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Are ‘Influencers’ worth the money? Part 1

Are ‘Influencers’ worth the money?

The dirty tricks undoing Insta stars, and the small business victories propelling sales. What you need to know before hiring an influencer.

It’s one of the hottest topics right now.
Is influencer marketing a fad, full of fakes? Or are they an authentic and powerful positioning tool ideal for businesses?

Earlier this month, the internet exploded with Vanity Fair’s influencers exposé. It profiled the utopian lives of Byron Bay mummy and lifestyle micro-influencers. Mum surfers with $10,000 ovens and well-dressed children.

The article pushed buttons and was followed by a steady wave of articles.

social media influencers

‘The Coast of Utopia’ Vanity Fair’s article on influencers sparked authenticity debate. SOURCE: Vanity Fair

Article overview

Items discussed further below

  • Insta-slamming trends
  • Statistics and predictions
  • The psychology and history behind influencers
  • Is this the end of the trout pout?
  • Are you and/or the influencer breaking the law?
  • Is your brand guilty by association?
  • Intellectual property – Who owns the copyright?
  • Should you have an Influencer Agreement?
  • 7 steps to follow – Follow to the end for your Action List

But influencer-slamming isn’t a recent trend. In 2016, the hashtag #coussousforcomment was reportedly created by Sydney restaurateur Tim Philips-Johansson, after an influencer asked for a free meal in exchange for a positive review.

More business owners have joined the movement voicing their frustration with the practice. Influencers who try this at the popular Los Angeles ice cream truck, CVT Soft Serve,  have to now pay double.

So why have influencers gotten under some people’s skin so much when they make a lot of money for themselves and some businesses? Well, it’s about authenticity.

Yes. We’ve heard that word to death the past year. But could authenticity be the stone that crumbles the influencer empire where they earn $8,000 for posting a pic of baby food with their cupid-looking bub? And could the Australian Tax Office and legal system, actually play a big part in bringing them down?

Let’s unpack the probability and whether businesses should be investing in this type of marketing or running for Mullumbimby!

No-freebies! Influencers will pay double for a scoop of ice cream at CVT Soft Serve in America. SOURCE: @cvtsoftserve

Let’s Get Real About Influencer Marketing

Influencer marketing is predicted to become a $6.5 billion industry this year. That’s up from $1.7B in 2016. Despite all the hype (the good, the bad, and the downright dodgy), it has its merits – otherwise it wouldn’t be growing, right?

The State of Influencer Marketing 2019: Benchmark Report surveyed 800 marketing agencies, brands and other professionals. It revealed 92% of respondents believe influencer marketing is an effective form of marketing.

It can provide a huge return on investment (ROI) for businesses. With earned media value as high as $18 per dollar spent, and an average earned media value of $5.20 per dollar spent. But it doesn’t always have to involve a cash exchange.

Collaborations and contra deals are also super popular and successful for many. For example,  Cake specialist Hannah Packwood (@hannahbakescakesperth) collaborated with hair salon, Viva La Blonde.

social media influencers
social media influencers

I said straight up I would love that (as) I’m small and starting out, (and) I cannot afford to do anything for free but would happily offer them my wholesale price,” said Packwood.

She said it was their local niche reach of 62,000 followers mainly in Perth, that attracted her. “Their customers care about pretty things, what’s on trend, go to parties and have enough money to get a $300 – $400 hair colour every 2 months and to me, that means they can afford cake!”

It also meant a boost for her brand. The main story had 11,000 views and @hannahbakescakesperth gained 70 new followers – a 12% increase in a day, said Pacwoood, – with paid orders within 24 hours. 

“It was a huge success in my books. I will definitely be looking for more opportunities like this again,” added Packwood.

With such impressive statistics and lots of success stories, it should be all peachy, right?

2019 Influencer Marketing Report:

  • 82% of leads from influencer marketing campaigns are of a higher quality than those brought in from other forms of marketing.
  • Google Searches for ‘influencer marketing’ grew 1500% over 3 Years.
  • 320 new influencer marketing focused platforms and agencies entered the market over the last year

Have you heard the horror stories?

Let’s be real here, they’re some impressive statistics, but horror stories keep popping up. Fake proposals, followers and photos to name a few. And some influencers don’t even use the term to describe their work anymore, trying to distance themselves from negative connotations.

And success is not guaranteed.

According to the Report, 25% of businesses either lose money or just break even. Worse still, it’s not uncommon for brands and influencers to butt heads over serious legal issues.

So how do you avoid the drama and cash-in on influencer marketing? First, you need to understand it.

Influencer @fashionambitionist reportedly faked the ‘surprise engagement.’ SOURCE: @fashionambitionist

Why Influencer Marketing works…

A bit of history and psychology.

Influencer marketing isn’t exactly new. Businesses have engaged celebrities and iconic figures to promote their products since the late 1800s when companies began paying celebrities to endorse things like cigarettes and home goods. To add an element of pop culture to dull industries, such as patented medicines, companies approached the likes of the Queen and the Pope for endorsements, which were believed to heighten the appeal of otherwise boring products.

In the 1920s, Coca Cola reinvented the Father Christmas character as a plump and friendly old man called Santa. This more likeable, relatable version of the man in red reinforced Coca Cola’s brand story, and intensified the values of their target market. So sometimes an influencer isn’t even a real person (sorry kids). Sometimes relatable, likeable characters are invented to be the ‘spokesperson’ for a brand. The macho character, Marlboro Man, was dreamt up in the 1950s, but he influenced consumers to associate smoking cigarettes with ‘being a manly man’ up until 1999!

“What’s the difference between George and influencers?” SOURCE: @Nespresso

“What’s the difference between George and influencers?” SOURCE: @Nespresso

Then you have the likes of George Clooney. Who doesn’t like George? But do we really think he drinks Nespresso in his multi-million dollar mansion? No, and we don’t care – it’s obviously a paid advert.

There are logos smacked everywhere, it’s cheeky and clear what’s happening. He is trying to sell us coffee through his dreamy smile and manliness. Some want to be him. Others want to ‘be’ with him. It’s the association we make (subconsciously or otherwise) that makes it a powerful marketing tool.

What’s the difference between George and influencers?

Well, truth be told. Not much! ‘Influencers’ are really just brand ambassadors. The main difference is they come with a smaller more achievable price tag than, George. Where the line gets blurry is some try and hide the fact they’re being paid to push a product.

Naturally, we trust people more than we trust brands. If a person (or fictional character) shares or represents our personal values, then we’re even more likely to trust them. This is why influencer marketing has so much potential to work wonders for your brand. If you want to learn more about the psychology behind this phenomenon, check out this article on he drinks Nespresso.

And why it sometimes doesn’t work…

Over the Trout Pout.

A social media ‘influencer’ is any person who has some influence over the ideas and behaviours of others. This could be someone with millions of followers or someone with a small group of loyal and engaged fans (micro-influencers).

No matter the size of their audience, there is something that all have in common – their followers trust them.

Developing trust is the backbone of successful marketing. The right influencers can be powerful advocates for you brand. They lend credibility, increase engagement and drive your conversions.

So, what happens to your business and brand if they lose their credibility? That’s why you need more than a trout pout to make this work for you.

Jessika Powers from 2018 Married at First Sight, famous for her pout. SOURCE: @jessika_power

Guilty by association

With authenticity playing a huge part in why we trust and pay these people, you’d like to think that flows over to their values when the camera isn’t on, right? Err, apparently not for some. A family member of a large Australian influencer reckons some are just cashing in on the lies as much as they can, while they can!

“As time goes on life starts to imitate the art – not the other way around. The line between work and personal is so blurred it doesn’t really exist. It feels like their life starts to revolve around what looks good in a video and photograph,” Joe Brown* said.

“Sometimes it feels like they have sold their entire life – privacy, home, kids and work, for the sake of a bit of fame and fortune”.

Brown believes it’s a toxic cycle. “Business keeps paying the influencers, the public keep looking and telling them how wonderful and inspiring they are, and the influencer must keep coming up with more attention seeking acts to stay in the game.” added Brown.

Tax evasion is another big issue according to small business specialist accountant, Nicole Kelly from ABA Tax, who said influencers are walking targets for the ATO.

“Some lifestyle influencers are claiming everything and anything they photograph in their home as a tax deduction – including their home.

Holidays, gifts – they should all be declared as income. While it may sound clever to be able to make huge claims, it could land them a big tax bill and their careers harmed,” she said.

social media influencers

Accountant Nicole Kelly from ABA Tax says influencers are targets for the ATO. SOURCE: ABA Tax website

Why should you care if they lie and cheat on their taxes?

Ask yourself one thing. As a business owner, what do you pride yourself in? What values do you hold and want upheld through your staff and brand? Now, what if an influencer you hired to promote your products was found to be the exact opposite of everything you stood for?

Worse still, imagine if that influencer was publicly named and shamed. Would you be guilty by association?

If history is anything to go by, influencers can’t expand brand loyalty if they are caught doing the wrong thing.

When a sports star gets busted it’s all over the news and their sponsorship is pulled. Michael Phelps, Lance Armstrong and Tiger Woods. We won’t even delve into Israel Folau – we know the list goes on.

Even the Australian cricket team lost several major sponsors last year after the ball-tampering scandal. You think sports stars and influencers are different? Think again.

They both earn income through brand sponsorship and brands drop misbehaving ambassadors to avoid being ‘guilty by association’.

Businesses Insider reported Tiger Woods lost $22 million in endorsements in 2010 alone. SOURCE: Business Insider

How to look at this objectively

Make the right call for you.

Influencer marketing should be only one piece of your giant marketing puzzle. We stress it is not the magic wand to ramp up your page followers and crash your sales carts with overnight orders. As much as you need or want it to be, you will be left disappointed.

A good way to understand its role, is to look at it as an effective delivery mechanism for content marketing. In the ideal world, the best time to consider influencer marketing is early on in your business journey, before you’ve built your own big following. That’s if you can afford it. The average cost $100 per post per 10,000 followers. So, if they have 100,000 followers it would be $1,000 per post and so on.

While the concept of paying for influence sounds simple, chances are you may not be equipped, just yet, to use influencer marketing to its full potential. You could even be breaking the law and be causing harm to your brand in the future!

Lawyer - Tegan Boorman

“We will see a significant legal case arise” said Lawer Tegan Boorman. SOURCE: provided.

What can go wrong: Potential legal issues and how to minimise the risks

With so many ‘regular people’ constantly posting about their day-to-day life and growing niche followings, businesses have an ever-growing pool of influencers to choose from. Influencer marketing is now more accessible than ever to even the smallest brands and newest businesses. But it comes with risk if you don’t view it as a business transaction.

Tegan Boorman, Head of Commercial Law at Boorman Lawyers, which niches in the legal aspects of social media explains:

“As more businesses engage in these types of campaigns, it becomes more likely that we will see a significant legal case arise from a campaign in Australia. We can look to overseas jurisdictions to see just what can go wrong with the power of influencer marketing,”

“We have laws in place to protect Australian consumers and it’s only a matter of time before our Courts are required to specifically consider them in the context of an influencer marketing campaign.”

So how do you pick the right one for you and engage them in the right way?

The Competition and Consumer Act 2010

The Australian Consumer Law set out in the Competition and Consumer Act 2010 prohibits conduct which is, or is likely to be, misleading or deceptive, or misrepresents a sponsorship, approval or affiliation with another party. That includes false testimonials and failing to disclose it’s a sponsored post.

“Whilst it is not illegal to pay an influencer to promote a product or service, it is illegal to do it in such a way that misleads or deceives or is likely to mislead or deceive the influencer’s audience,” said Boorman.

It’s also illegal to make false or misleading representations, including saying they’d purchased and used a product for an extended period of time when they hadn’t.  When the reality was “the influencer had been sent a free sample of the product by the brand and it was the first time they had ever used it, if they had even used it at all.”

Boorman warned breaching this legislation may come with a hefty price:

 “The maximum penalties for breaches of certain sections of the Australian Consumer Law… were increased on 1 September 2018. It is now $500,000 for an individual (often an influencer) and for a corporation (often a brand), it is the greater of $10million, 3 times the value of the benefit obtained from the contravention or offence (where the value can be calculated); and if the value of the benefit cannot be determined, 10% of the company’s annual turnover in the preceding 12 months”.

Amongst its other enforcement powers, The Australian Competition and Consumer Commission can require any claims made on social media be substantiated. It has the power to commence court proceedings where a breach of the law has been identified. If someone suffers loss or damages (such as damage to their commercial reputation) as a result of misleading and deceptive conduct, they may also commence proceedings with a claim for damages.

Sponsored posts must be clear and obvious to avoid breaches. SOURCE: Instagram #sponsored

Disclosure of sponsorship

Under the Australian Association of National Advertisers Code of Ethics, influencers must clearly label their sponsored content so that is very clear to their audience.

However, there are some grey areas around the Code. Not only is the association self-regulating and non-binding, but the Code doesn’t specify exactly how obvious this disclosure needs to be.“Some of the cases considered by Ad Standards provide some guidance around what constitutes adequate disclosure” said Boorman.

In other words, those buried #sponsored hashtags at the end of a post may not be adequate. “Ad Standards can refer a case report to the Australian Competition and Consumer Commission, and that is where the real risk exists for Brands, Influencers and Agencies alike who may be involved in a campaign which is found to be in breach of Australian Consumer Law,” said Boorman.

Buried #sponsored hashtags at the end of a post may not be adequate.” SOURCE: Instagram

Intellectual Property Concerns

Who owns the copyright of content created for an influencer marketing campaign?  Australian law recognises the first owner to be the person who created the content. This is the first person who first wrote, photographed, produced or broadcasted it. Influencer Agreements and contracts can give the copyright to the brand.

Influencer Agreements

An Influencer Agreement is a legal document which sets out the agreement between the influencer and the brand in relation to the rights and obligations of each party.

Having your Influencer Agreement drafted by a lawyer means your agreement is more likely to include everything necessary to protect yourself. “An Influencer Agreement need not be a long drawn out document, but it should contain all the relevant clauses to protect the parties from the risks involved with influencer marketing campaigns, of which there are a few,” said Boorman.

The agreement should include details like the duration of the campaign, termination rights, payment terms and any agreed exclusivity. There are a number of provisions that should be included, depending on the specifics of each individual campaign. Boorman Lawyers have a detailed list of what to include in an Influencer Agreement.

So how do you pick the right influencer for you and engage them in the right way?

Where to start

#1 Know your ideal customer

To find the right influencer, you first need to identify your target audience. Try our free guide if you need some help! It’s important that you understand what your customers want and ensure the influencer’s personality and image align.

#2 Find the right fit

Sometimes, less is more. Micro-influencers only have a few hundred or a few thousand followers. Because they have such a niche following, their audiences can be much more engaged, aligned with and interested in what they have to say. If you’re a B2B, you want an influencer that is an authority and thought leader.

#3 Authenticity is key

We’re living in the internet age of authenticity. People are on the hunt for brand stories that they can connect with; that they can get behind and believe in. And we trust people more than we trust brands, especially if the person shares our values.

Business concerns aside, finding the “right” influencer also has legal implications. For example, you can’t talk about your experience with a product if you haven’t tried it. Your influencers need to have experience with your product or service, and it’s super important that they actually like it.

#4 Look at using an agency

There are professional agencies and matchmaking networks that focus on this space. Influencer Agencies have a roster of public figures and people with large social followings and they help them create connections with relevant brands. As the industry has matured, it’s attracted the support of many companies and apps designed to simplify the process for both brands and influencers.

#5 Do your due diligence!

Ask for the influencer’s page and profile insights and check their audience to ensure they really are your target market. Data and metrics are key in understanding any marketing campaign’s potential success and end return on investment. It also shows you, in black and white, if someone is the real deal.

Kitly (previously known as Q-83) is an influencer certification platform that claims it can give you 100 per cent accurate application programming interface data, automating how influencers and talent managers share metrics and campaign reports. For influencers, they can also prove their commercial value by linking their Instagram account, which then allows brands and agencies to access metrics and data on the spot!

#6 Write a brief

Once you’re confident you’ve found the right influencer, you should write a brief. Your brief should clearly set your expectations, your Key Performance Indicators (KPI’s), provide details on the agreed payment terms, and explain the product returns policy.

Be prepared to be flexible though. Sunshine Coast exercise micro-influencer (although he doesn’t like being referred to as an influencer, Matt Fox (@Mattycfox 137k followers) said while it’s a good idea to let them know what you want, “you also (need to) let the influencer have their natural input and do it so it’s authentic – too many guidelines normally won’t work as it becomes a proper ad then, and most people know it’s just a paid ad now.”

#7 Create a binding contract

This will protect both parties and help clarify expectations and responsibilities. Both sides have rights and it’s important that this is viewed as a professional business transaction with mutual benefits.

A great marketing tool – if done right

So, should you bring social media influencers into your marketing strategy? All things considered; great gains can be made. Using influencers can be effective for expanding your audience and growing your brand. But, educate yourself, to avoid it going terribly wrong,

Whichever way you look at the mystical world of influencer marketing, influencers have massive shoes to fill and have a lot of responsibility socially, ethically and legally. As do the brands engaging them – something that all business owners and influencers should consider. Whether it’s a fad or here to stay, it’s a high-stakes game.

We will explore this topic even further in Part 2 in August, where our training guide will show you how to develop an Influencer Strategy.


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Actionable Task List

Find the right fit
Authenticity is key
Look at using an agency
Do your due diligence
Write a brief
Have an Influencer Agreement drafted by a lawyer

The fine print
*name and event has been changed to protect source
** This blog post is for information purposes only and should not be considered legal advice. You should obtain legal advice tailored to your own personal circumstances prior to participating in an influencer marketing campaign.