Monday 21 October 2019

Just how do influencers make their money - and is the game up for them?

With brands increasingly turning to social media stars to market their products, Regina Lavelle asks if tighter regulations will protect consumers from being misled

Fyre Festival tents weren't quite the luxury villas the attendees were expecting
Fyre Festival tents weren't quite the luxury villas the attendees were expecting
Social influencers in the UK now need to disclose if content has been paid for
Fyre Festival Promoter Billy McFarland

Regina Lavelle

As cautionary tales of the perils of social media go, there are few more apposite than that of Fyre Festival. With its founder Billy McFarland currently serving six years in prison having defrauded investors of $26m (€23m) in the 2017 festival, it is a lesson that even in the neverland of social media, actions have consequences.

Fyre's success in offloading thousands of tickets at prices up to €12,000 (€10,500) was the result of a persuasive campaign featuring models Bella Hadid, Hailey Baldwin and Emily Ratajkowski frolicking on a Bahamian beach and lounging on yachts.

On the strength of that promotional video and a co-ordinated influencer campaign, thousands signed up for the festival. As a contributor to the Netflix documentary, Fyre, The Greatest Party That Never Happened, commented: "A couple of powerful models posting an orange tile is what essentially built this entire festival."

In the ensuing blamestorm, the role of the influencers was propelled into view. "We certainly wanted to send the messages to influencers that when you post a photograph and you don't say hashtag advertisement, there is some level of responsibility. The Government, because of this incident, is now cracking down more and more," Ben Meiselas, a class action lawyer, told the documentary.

Now agencies this side of the pond are cracking down too. An investigation by the UK's Competition and Markets Authority led to 16 influencers, including Rita Ora (left) and Alexa Chung, agreeing to disclose all brand involvement or association on social posts. Last month, the country's ASA warned "hundreds" of influencers over opaque brand deals, where promotional content had not been adequately signposted. And it's a growing industry - Statista estimates the global value of Instagram influencer marketing will reach $2.38bn (€2.07bn) this year, up from $1.07bn (€.94bn) in 2017.

So just how do influencers make their money?

Rita Ora
Rita Ora

Melanie Murphy has over 564,000 subscribers on her YouTube channel where she posts video essays on sex and relationships. She has done several campaigns with brands, including Wella. Because her content refers to fairly explicit sexual content, she is not directly monetised - that is her content is too adult for the YouTube inventory. She started posting videos after finishing her BSc in education and training from DCU and says she gained brand attention relatively quickly, although not all of it useful.

"It was the Wild West back then. I really didn't know what I was doing at the time, and neither did brands - they were just looking for access to numbers. Many of the opportunities coming to me back then were pretty awful - companies asking me to commit to making a lot of free content for them in exchange for 'exposure' or for free products, sometimes for small fees..."

Murphy admits that not everyone in the industry is worried about integrity.

"There is a responsibility to not sell out, because it leads to people unfollowing you and I've seen it with so many people in the industry. I pride myself on only working with brands I already have or would spend my money on."

Ivan Adriel is digital director of Connector, a Dublin-based influencer agency. His biggest campaign, he says, was "over €100k" which was "an annual contract with 12 posts, 24 stories and other deliverables such as attending events and photocalls. For a single post, the maximum I have seen in the Irish market is €10k. The industry is moving towards brand ambassador roles, where an influencer will be contracted for three, six, or nine months and do five posts over the year including a press trip and a photocall.

"I've had someone turn down a €40k campaign because it was demanding exclusivity and they didn't want to give that".

Such campaigns can reach €50,000 with contracts extending to 50 pages. Standard brand/influencer contract clauses include exclusivity, non-compete, non-disclosure, morality and that failure to post "ad" constitutes a breach. It's not quite the stuff of old Hollywood, but there's no doubt where the power lies.

But where celebrities have a variety of income streams, influencers are reliant on brand advertisers, an industry not renowned for its ethics.

For some influencers, the question about maintaining integrity is bound up in protecting themselves from exploitation.

For some, the answer is an agency to protect your interests. Some of these agencies embrace increased regulation.

"At the start, the industry was very much unregulated," says Mark Jacobs, Director of the Outset digital agency in Dublin. "Talent didn't know what they were doing. Brands, specifically, didn't know they were doing. A lot of the confusion was over where the budget was coming from. The whole line is becoming a lot more settled now.

"Brands want influencers to use the 'In Partnership With' branded content tag on Facebook and Instagram because it's a tool which gives real-time insights on the performance of the campaign."

The Advertising Standards Authority for Ireland (ASAI) has not yet announced whether it intends to adopt the ASA's more rigorous standards on disclosure of free products, affiliate links or previous brand associations here. But consumer law is unambiguous on the matter.

"Social media influencers and bloggers have responsibilities under the Consumer Protection Act to ensure that consumers are not misled by online advertising that is disguised as blogs, tweets and other social media postings," a spokesperson for the Competition and Consumer Protection Commission said.

Meanwhile, the International Consumer Protection and Enforcement Network (ICPEN), of which Ireland is a member, says influencers "need to disclose… whether content has been paid for, be open about other commercial relationships that might be relevant".

That means that content which has a commercial element should be clearly signalled as "sponsored content" or "ad" and not hidden behind any other content.

But can anyone really regulate what often amounts to make-up and dresses? Well, the taxman has a role to play, for a start. All those freebies function as payment-in-kind (PIK), meaning the influencer is liable for tax on them. "Bloggers who are in receipt of products, or other non-monetary benefits, in return for posting online promoting the product, will be subject to tax on the benefits they receive," a spokesperson for the Revenue Commissioners says. Does this occur to influencers? "No, at first they're not fully aware of the tax requirements," says Brendan Brady of Brady and Associates Accountants. He specialises in freelancer tax returns and has given a number of talks on tax at blogger events. "It's only after I have a conversation with a blogger/influencer that they realise that PIK are considered taxable income."

Brady says in spite of big campaign numbers, most are not making huge money.

"My estimation is that there's a handful of influencers in Ireland making a living out of it. Some are doing fairly small numbers. Some of it is barely minimum wage - at least in terms of what's going through the bank. They may be receiving other benefits they're not telling me about, but ultimately the responsibility is on the blogger/influencer to file a complete tax return."

But for all that there is a backlash, brands are not tiring of influencers.

"Clients, in the main, and agencies are simple enough people. We follow the eyeballs," says Bill Kinlay, CEO of media investors, Group M. "As long as it's a safe environment and you're dealing with real eyeballs rather than bots, it's somewhere clients want to go. If there's an influencer and they have a loyal and quality following, then clients will want to get on board."

It seems likely that influencers are going nowhere; the industry is established and brands are hungry. But there is a growing awareness that things must be done right.As one of the final contributors on the documentary mused: "Fyre shows what happens when that goes to an extreme."

Irish Independent

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