Blog: Making sense of influencer pricing

Influicity founder and CEO Jonathan Davids breaks down the basics of how exactly you should be calculating your online celebrity costs.

By: Jonathan Davids

Influencer marketing is one of those buzzwords that has picked up a lot of steam over the last couple years. As with any new ad vehicle, there is a good deal of mystery around metrics, benchmarks and inventory selection. Advertising Standards Canada even announced recently that it would be cracking down on brands that lack proper disclosure alongside influencer promotions.

I wanted to kick off this column with the question that brands ask me most of all: pricing. What are we supposed to pay for these people?

In the words of one anonymous social media exec, “we threw too much money at them and did it too quickly. So injonathanDavids 2014, they were making $500 to show up and take some photos. Then it became $1,500. Now it’s hundreds of thousands of dollars.” This sentiment is shared by many industry observers.

Marketers are now beginning to place rigid, quantitative metrics around influencer ROI. Without any fancy algorithms, there are some basic calculations every marketer should make.

Subscriber-to-engagement ratio

Many marketers will look at an influencer’s total subscriber count and make a quick judgement call. In fact, not all subscribers are created equal. The more telling number is average views per video (on YouTube), average likes per post (on Instagram), and average number of comments per post. Furthermore, are the comments timely and relevant? These are critical ratios to investigate, beyond top line numbers. (Tip: Very low subscriber to engagement ratios could point to subscriber fraud.)

Established media benchmarks

With decades of knowledge on CPMs for TV, radio, print and digital, any savvy marketer can engineer a reasonable rate card. For a YouTube comparison, simply look at what you would pay for a product placement on TV. Calculate the reach and factor in creative costs (if the influencer is doing their own production). The resulting formula might look like this:

500,000 (subscribers) x $19 (CPM) / 1,000 = $9,500
+ $1,500 (Creative, assuming there is some workload involved)
= $11,000

So in the example above, we might pay that influencer $11,000 for a product placement within a YouTube video. On Instagram, use a glossy magazine as the comparable.

Category density

Certain subject categories have a large population of influencers, like beauty or gadgets, while other categories have a much more narrow selection. In Canada, we have found that French-speaking Canadian influencers, with a sizeable reach, demand a premium. Same for influencers who have a densely populated audience in Eastern or Western Canada.

Offline celebrity

An influencer’s mainstream credibility will certainly affect their price tag. Does the influencer regularly appear on TV? Are they a well-known author? Did they star in a reality show? The lines are blurring between mainstream celebrities and social/digital influencers with some of today’s biggest celebrities having gotten their start on social.

Marketers must account for the halo affect of a certain influencer’s endorsement.

Jonathan Davids is the founder and CEO of Influicity