Helping Influencers Monetize— The Next Step of Influencer Infrastructure
The passion economy is here and the long-tail of influencers, bolstered by various social media platforms, has emerged in a big way. As the distribution and growth of reach has professionalized, how will the development of the monetization infrastructure look like?
We focus on the history of influencer monetization, its core value proposition, and what the new monetization layer looks like in the influencer/tech world.
Let’s go back 50 years. Influencers (celebrities when the mode of media distribution was more traditional/centralized) had agents/managers that helped with everything that was not the acting-side of acting. This included finding jobs, commercial opportunities, commercial negotiations, royalties, money management, etc.
An example of an agent/manager and what they do can be found here:
While Fuller didn’t discover the Spice Girls, he succeeded in turning the band into a brand once he took over their career in 1995. In their first incarnation, the band sold 53m albums worldwide and signed eight £1m sponsorship deals with the likes of Pepsi, Asda, Walkers and Cadbury.
Agencies have historically fulfilled the same job to be done that we increasingly see influencer monetization platforms step into.
At a high level, there are 2 value propositions that act within influencer monetization:
- Streamlining of commercial agreements
- Product creation/structuring
A. Streamlining/Standardization of commercial agreements
After a certain scale, influencers are not likely to want to deal with nitty-gritty commercial negotiations, nor have sufficient knowledge to understand at-market terms.
In the past, experienced agents would act as the middle-men for commercial negotiations.
The future is likely to encourage streamlined and standardized commercial agreements for long-tail influencers. As brands aim to expand their reach through the long tail, platforms will emerge embedded with industry-streamlined commercial agreements between brands and influencers.
Just as the gig-economy helped to streamline interactions [terms, liabilities, payment cycles, etc] between gig-workers and clients, influencer monetization platforms are likely to develop more streamlined interactions between the long-tail and brands.
An additional obstacle platforms must address is the relative nascent emergence of corporate-influencer sponsorships, especially for the long tail of influencers across multiple social media platforms (relative to PPC, offline sponsorships, etc). This reveals an opportunity for deeper integration within marketing/sponsorship corporate workflows.
B. Product creation
Historically, the interactions between brands and celebrities were fairly straightforward. Monetization products came in the form of various types of sponsorships which were well understood.
NBA players [Influencer ‘type’] would be sponsored by Nike, Adidas [Brands], etc to wear their equipment [Products/Form Factor]. Movie stars would be sponsored by brands in advertisements.
With the new digital economy, the combination of the following has increased dramatically:
- Brands
- Products/Form Factor
- Influencer ‘type’
One of the more creative monetization/product combinations that was released was MrBeast, a Youtube Influencer famous for his game-show type videos, working with cloud kitchens to release home-delivery burgers.
Beaubble for example provides white-labelled beauty kits that allow Influencers to build beauty brands from scratch, streamlining the quality control and manufacturing process, and provides a ready product for influencers to monetize on.
Cameo is perhaps one of the most famous example of product structuring. Through sponsored short-recorded videos by celebrities, Cameo helped unlock revenue streams for celebrities that would have not otherwise have been created.
Product creation is fundamentally focused on expanding the range of monetization opportunities.
As we have seen, influencers are increasingly emerging in a range of niche industries. I expect to see a corresponding explosion in influencer monetization specifically unlocking the range of product possibilities.
In doing so, these monetization infrastructure allow influencers to focus on what they are good at — building traffic and brand legitimacy — while providing them with plug & play options for product monetization.
Part of this hypothesis helps to explain my personal view of why I think Patreon has struggled as it fails the 2 main value propositions above. Patreon’s main value proposition essentially boils down to a payment gateway. As a consumer-facing platform, there is relatively little value proposition in the streamlining of commercial agreements. Further, Patreon plays little role in product structuring. The products that influencers must develop for their different Patreon subscribers are designed by the influencers themselves. Patreon has recognized this limitation for growth and have moved into merchandizing, a form of product structuring as seen below.
Patreon CEO Jack Conte said in an interview with CNBC that the platform will soon be facing the challenge of maintaining a profitable model as the company continues its growth.
“The reality is Patreon needs to build new businesses and new services and new revenue lines in order to build a sustainable business,” Conte said.
The company does not currently provide contracts, which allows users to retain 100 percent ownership of their work and full control of their brand.
The company plans to provide creators with new “value services,” like options for merchandising, to generate new revenue. Creators will be given the opportunity to participate in these services, and it could ultimately reduce Patreon’s generous 90 percent pay-out model.
Incidentally, product structuring even around the content itself has also been recognized as a key insight into helping content creators engage with their community, as can be seen in the below case of TikTok/Douyin:
The team learned to make the video recording process as simple as possible, and did everything they could to solve the problems of not just how to make a video, but also what to make.
For example, instead of dances, which can be difficult to perform, the Douyin team worked with an early user to create “gesture dances,” which were far simpler and consisted of basic hand movements, creating many viral hits that way. They also created campaigns with unexpected partners, such as adding edgy filters to famous classical art pieces, which surprised and delighted their users. And of course, they focused on music, hiring experienced professionals to create some of the earliest viral sounds on the app. — China Spec
Product structuring is the easiest value-add that a platform can build, and I expect more influencer monetization platforms to come prepared with innovative but standardizable white-labelled products or product ideas for influencers to monetize with.
Thanks to Pavir Patel, Akshay Bajaj, and Keng Low for thoughts!
Chia Jeng Yang, Principal at Saison Capital, dives into consumer, SaaS, and fintech investment trends across the U.S. and Asia, builds projects in the venture capital and public policy space, works closely with early-stage (Pre-A) founders and can be contacted at jengyang.chia@gmail.com. Previous work here: http://chiajy.com
