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MS of IM Post 3: Why Is Influencer Marketing Usually Priced Based on Reach?


Key Article Takeaways: 

  • Pricing based on Reach has been popular because: 
    • It’s an easy-to-gather up front measurement metric 
    • It’s a common denominator with previous outstanding media types such as TV, Newspapers, etc.) 
    • Influencer media kits and rate cards highlight Reach 
  • There are better, lower-funnel metrics than Reach to judge an influencer marketing campaign on. 
  • It’s difficult to measure success with some other metrics such as Engagements since a post can get many irrelevant results (“Here first!” “I [heart] you! Pls reply!”) 
  • When estimating video views for an organic post, do so by measuring median view numbers for past videos instead of the average 

While we’re going to talk about the shortcomings of (and methods of dealing with) pricing sponsored content using an influencer’s Reach, we should also consider that it is the most appropriate starting place for any fixed-rate influencer program.  

Not so long ago it seemed like a lot of brands were still pricing or valuing deals based on the number of posts or influencers involved. As we’ll discuss in a future post (teaser!), this is a palm-to-face approach whose main benefit is not only to drive up the margins of your influencer marketing vendor, but also leads brands to become (unnecessarily) dependent on that vendor. 

As a side-bar, it’s also worth noting that while we love and will discuss performance-based pricing in the future, it isn’t always available. Even when it is, it isn’t always the appropriate approach for the brand or influencer. 

So Why Is Price Based on Reach? Three reasons: 

With organic influencer marketing (which I’d argue is the only pure influencer marketing), it is the most relevant metric that is knowable up front.  

  • One of the great attributes of organic influencer marketing is that it is opt-in marketing. Audiences are choosing to engage with your content in a way that is very different than with paid media, whether through a subscriber feed or even better, through search. The downside of organic views or impressions? They can be remarkably tricky to predict.
It is a common denominator metric with other media types.  

  • Most people in the influencer marketing space understand the estimated views point above. Most people *don’t* really understand this second point. It even took me a while to really understand it: I tend to “apologize” to clients for talking about Reach and redirecting their attention to what I consider the first point of real value, views or impressions. But this is also a bit of a mistake: newspapers don’t apologize for their circulation, TV networks don’t apologize for their subscriber counts or show ratings (which is no guarantee that someone watched the commercial). Potential audience is a completely reasonable metric to talk about as brands compare media options.  
Influencers themselves tend to set their rate cards based on Reach and vertical.

  • While influencer pricing isn’t always in line with a brand’s budgets, supply-demand dynamics (and lack of clarity around real value) make this pricing somewhat sticky around the Reach metric.  

So What’s The Problem?

The problem – and it’s a good one! – is that there are so many better metrics available to judge an influencer marketing campaign on. As noted, they might only be estimates at the beginning of the campaign, but they can be estimated and layered in to get a better understanding of expected performance: 

  • Views or Impressions: Especially on YouTube and TikTok, it’s easy to get a sense of historical viewership. Using data from previous gen.video programs, we can determine that on YouTube, we look for a “playthrough rate” (defined as views / Reach) of around 10% as one relevant benchmark to understand how engaged an influencer’s audience is.  
     
    It’s not always a negative if it’s lower.  A more established influencer may just have legacy subscribers who have rotated out (but not unsubscribed), but as long as the influencer is continuing to attract new viewers and views, it just needs to be understood and priced accordingly.  
     
    Another math based pro tip: when estimating future views, use the MEDIAN viewership of recent videos, not AVERAGE. Why? Videos that go viral will drive up averages in a way that skews the calculations. See the *Exhibit below. 
     
  • Engagements: The punchline of influencer marketing: agencies counting up likes and comments (“Here first!” “I [heart] you! Pls reply!”) and claiming victory. My problem with likes and comments mathematically is that I really can’t get a grasp of what the benchmark is or how to calculate it. Because impressions aren’t publicly available on Instagram, discovery platforms tend to report engagement as “Likes and Comments / Follower Count.” This tends to lead to really low fractional numbers that are both hard for the brain to understand and even harder to get excited about.  
     
    There is a ton of value in comments but to my mind, it’s all about the sentiment and verbatims that can be pulled out to tell you who the audience is and how they are using the influencer’s content   
     
  • Clicks: I love this one!! Clicks are a downfunnel metric and show how we are driving consideration for a brand. Clicks are so fundamental to performance that we do talk to clients about expected clicks in a campaign. That said, the expectations are widely variable based on vertical. Again, from gen.video data, we’ve seen that CE campaigns on YouTube have a 3% CTR benchmark while for a CPG campaign, .3% is a huge win. 
     
  • Direct Sales: Clients love to ask about this and in certain industries – like CE – it’s reasonable to anticipate direct sales impact. That said, there are so many complexities to sales success, including the timeframe over which sales will be realized, that it really has no place in a pricing conversation. Much more on this topic in future posts! 

And so that’s why influencer marketing has been priced based on Reach and how to think about that Reach compared to other metrics when evaluating the appropriate scale for a campaign. 

*Exhibit: Why you need to estimate views based on median views, not average. In this simple but representative example, one out of eight videos (# 5) goes viral. Do you think the average views (17) or median views (5) is a better indicator of the probable views of the next video? 

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