Influencer Pay: Macro, Micro, Minority

Influencer marketing has become one of the main channels for marketers to reach consumers. With the exception of a few celebrities though, little is known about how much they are paid, or how effective they are in driving sales. During last month’s Marketing Science Conference, two papers shed light on these issues.

First, analyzing the data from a U.S.-based influencer marketing agency that connects brands and influencers, Pei et al. find evidence of a reversed pay gap between Black and White influencers, where Black influencers were paid on average $3.40 more per post than their White counterparts in the 2019-2020 period. This gap is not explained by influencer demographics, engagement metrics, or experience. The authors propose the explanation of firm signaling. ?In light of the Black Lives Matter (BLM) movement following the murder of George Floyd, many consumers feel that it is important for brands to value racial equality and act on it. One way to do so is increasing the racial diversity in hiring. Another way is increasing the racial diversity in brand communications. Interestingly, influencer marketing allows firms to do both – but only if these influencers are highly visible, i.e. have lots of followers.

Indeed, Black macro-influencers were paid on average $128.3 more per post than their White counterparts after George Floyd, whereas there was no change in the pay for Black micro-influencers. These findings imply that firms' strategy to address racial inequality only benefits a small group of visible Black influencers, and that policymakers and advocates who wish to address the racial pay gap should focus on sectors that receive less attention and less visible jobs.

Second, Beichert et al. studied how the Return on Investment for micro vs macro influencers throughout the funnel. While macro-influencers give you lots more views and engagement, they don’t give you much more sales. Compared to their demanded higher compensation, macro-influencers on average give you a lower ROI than micro influencers!

Of course you may still have good reasons to go with macro-influencers: in the above funnel, 1 macro-influencer gives you higher net profit than 1 micro-influencer. Sure, you can split your budget to create a community of several micro influencers to amplify your message. But this requires an effective administration and management process for influencer identification, campaign management and reporting. Moreover, macro-influencers may be known outside of their follower base and excel at creating awareness (upper-funnel), which can then be monetized by micro-influencers (lower-funnel).

In any case, it’s time to give micro-influencers, especially from minorities, a closer look!