencer side, you know, micro influencers are really touted as being you know, some of the most effective, which there's a lot of truth in that, right, their engagement rates are higher, they have a tighter core audience. They're, you know, they're less expensive to work with, on a cost per post basis. The issue that that most people don't understand that are new to the industry is there's a certain amount of work and to engage with those kind of influencers. And typically, a lot of that work is on the brand side with them just approving those influencers or communicating or liaising with those influencers or contract and then enforcing quality control, all the different things, a lot of which can be automated, a lot of which cannot. And so sometimes, depending on your strategy, and depending on what you're trying to con you're trying to create, the juice isn't worth the squeeze working with micro influencers, you actually end up paying a lot more on a cost per view basis on a cost per engagement basis. So that's what we tend to see in our industry, the sweet spot really being in the mid tail, and that tends to be sort of the, you know, sort of standard for a lot of brands, the mid tail are influencers, you know, that aren't necessarily social celebrities, but you know, have outgrown being a micro influencer. So your your cost per metric, again, are much better. I can't really give exact ranges because it's different for industry. But, you know, kind of rule of thumb ballpark for mid tail influence would be anyone with 50,000 to, you know, 500,000 followers on their primary platform. Gotcha. So,

Neal Schaffer:

so if you're asking what type of influence you should be engaging with, you really need to start back with that strategy, I think is the is the main message and so true. You know, marketers want to look for shortcuts. And the formulas right. And with working with influencers as as you know, best. You really need this holistic approach, correct? Yeah, absolutely.

Eric Dahan:

And an example would be like, let's talk about an automotive brand, right. There's no such thing as really a quote unquote, automotive influencer. I mean, yesterday, let's just talk about cars. But realistically, if your car Brad, the way you're going to market, your pickup trucks are completely different than the way you're going to market your minivans, right? And so, if you think about it from that context, the influencer set is going to be completely different. The social platforms you're gonna work on are going to be completely different. And so you really want to figure out again, who's the audience, what are you trying to communicate and then the messenger comes last

Neal Schaffer:

awesome advice. Thank you very much. Let's, let's move on to the next question. So I think we've already seen potential for the mistakes that brands make when engaging with influencers or when creating or managing influencer marketing campaigns, in your opinion, you know, with open influence, you've worked with countless numbers of brands and influencers and engage with campaigns, what is sort of the low hanging fruit that you see that you think brands can immediately

Eric Dahan:

improve upon? Yeah, I mean, one of the, I would say the most common mistakes, brands may. And the savvy advertisers have actually picked up on this, which is good, but they focus more on talents and names rather than metrics, right? So a lot of decision making is still very subjective. I follow these influencers, personally, I want to work with them, versus Hey, which influencer based on their metrics is going to perform the best for my brand, which influencer is going to have the best metrics from a cost PR standpoint or conversion standpoint for my audience. So a lot of marketers, unfortunately, are focusing on the wrong things in some cases. Another mistake brands and marketers make, they think influencers are, you know, they treat them like programmatic ad units, or, you know, a little bit better sometimes, like Uber drivers, right? They say, Okay, I'll engage with this influencer, they'll pick me up at point A, and they'll take me to point the no problem whatsoever. It doesn't work like that, right? It's not a utilitarian product, like going, you know, 10 blocks away or newer, right? It's there's content being created, influences our personalities, there are a lot of moving parts, right? There's subjectivity always when it comes to content there. And so if you don't plan, it's one of those things, if you if you don't plan for those aspects of the process, you find yourself, you know, essentially doing 10 times the work, because you're back, you're backtracking. And you're redoing, and you're reshooting. And so a big part of what we do is we know that these are parts of the process, we know that there's certain parts that we can't fully automate. So what we do is we build it in so that we're able to really account for it throughout. So for example, Content Approval is something that you don't want to necessarily do in an automated fashion. But we make sure it's easy, because impulses can upload multiple pieces of content, according to the brief. And we're then able to go through and are finally able to go through and approve the best ones and even comments further on the ones that they approve, to make the last minute tweaks and adjustments, whether it's the text, or to the image or video itself. And so these are the sorts of things that are key. Another more concrete example there is let's say we're doing an ad for Under Armour, and the influencers training a Starbucks, right? We don't want the focus in that piece of content to be on the Starbucks cup, we want to be on the underarmor floating. And so our team will go through an airbrush out the Starbucks logo. And unfortunately for Starbucks, I think we've actually removed more Starbucks ads and we've created over the course of our time here. Yeah,

Neal Schaffer:

I'm so glad you brought up that treating influencers as as, you know, ad units because I see a lot of that from the other end of brands saying you know, we want you to post it has to be an Instagram story only three frames, you must look at this product in this store, but feel free to be creative. It's it's funny the boundaries that brands put on influencers and trying to treat them as ad units, as you say. So thanks for bringing that up. It's really funny actually, sometimes I'm sure you've seen some funny ones as well. Definitely. Alright, so let's look at another thing that I that I know that you have a very, very strong opinion on, which are influencer marketplaces. So influencer marketplaces, if you do a search for influencer marketing on Google, you're bound to run into these marketplaces. And sometimes they look like they're tools, but they're really tools to access a marketplace. And other times they're just pure marketplaces, meaning that they offer a database of influencers and allow you to contact them and what have you. And it's really funny because a lot of them reach out to me as well. And when you enter yourself as an influencer, in these marketplaces, they're basically saying, Hey, give us a bio. Let us you know, authorize your accounts, but categorize yourself. Sometimes they give you like a maximum of five categories, because I do more b2b influencer marketing. I rarely see like a business category, right? It's always like technology or news. But why do you think they do that, Eric? And is it a best practice and really, you know, what is your advice for brands that are still spending a lot on influencer marketplaces with They may be missing out on the bigger picture because of the way that they work.

Eric Dahan:

Yeah, yeah, I'm actually not a fan of the influencer marketplace model. A lot of these companies treat it like, you know, an influencer displays the price brands go on some categories, select the influencer in cage, I don't think that model generates a lot of value for advertisers. The reason why my co founders and I, you know, we have our backgrounds and economics. And so you know, believe me when I say, we love nothing more than dynamic marketplaces, and being able to extract deficiencies with transparency. The issue we found with a lot of these marketplaces is influencer, pricing is all over the map. It it really builds out an incentive scheme. And, and it allows for influencers to overcharge customers, and over anchor pricing, rather than putting the power on the demand side, which is the advertiser side to help drive pricing down. And so, you know, I think the right approach is identifying the right influencers, and then shopping from those influencers, having them compete against one another, for opportunities. And that's a really good forcing function for driving, you know, cost down in value up. But the other issue that that I, that I have with with a lot of those companies, and I looked at by virtually every other company in the space, is how they're categorizing talent. So one of the challenges we saw early on, we did what, you know, what everyone else started doing, and we're early to the industry. So we're able to see the downsides of first. But we've categorized influencers in these really predefined verticals, right? And so, you know, you'd fuck it the influencers in either beauty, or fashion, or automotive, or business or whatnot. And, you know, that's fine if you have a very finite set of influencers. But once once we start scaling, we encountered a ton of issues. One was, there was a lot of subjectivity, you know, if we were categorizing the influencers, internally, different people would categorize different people on our side would categorize the same influencer differently, right. So, you know, you have blog, your, you know, quote, unquote, business author, right, even though you have your own areas of focus within that, but this is a very broad category. But like, you know, you might also have a pet, you might also be into fitness, right? You're playing, you know, you play soccer, you play other sports. And so, you know, depending on the most recent content that talent coordinator was was looking at of yours, they might categorize you differently. So it's not that black or white in terms of what function you fall into. And so that's the big challenge. It's just a subjective, if you're categorizing yourself, right, well, yourself. Well, we saw a lot of influencers. When we gave them categories, every single influencer was a high luxury influencer. All right, right. And every influencer was a fitness influencer, a food influencer, most of them have pets, so they're pet influencers, and like, none and no, you know, so there's a lot of bias there. And yes, there are ways to tweak for that, and, and to sort of narrow it down, but it's overall pretty sloppy in your category business, you know, business community 1000 different things. It's an extremely broad category. And so if I'm looking for someone who's an expert in social media and influencer marketing, if I'm looking through business for that, well, there's gonna be a lot of noise before I find you, Neil, right? I'm gonna, I'm gonna probably have to come through, you know, 5000 10,000 other profiles, and most of which are relevant, and I still don't get a good sense for who they are. And a lot of those platforms have a Rolodex approach, which is like, Hey, here's, here's the influencer. Here's a headshot. And here's some basic stats, say, well, thank you. But I can't do anything with this information as a marketer. And so the approach we've taken is, we removed all the subjectivity in the bias, we remove all the noise. And rather than going after these categories that are very arbitrary, and really don't mean anything, we look at individual keywords, we analyze each piece of content that you create, so that we can say, Okay, I want to find an influencer marketing expert. And I could run a search and have you pop up top of that list, because you're extremely relevant to that category. Right.

Neal Schaffer:

So, you know, in all fairness, I obviously work with with a lot of different companies, and I know a lot of marketplaces that are out there, and some of the CEOs of them and they also have very successful case studies of how their clients generated ROI. So I suppose that for those brands that have only worked with marketplaces, while they might have had successes, they should definitely be looking at it the other way of working with an open ended So let's see what the differences in the ROI might be. And they might be surprised by

Eric Dahan:

that correct? Yeah, I mean, correct. Yeah. And not not to shoot down the marketplace models too much. I mean, there are companies that are able to perform and do well and compensate for it. But you know, we started as a marketplace as well, very early on, right. And we've evolved it because there are definitely inherent shortcomings into the model, right. And so a lot of marketplaces have their way of retrofitting and overcoming it. And of course, there are ways to generate ROI. But we really believe that in the direction things are growing. You know, we wouldn't be doing our job if we weren't thinking 10 steps ahead of where the industry is going and holding ourselves to a higher standard than than the markets holding ourselves to. Gotcha,

Neal Schaffer:

great. And who knows, maybe we'll have a rebuttal podcast after this one. But it's definitely food for thought. And, obviously, like I said, there's just a lot of noise in the market. But think ahead. And you'll see hopefully, you've already downloaded and read how AI is revolutionary, revolutionize influencer marketing, and you'll begin to fully understand what Eric is talking about here. So I wanted to finish this with one final question. You know, we've talked and when we talked about integration of ebook, this friction between supply and demand, and you mentioned how you're all have economist backgrounds, and, and we talked about marketplaces. So with this friction of supply and demand, you know, what do marketers need to know about it? And where should they be focusing their efforts going

Eric Dahan:

forward? So like any industry, like any business, you have supply and demand that are the driving forces, that determine pricing that determine market dynamics? Historically, the talent business has been a supply side driven business, which means the talent has been the customer of the main customer, and has been the one holding a lot of power. And what does that look like? That looks like a handful of talent agencies representing all the celebrities out there, right. So if you want to work with a top tier talent, you go through a talent agency, and there's nothing wrong with how an agency is right, their model is excellent for the talent they represent. You're dealing with, you know, a top level celebrity, you will in you are a top level celebrity, you want to make sure you have an agent, that's there for you and a manager that's there for you looking after your best interest, because there's just so many brands have so many opportunities that you can take, you need someone who can manage that and procure the right business for you. But in today's world, with the emergence of social media, with the emergence of mobile, native social platforms, you opened the door to, you know, from a handful of celebrities, to now hundreds of 1000s and millions of people becoming, you know, influencers. So what does that mean, you have a huge increase in supply. And those influencers, you know, are big enough, perhaps to have a dedicated agent or manager. And so, you know, it's allowed for a shift to happen to the demand side thing, you know, the advertiser, right, the advertiser is the one with the budget, the advertiser now has the ability to really moreso dictate what is what it is they want. And so that's shifts in supply and demand, or from being weighted heavily on the supply side, the demand side, has allowed for a change in model has allowed for a shift from, you know, for the bulk of influencers, from being from you know, a management and representation business to, you know, more of a media buying business, right. And essentially, it's also a lot for big shift, selling away from cache, to selling against metrics. So, and buying against metrics. And what I mean by that is, you're not going out and procuring a talent, because there's some big name, right? The old way of PR companies working with what celebrities is the purely do it based on who that celebrity was, right? You're gonna work with George Clooney, because he's famous throughout, you don't need to look at his stats, you know, who what his stats are, like, you know, he's a household name. And you fast for today's world. There's so many influencers out there, you don't really, you're not really looking at who the individual names are. There's so much interchangeability, you're looking at the metrics, right? And so because there's so much interchangeability, you, as an advertiser, have a lot more choice of who you can work with, you're not stuck to working with one or a handful of influencers for your brand, you know, have hundreds to 1000s that you can possibly engage with at a given time. And so, that's, you know, that was really sort of the driving force. And the reason why influencer marketing emerged now, rather than, you know, 10 years ago, or 15 years

Neal Schaffer:

ago, so really, I don't want to use the word or say that influencers are becoming like commodities. But as that supply grows, and you mentioned that interchangeability, the only way to choose going forward really is based on that data, right,

Eric Dahan:

yeah, it's based on the data and the differences. You know, it's, it's not it's not commoditize. I mean, literally, like you would like in a programmatic ad unit, right? The sense is, it's there's no real set price, right? It's not like, it's not like you're, you know, buying or selling gold on an exchange right, on a on a marketplace, where, you know, there's a clear market price that's set for it. And so, influencer pricing really fluctuates, right? An influencer could drastically change their price, depending on other opportunities they have, depending on the relationship they have with you, depending on you know, what are the terms that you're asking for? And so there are all these different variables that really affect and influences price, because influencers are people and for them, they don't really have a high cost structure, right, they've recovered, essentially their living expenses, but they don't have any cost of goods sold associated with what they're selling. They can be flexible, our cost structure, their inventory is not, you know, is not completely specifically limited right to a certain number. They can do more or less as they please. So there are a lot of aspects that really keep it from being treated, or commodify. standpoint. The other aspect that's really important with this industry is, you know, an ad isn't an ad, right? An influencer sponsorship isn't an influencer sponsorship, you're not playing paying for placement. You're paying for content creation, and, and placement and distribution. And so it's not like you're saying, I'm uploading this piece of creative that already have go placed across a bunch of different channels on measure performance. There's real qualitative aspects of the content being created. And so there's a lot of uniqueness with everything being done. But at the same time, you can boil everything down on a macro scale to two metrics. And two, you know, and they will fall subject to market forces at him that

Neal Schaffer:

day. Right. That's really great advice. Hopefully, as you're listening to this, it's really sort of expanding your horizons and made you think a little bit differently about influencer marketing. And obviously, as your budgets grow. That's where you're going to see significant impact by following all the advice that that Eric has given us, compared to the old ways of doing influencer marketing. So, Eric, I know we're short on time today. I want to thank you for your time. Any final notes or final advice for our

Eric Dahan:

listeners? No, but I guess they could reach out to us and we'll be happy to answer any questions.

Neal Schaffer:

Yeah, awesome. Yeah, open influence. They're a global company. They have offices throughout the world. They're great people. I love working with them. I highly recommend you reach out to them. You're looking to take your influencer marketing to the next level, or even if you just want to do a reset on your entire program, though. They're a great resource. So Eric, once again, thank you for your time, everybody. I hope you enjoyed the show. And stay tuned for the next show after this one where we are on the world. Make it a great day. Bye. Bye, everybody. Thanks for listening to the maximize your social podcast. Don't forget to subscribe and rate the show on iTunes so others can enjoy it to continue the conversation and empower your business through social media. Visit Neal schaffer.com right now. Have a great week. We'll see you on the next episode.