Economics of the Lockdown: Influencer Economies

By Mahika Govil, Edited by Niyanta Desai

Source: We Are Social Asia, 17 Nov. 2020, wearesocial.com/sg/blog/2020/11/we-are-social-asia-tuesday-tune-up-439.


The American photo, and video sharing app, Instagram created a decade ago by Kevin Systrom and Mike Krieger, has since then evolved from a simple photo-sharing app to one of the most powerful instruments for social media networking as well as an important tool for businesses.


An app that was originally conceived to facilitate the simple sharing of photos has grown tremendously- it has 1 billion monthly active users (Dean, 2021). It is a platform where users can write and share anything under the sun. Instagram, as a social media app, has countered its competitors' USPs with the introduction of stories, IGTV’s, reels, allowing users to maximize their creativity through any outlet that they wish to use. The rise of virtual reality in the pandemic has given influencer marketing a boost. Micro and nano bloggers connect with niche customer bases to provide authentic content. Industries like finance that hadn’t invested heavily in the tactic earlier are also learning to navigate the space. As e-commerce and social media converge, influencers will become increasingly vital intermediaries, helping to connect brands with consumers on social media in highly resonant, and authentic ways that can deliver immediate returns.


Influencer marketing is most assuredly on the rise. From a mere $1.7 billion in 2016, influencer marketing is estimated to have grown to have a market size of $9.7 billion in 2020. This is expected to jump to $13.8 billion in 2021 (Geyser, 2021).


Digital media marketing has proven to be an invaluable asset to firms and provides companies a cost-effective strategy to advertise their services and products with an immediate return. Social media influencer marketing is proven to have a direct rate of interest (ROI) when it comes to increasing brand awareness and receiving a direct response from the consumer base. Instagram is the most popular platform for brands with two-third of the marketers (Bailis, n.d), leveraging its ease of photo-sharing features and niche audiences.


Equally important are the accessible data analytics tools available and the highly committed user base, for users consume social media content for a considerable amount of time. An average user spent 2 hours and 24 minutes per day on social media in 2020 (G., 2021). Facebook is the most popular, costing people an average of 2 hours and 24 minutes each day, while people spend 40 minutes on an average on Youtube. Instagram users spend a daily average of 28 minutes on the platform (G., 2021). Twitter has over 330 million active monthly users. While TikTok has an enormous influencers presence, Facebook, Instagram, Youtube, and Twitter not only have a large base of influencers but they also use invest heavily in advertisements, that seek to nudge the average user into buying products online, and increment e-commerce. Firms can reallocate their precious funds to appear on these feeds through stories and posts which target highly specific communities.


Although Facebook, Snapchat, and Twitter have a vast audience, they do not enjoy the same popularity and preference as Instagram. Instagram remains the platform of choice for social influencers, with 68% of brands considering it the most important platform for them (Santora, 2021). 93% of U.S. marketers plan to use Instagram for their influencer campaigns in 2021 (Newberry, 2021).


Instagram’s ad revenue was estimated to be at $12.32bn in 2020, (Bailis, n.d) indicating just how willing firms are to pay for access to this huge pool of potential customers. This expenditure is the reason behind being an Instagram influencer to be considered as a legitimate vocation. Some of today’s most successful pop-culture icons rose to fame on platforms like Instagram rather than through the silver screen. 19-year-old Tik-Tok star Addison Rae rose to fame sitting at home making dance videos and became its top-earning star, bringing in an estimated $5 million last year, thanks to her 54.1 million followers. These viral video creators, all of whom earned at least $1 million in just 12 months (Brown, 2020) have only just begun to monetize their fame, primarily through sales of personally branded merchandise and sponsored content for brands such as Sony, Chipotle, and Revlon.


US firms these days spend 69% of their influencer budget on Instagram and pay up to $3,500 per post depending on the influencer’s engagement and following. The notion that social media cannot be a legitimate vocation is long gone with the most common baseline pricing formula for influencers' Instagram posts being $100 x 10,000 followers + extras = total rate, according to Insider Intelligence Editors.


It all boils down to the simple microeconomics phenomenon of labor: the higher the wage rate, the more candidates are willing to work. This largely explains why there are so many people entering the influencer market. Theoretically, we could hypothesize that following Instagram’s launch in 2010 and subsequent growth as a major promotional platform, real wages have risen. Whilst being an Instagram Influencer might not be the most conventional path to take, the return makes it an alluring option for many. This has led to employment levels rising as more and more people are willing to enter into the influencer economy. Brands utilize celebrities with millions of followers all the way down to Nano-influencers which have 1,000 to 10,000 followers which open up the door for many.


Another psychological reason is that social media platforms, especially Instagram portrays a glamorous lifestyle of a plethora of influencers that people want to replicate. Inevitably these people look up to influencers in social media to guide them with their decision-making and compare their lifestyles. One reason people post on social media, according to an article in the Journal of Experimental Social Psychology, is because social media sharing can link to positive social media feedback and self-esteem. More directly, the quest for likes or follows on social media heavily influences why people post. The positive attention some users receive for posting inspires more and more social sharing in many users. The instant validation, the portrayal of a carefully curated lifestyle, and an attractive wage rate is prompting many people to enter the rapidly growing industry.


There are numerous factors that led to the accelerated growth of the influencer industry during the pandemic. With the majority of individuals locked up in their houses, screen time across all age groups, demographics, and socio-economy regions increased drastically. With restrictions imposed and loneliness during isolation, people turned to their social media for the purpose of entertainment and also to feel connected to the outside world. The amount of time people, across the globe, spent on social media increased manifold and content consumption was at an all-time high. For example, in the first week of the government-imposed lockdown in 2020, Indians spent more than four hours every day on social media. This is an 87 percent increase (Naik, 2020) from a week before the lockdown.


Another reason for the rapid growth of the influencer industry is content creation taking place at the individual, influencer level owing to production houses being largely shut.

Recognizing the impressively high quality and engagement levels of the content being created by influencers, the biggest brands of the country are also embracing the influencer marketing trend.


Finally, micro-influencers depict their normal, relatable lives and lifestyles, that an average user longs to see and emulate They talk about current situations and realities that stir up empathy in the consumers who feel less alone during the pandemic.


Influencer-era is not just limited to brands- during the outbreak of the second wave of Covid-19 in India, social media became an important tool to mobilize resources, and reach for help. Platforms like Facebook, Twitter, and Instagram with a vast reach across multiple geographies have helped the country grapple with the horrors of the surge in cases and the crippling healthcare system.


As more and more people enter the creator influencer economy, the market is most likely to get saturated. While this means that more opportunities are available, the wage rate will go down.


The influencer economy is a new concept, one that is unique to the current world scenario. However, it is rapidly growing and providing more economic opportunities to users. The world has never been as interconnected as it is now, and only time will tell where exactly this boom in the market takes us.




References


Bailis, R. (2021, March 30). The State of Influencer Marketing: 10 Influencer Marketing Statistics to Inform Where You Invest. The BigCommerce Blog. https://www.bigcommerce.com/blog/influencer-marketing-statistics/#10-most-important-influencer-marketing-statistics-for-2020


Brown, A. B. (2020, August 6). TikTok’s 7 Highest-Earning Stars: New Forbes List Led By Teen Queens Addison Rae And Charli D’Amelio. Forbes. https://www.forbes.com/sites/abrambrown/2020/08/06/tiktoks-highest-earning-stars-teen-queens-addison-rae-and-charli-damelio-rule/?sh=33f5831c5087


Chenkov-Shaw, G. B. S. (2020, March 26). The economics behind becoming an Instagram influencer. The Economics Student Society of Australia. http://economicstudents.com/2020/03/the-economics-behind-becoming-an-instagram-influencer/#_ftn4


Dean, B. (2021, September 10). Instagram Demographic Statistics: How Many People Use Instagram in 2021? Backlinko. https://backlinko.com/instagram-users


G., D. (2021, September 9). How Much Time Do People Spend on Social Media in 2021? TechJury. https://techjury.net/blog/time-spent-on-social-media/#gref


Geyser, W. (2021, August 18). The State of Influencer Marketing 2021: Benchmark Report. Influencer Marketing Hub. https://influencermarketinghub.com/influencer-marketing-benchmark-report-2021/


Insider Intelligence Editors. (2021, July 20). US influencer spending to surpass $3 billion in 2021. Insider Intelligence. https://www.emarketer.com/content/us-influencer-spending-surpass-3-billion-2021


Naik, B. N. (2020, September 9). Increasing use of social media in lockdown. The Times of India. https://timesofindia.indiatimes.com/readersblog/bhukya-naik/increasing-use-of-social-media-in-lockdown-25765/


Newberry, C. (2021, August 10). Influencer Marketing Guide: How to Work With Social Media Influencers. Hootsuite. https://blog.hootsuite.com/influencer-marketing/


Santora, J. (2021, September 7). 100 Influencer Marketing Statistics For 2021. Influencer Marketing Hub. https://influencermarketinghub.com/influencer-marketing-statistics/


We Are Social Asia. (17 Nov 2020). wearesocial.com/sg/blog/2020/11/we-are-social-asia-tuesday-tune-up-439