Instagram has become a go-to social media platform for young people and brands trying to connect with young people. More than 55% of total Instagram users are younger than 30, which means it skews younger than Facebook, Twitter, LinkedIn, and Pinterest. In fact, the only social network that can compare is Snapchat, which Instagram is actively competing against with the debut of Instagram Stories.

Instagram has also become one of the biggest marketplaces for influencers. The highly visual layout makes it a perfect platform for health and beauty brands, whose influences can generate thousands of likes through strategic hashtags like #thinspiration and #OOTD (Outfit of the Day).

However, Instagram is evolving, and brands are changing how they work with influencers on the platform. Here is the current state of Instagram marketing, and why it’s changing for marketers and publishers alike.

 

The Growing Instagram Influencer Bubble

Scott Disick, of Keeping Up With the Kardashians fame, reportedly earns $15,000 per Instagram endorsement. For that kind of money, you would think he would pay close attention to what he shares, but that didn’t stop him for copying and pasting the instructions from a publicist a few months ago.

“Not only was Disick’s copy-and-paste job embarrassing, but he failed to mention that he was being paid to promote the product, even though federal regulators require it,” reported Ashley Rodriguez for Quartz.

“Shortly after the copy-and-paste fail, Disick corrected his mistake. He reposted the ad on Instagram without the sponsor’s instructions, and labeled as an #ad. But the damage had already been done. ‘Do you even drink the stuff,’ one commenter mused.”

While celebrities making millions off endorsements isn’t exactly news, most people don’t realize that some of the highest paid influencers on Instagram aren’t movie stars or A-list models. Many of the largest Instagram influencers — like Liz Eswein, @newyorkcity — started off as early adopters posting about their lives.

“She signed up for Instagram in 2011 and started off posting pictures of New York for fun,” reports Michelle Smith, business and finance writer for GoBankingRates. “Last year, Eswein was commanding up to $15,000 per shot, and charging brands $1 per like for sponsored Instagrams. To put that into perspective, the Guardian reported some posts attracted more than 23,000 likes.”

How did Eswein get there? She started by asking for $50 per post and started increasing her rates, a practice many influencers follow today.

“Some people ask for $50 to write a tweet, while others won’t post branded content for less than $100,000,” says Amanda Pressner Kreuser, co-founder of Masthead Media. “Because influencers haven’t had a reliable way of comparing their own pricing with their social counterparts, they often base their fees on what someone has offered them in the past — or what they simply feel their time and effort is worth.”

This ambiguity of what an Instagram post is worth has lead some influencers to create a platform to share what they’re getting paid in an effort for increased transparency and fair pay.

“Amber Discko, the founder of FemSplain, [almost] immediately launched the Tumblr Who Pays Influencers, inspired by a Tumblr called Who Pays Writers that crowd-sources how much different media sites pay their freelancers,” writes Megan Willett for TechInsider. “She says it’s not anti-brand, but is a way to make the industry more transparent — something that both the influencers and brands should be fighting for.”

There’s certainly big money available for influencers, but is it worth it for brands?

#FBF to summer seafood.

A photo posted by American Express (@americanexpress) on

 

Why Are So Many Brands Investing in Instagram Influencers?

As long as Instagram influencers continue to produce social media interaction and engagement for brands, they’re going to continue investing.

“Many brands have proven that influencer marketing on Instagram is a viable marketing strategy when implemented properly,” writes the team at Markerly. “American Express, for instance, earned 10 million impressions and 40,000 engagements in just two weeks with the help of six professional photographers to whom the company ‘handed over the keys’ to its account. Overall, the influencer content earned 23 percent more engagement than the company’s other Instagram content.”

While brands with longer paths to purchase such as American Express benefit from the brand awareness and engagement, smaller-ticket beauty brands can see immediate results.

The team at NewsWhip studied the top beauty brands of April 2016 to understand what worked and what drove engagement. They found makeup brand TooFaced had the highest number of engagements per post because they tapped into the power of influencer marketing.

“All but one of its ten biggest posts for this period featured an influencer, and each generated a minimum of 92,000 engagements. …The influencers’ following differed hugely — some had tens of thousands of followers, while others had only a few hundred. It’s an intriguing strategy which speaks to the brand’s efforts to market itself as an accessible, inclusive alternative to other names.”

As long as there’s creativity on the brand’s part and freedom for the influencer, its possible to market to large audiences that they might not have reached otherwise.

“Many of today’s top Instagram influencers have attracted millions of engaged followers by focusing on a specific niche or content category,” writes the team at MediaKix.

Meanwhile, “[Beauty and fashion] brands are drawn to influencers in this category because the photo-centric app enables Instagrammers to feature a rich image of their finished product and/or up to 15 seconds of video that features quick how-to guides and DIY branding opportunities.”

Essentially, brands can get the finished feel of a magazine spread with the word-of-mouth power of influencer marketing.

 

Instagram is Shifting How Marketers Allocate Their Budgets

When it comes to budgeting for $15,000 sponsorships, brands are pulling from the places in their budgets that aren’t providing the same amount of exposure or ROI.

“The number of active adblock users has increased to 198 million worldwide,” says digital strategist Shane Barker. “The growth in ad blocking means that marketers can no longer rely on traditional ads to reach consumers.”

However, brands aren’t just turning to influencer marketing because their ads are getting blocked. They’re tapping into the people that younger consumers trust and want to emulate.

“Teens are more influenced with top YouTubers than with traditional celebrities,” Baker says. “In fact, their emotional attachment to YouTube stars is seven times greater than that towards traditional celebrities.”

Along with SEM, Instagram is also pulling from the marketing budgets of other social channels that can’t keep up.

According to RhythmOne’s 2015 Influencer Benchmarks Report, customers saw an average influencer engagement rate of 1.50%. “Overall, Instagram was the best performing channel for social action. It delivered a social action rate (social media engagements/social media exposure) of 3.21%.”

This means that Instagram engagement provided almost double the return of Vine, Twitter, Facebook, YouTube, and Pinterest.

Furthermore, the rise of influencer marketing is actively disrupting industries that rely on advertising dollars to thrive — like beauty and fashion magazines.

“The credibility of a blogger versus a beauty journalist does not seem to be an issue to consumers seeking information wherever they can find it,” says Rachel Strugatz, digital news and features editor at WWD.

“In their view, their favorite bloggers and digital influencers are as credible as a magazine — maybe even more so. … As long as sponsored posts are clearly labeled as such, an influencer’s individuality and authentic voice allows them to connect to readers in a way that magazines are struggling to do.”

Instagram is where the audience is, and influencers are the people who canreach them. The same marketing principles from 100 years ago apply to today’s channels.

 

What is the Future of Influencer Marketing on Instagram?

There are three changes to the Instagram world this year that will shape how brands and publishers will work together in 2017:

1 – the rise of Instagram Stories,
2 – the emphasis on ROI,
3 – and the shift in influencer audience size.

The first, Instagram Stories, is a Snapchat-like feature that allows users to create video and images streams that disappear after 24 hours.

“An established Instagrammer with a good following now has less reason to jump over to Snapchat,” says Francis Trapp, CEO of Brandnew IO. “Unless they are looking to expand their reach specifically within the youth market (Snapchat’s domain), it may be a better strategy to consolidate their efforts within Instagram.

“For established Instagram influencers and those using Instagram for professional purposes, the Stories feature opens up opportunities to deepen connections with their audience without ever leaving the ‘gram.”

Brands are also looking to better track their ROI. This means getting a better picture of an influencer’s ability to actually influence — something more nuanced than share counts or number of followers.

“By opening up your tracking parameters beyond likes and shares, you give yourself more flexibility to dig into the true impact of influencer marketing,” says Denise Chan, writing for Later.

“Beyond the number of engagements influencers drive, the quality of these relationships is just as, if not even more, powerful. You might be surprised at some of the results you see behind the scenes, because likes do not necessarily equal conversions.”

However, the biggest adjustment to the Instagram influencer scene will be the target audiences that brands look for, and the influencers who speak to them.

“Brands are also beginning to see that simply throwing wads of cash at any personality with a following in the millions does not equate to a ‘strategy’,” reports Alyssa Vingan Klein, editor at Fashionista. “73 percent of [companies] admit that finding the right influencers with whom to enter into an authentic-seeming partnership is an ongoing challenge and time commitment — and one that is predominantly researched in-house.”

It’s this development that will hurt some current influencers. Brands are learning to choose quality relationships over big names with large followings.

 

What is the New Follower Sweet Spot for Influencers?

While influencer marketing continues to expand, the types of influencers are starting to shift. Brands are starting to think small in order to see a big impact.

“One way to increase your chances of getting good ROI on your marketing spend is by getting as targeted as possible in the people you’re going after,” marketer Raghav Haran writes at Oberlo. “For example, if you have an online store that sells formal shoes, you might want to target influencers that specialize in ‘professional footwear for men’ as opposed to influencers that are in men’s fashion.”

The numbers don’t lie: These niche audiences pay off when it comes to engagement.

“As following base continues to increase, like rate keeps decreasing,” explains Yuyu Chen, brands reporter at Digiday. “Instagram influencers with 10,000 to 100,000 followers see a 2.4 percent like rate, compared to 1.7 percent for those with 1 million to 10 million followers and more. Comment rate follows a similar pattern.”

As a result, brands have turn to micro-influencers, who engage more of their audience and have a more niche fan base that matches the brand better.

“Creating content for a brand is still secondary to [micro-influencers’] full-time profession, so they post sponsored content less often than social celebrities,” Chen says. “And thus they feel more authentic.”

This practice of reaching out to micro-influencers also makes Instagram marketing more practical for small businesses and local brands who want to tap into the market, but don’t need the international exposure of major bloggers.

For example, CNBC journalist Uptin Saiidi reports on a New York fitness instructor, Ashley Wilking, who has built a working relationship with local startup Indie Fresh, which sells smoothies, soups, and other healthy foods.

“In an Instagram post, she often poses holding its products and offers a 10 percent off discount to her nearly 5,000 followers. The discount code is specific to her name, ‘ashleywilking10,’ so the company can easily track how many sales are coming from her.”

This means Indie Fresh can target a hyper-niche audience — the New York City health conscious — while tracking the total conversions through a unique discount code.

Instagram marketing is following the same path as other advertising channels: There is a continued shift away from mass media toward hyper-niche and engaged advertising. These targets are more effective, provide lasting relationships, and are even more cost-effective for brands in the long run.

 

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