The dark side of Influencer Marketing: How hidden costs are affecting Influencer’s profit
Influencer Marketing- The Harsh Reality of the Trending Industry
In a world where social media rules, influencer marketing is the reigning king. It’s like the new popular kid on the block that everyone is talking about! Brands are ready to shell out top dollar to get their products promoted by famous social media personalities, making it a desirable source of income for influencers looking to cash in on their online fame. Today every second child aspires to be the king or queen of the Influencer Marketing industry. But behind the glamorous façade lies a harsh reality: influencer marketing comes with a price tag, and many hidden costs can eat into an influencer’s profits. From sneaky commission fees to unexpected production costs and taxes, the road to influencer stardom is paved with financial potholes that can derail even the most successful social media mavericks.
Many social media influencers have extensively spoken about the unperceived hidden charges and costs that knocked them sideways and caught them unawares. Many top influencers like Emma chamberlain, Emily Duncan, and Grace Beverly have spoken from experience about the perils of influencer marketing and brand collaborations where they have faced issues such as hidden fees charged by influencer agencies, which can be as high as 30% commission on all deals. Many have discussed how brands sometimes don’t cover production costs or charge for additional services, such as reposting content.
The hidden costs you need to be aware of
Before diving headfirst into sponsored post collaborations and brand deals, you need to be aware of the sneaky hidden costs that can seriously impact your bottom line.
- Platform fees: Influencers and digital creators use popular social media platforms and influencer marketing agencies to connect with brands. These platforms and agencies act as intermediaries between brands and influencers, facilitating partnerships and negotiations. However, they often charge exuberant fees that reduce influencer’s profits by a significant margin. For example, an influencer marketing agency can charge a platform fee as high as 20% to 30% for each sponsored post or partnership they negotiate. Let’s say if an influencer receives $1000 from a brand agreement, they will only receive $800, with the remaining $200 going to the agency. Similarly, they can also charge for access to certain features like analytics, marketing tools, or increased visibility.
- Payment processing fees: Influencers may be charged transaction fees from the payment processing platform, such as PayPal or bank transfer fees when they receive payment for sponsored posts or partnerships. In some cases, influencer marketing agencies may deduct these fees from the influencer’s earnings before transferring the payment. This implies that influencers may not be aware of them being charged, as these charges, more often than not, are not clearly disclosed on the payment statement or invoice. Furthermore, some agencies might put the transaction fees in their contracts or terms of service as a hidden expense rather than disclosing them upfront. This can make it difficult for influencers to accurately calculate their earnings and negotiate fair compensation for their work. Therefore, influencers must carefully read contracts and clarify fees and payment terms before agreeing to work with a brand.
- Product/service costs: In some cases, influencers may be required to purchase products or services from the brand in order to promote them. They may be responsible for shipping and handling costs for physical products, which can further eat into their profits. This is especially true for the newbies on the block who are just starting and have no standing in the influencer marketing world for brands to shell out freebies as they do for well-established influencers.
- Travel expenses and costly equipment: There are cases where influencers might have to travel for brand promotions. They are required to travel to attend events or create content in a specific location, and these travel expenses can include transportation, accommodation, meals, and other related costs. While brands may cover some of these expenses, they may not cover all of them, and the influencer may need to foot certain bills themselves. Additionally, even if the brand covers all the expenses, the influencer may still lose out on potential earnings, as the time spent on travel may prevent them from accepting other brand deals or creating additional content.
Furthermore, influencers may need to invest in cameras, lighting equipment, editing software, and other tools to create high-quality content. Many well-established creators employ others and have a team to run their company operations. Consequently, their profits can be impacted in a number of ways, such as they will have to pay salaries and benefits. Also, additional costs associated with hiring and maintaining a team are incurred, which raises overhead costs. - Time and effort: Creating content for brands as an influencer can be lucrative, but it also requires a significant amount of time and effort. That time spent on content creation can reduce the influencer’s hourly earnings. Creating high-quality content also requires additional recourses, such as equipment, editing software, and props, which can increase the production costs that may not have been deciphered into the agreed signed, reducing the influencer’s profit margin. Influencers need to address these factors and carefully negotiate fair compensation to ensure they are adequately compensated for their time and effort.
- Opportunity costs: The value of the next-best alternative that an influencer must forego to follow a specific course of action, such as writing content for a brand, is referred to as the opportunity cost. For instance, a brand may offer an influencer the chance to work on a high-paying project, but the influencer chooses to create content for a different, lower-paying brand instead. The potential revenue they might have made if they had accepted the more lucrative assignment in this situation would be the opportunity cost.
Additionally, creating content can take a lot of time, so influencers may have to pass up chances or other activities to concentrate on. For instance, an influencer may have to forgo social invitations or networking events to complete a sponsored project.
Taxes and legal fees: Influencers may need to hire lawyers to review contracts and ensure they are not signing any unfavorable agreements. They may also need to pay lawyers in case of payment or other disputes with brands or agencies. These legal fees can add up and reduce their profits. Furthermore, influencers are also liable to pay taxes. In India, for instance, social media influencers are required to pay a 10% tax deducted at source (TDS) on gifts or any other kind of payment in kind if the product’s worth is greater than 20,000 as per the Finance Act, 2022.
Social media influencers and artists in the UAE have to pay value-added tax (VAT) on their services, including any online promotional activities, such as blog or social media posts, paid physical appearances, or any other marketing activities. In addition, if social media influencers or artists received goods — such as mobile phones or other gifts — in return for their services instead of cash, these must be accounted for in their VAT calculations. These taxes are the unaccounted hidden costs that many social media influencers do not pay attention to.
Late, partial, and non-payments: An influencer’s earnings may be significantly impacted by payment delays or partial payments. Delays in payments may put the influencer under monetary strain, making it difficult to take advantage of other possibilities or invest in their business. Partial payments can also make it challenging for influencers to manage their income and establish financial plans effectively. Furthermore, the relationship between influencers and brands can also be harmed by delayed or insufficient compensation. Trust gets damaged if a brand frequently misses payment deadlines, and future collaborations with the influencer may become challenging. Partial payments might also make influencers feel underappreciated, which can cause anger or irritation.
As a savvy social media influencer, it’s crucial to carefully consider the time, effort, and expenses required for each partnership opportunity that comes your way. Doing so lets you make informed decisions about which collaborations to pursue and how to downsize those hidden costs and maximize your profitability like a boss.
How Spreadd gives Customized Solutions to Hidden Costs
When it comes to hidden costs, the struggle is real for digital creators. But fear not, our fellow influencers, because Spreadd has your back! Our platform is fully committed to giving you the best deals and opportunities without any sneaky surprises.
Our decentralized platform ensures transparency in every activity, from commission to payments to brand collaborations. We understand that your profits are precious, and we won’t let any hidden costs eat into them.
There’s more! Spreadd isn’t just about brand collaborations; we also offer opportunities to monetize your skills through online courses and NFT marketplaces. And don’t worry about hidden charges; our subscription model is water-tight!
So, are you feeling the vibes yet? If you’re ready to scale your digital career and grab some sweet monetization opportunities without hidden costs, hit us up pronto! Let’s make some waves together.
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