With the astounding growth of social media channels (Instagram has reached 1 billion users and YouTube has 1.8 billion monthly users) and a general trend of declining TV audiences and revenue, influencer marketing is beginning to see the shift of billions of ad dollars.
While calculating return on investment (ROI) from influencer marketing initiatives has been challenging for marketers, a report by Tapinfluence indicated that influencer marketing ROI can be up to 11x higher than traditional advertising. However, there is still no universal consensus on the numbers or topic. That said, research by Activate found that 71% of surveyed marketers believe influencer marketing has helped them grow awareness, with 67% saying the practice has allowed them to reach a more targeted audience.
As the polls and surveys continue to be evaluated, interest around the topic trends, with searches for “influencer marketing” increasing almost 50-fold over the last five years.
With the potential influx of billions of dollars of annual ad spend, influencer marketing has also attracted the interest of venture capital. The influencer market is prime for investment from venture capital as there have already been a string of successful acquisitions and being blue ocean territory, there’s much technology to be built to funnel those billions of advertiser dollars. The space is much analogous to the shift to programmatic ad buying and ad technology (“Ad tech”) that started in the early 2000’s but started to attract serious venture capital in 2008 and later.
As influencer marketing has grown, so have company acquisitions. In recent years, several agencies have been purchased or invested in by companies looking to leverage firms’ reach and expertise.
In June, Quotient Technology, Inc. acquired influencer marketing agency, Ahology. The deal, which includes $20 million at the outset, with a potential $30 million more if Ahology meets certain financials, is aimed at growing Quotient’s CPG marketing.
At the beginning of the year, Viacom acquired influencer marketing agency, Whosay, for an undisclosed amount of money. The deal is the second large purchase by Viacom in the influencer space, acquiring online video event, VidCon, in February.
In March of 2016, influencer marketing agency and analytics firm, HelloSociety, was purchased by The New York Times for $12 million. In recent years, The Times has been ramping up acquisitions in the digital space to support its native ad department, T Brand Studio.
Google purchased influencer marketing platform, Famebit, in late-2016 to help the technology giant connect brands to their growing roster of creators on YouTube. According to FameBit, the branded content generated by their marketplace has now logged 1 billion views and 4.7 billion minutes of watch time.
Related Post: Google Buys FameBit: What This Means For Creators
As digital media continues to occupy more of people’s time, traditional consumption habits are changing. Marketers are taking notice, shifting ad dollars from sectors such as television toward digital outlets and social media platforms.
With 70% of surveyed brands currently engaged in influencer marketing efforts, 43% are planning to increase their budgets, meaning the global influencer marketing industry could reach $5-10 billion as quickly as 2020. Additionally, the overall social media audience is growing, with global users estimated to rise to 2.9 billion in 2019.
For venture capitalists (VCs) interested in subscription revenue, software as a service (SaaS) tools from influencer marketing databases and platforms could offer the kind of earnings and market share insights they look for in a business.
From media companies like Viacom and Sun Seven Stars, to news outlets like The New York Times, to technology giants like Google and IBM, a variety of companies and industries are investing in the future of influencer marketing.
More than three-quarters of people in the U.S. own a smartphone, and there are over 5 billion mobile devices in the world. Instagram, the world’s hottest mobile-centric network, has capitalized on these numbers as it counted 1 billion monthly users earlier this year. Influencer marketing is already a $1 billion industry on the platform and, in 2019, that number is expected to more than double.
Instagram makes itself incredibly attractive to advertisers, offering many options for brands to hawk their wares. As a major hub for influencers, the platform also allows for organic amplification of paid advertising efforts. This, combined with Instagram’s ability to reach desirable audiences, makes it one of the most intriguing places for brands to market.
The influencer marketing craze is relatively new, and while many have theories on its future utility and size, no one can be sure of its ultimate scope. As social media platforms and brands plan ahead, influencer marketing will need to evolve alongside. Already, experiments looking at the next generation of influencer advertising are taking place, while best practices for tracking things like ROI, or calls to rethink it, are being discussed and explored.
As the influencer marketing industry continues to evolve, so do the companies inside of it. With a variety of organizations offering influencer solutions—from marketing firms, to software-centric tools and databases, to platforms and marketplaces, to agencies—there is no shortage of companies looking to compete in the space.
With the landscape projected to grow, investments in influencer-based ventures have continued—it’s clear that influencer marketing venture capital investments will continue to flourish. However, smart investments are only so in hindsight. VCs interested in the space will do their due diligence to see if the industry or a specific venture is right for them and their investment goals.