Advertisers are turning toward "influencer marketing" more than ever before to reach online audiences with whom it is difficult to engage through conventional digital advertising.
Yet influencer marketing suffers from significant challenges and connecting advertisers to influencers is difficult; and so is ensuring that influencers receive a fair share of advertising revenue.
Blockchain technology offers a solution. Blockchain startups are already building decentralized influencer marketing platforms that add efficiency to the process and enable influencer marketing campaigns to operate on a much larger scale.
Influencer Marketing on the Rise
Conventional online advertising strategies, which revolve around placing ad content on web pages or in apps, are faltering. Ad blockers are surging in popularity which means many consumers no longer view embedded ads. Meanwhile, only a tiny fraction of users who do see banner ads actually click on them.
In the face of these challenges, influencer marketing offers a more effective way for marketers to connect with consumers. The return on investment for influencer marketing expenditure is about 650 percent by one estimate. On top of that, 71 percent of consumers are more likely to make a purchase when they are influenced by social media. For these reasons and more, investment in influencer marketing is on the rise. Nearly 12 percent of marketing budgets are now devoted to influencer marketing , compared to less than 4 percent in 2009.
The Pitfalls of Influencer Marketing
Although influencer marketing can overcome some of the challenges associated with other types of digital advertising, it also suffers from shortcomings of its own.
Perhaps the greatest is the challenge of connecting advertisers to influencers. In most cases, contracting with an influencer to market a product is a manual process. An advertiser must identify an influencer to work with, determine how to contact him or her and then negotiate a marketing arrangement manually. This makes influencer marketing very inefficient, especially compared to other forms of online ad placement, which can be automated using software tools.
Another limitation is that, in general, only major influencers are able to participate in influencer marketing campaigns. If you aspire to be an influencer, building a name that is large enough to attract the attention of advertisers requires amassing hundreds of thousands of followers or viewers. Influencers with more modest followings are left out of the picture, even though they can still provide value to marketers, at a lower cost than top influencers.
Some companies attempt to solve these challenges by offering tools and services that connect marketers to influencers in an automated way. While these solutions can help, they create additional challenges. They add overhead to the influencer marketing process, which cuts into influencers' profit margins and makes marketing more expensive for advertisers. Influencer marketing companies also make the process less transparent because they work as middlemen, preventing advertisers from connecting directly with influencers.
In short, the major challenges facing influencer marketing today are a lack of automation; the centralization of influencer marketing campaigns around a small part of social media communities; and the difficulty of connecting advertisers to influencers in a direct and transparent fashion.
Improvement Through Blockchain Technology
These are challenges that blockchain technology is well positioned to solve. A blockchain can decentralize influencer marketing by allowing brands to connect directly with influencers, while facilitating transparent and reliable payments.
Companies are already leveraging blockchain technology toward this end. One example is SocialMedia.Market , which is building a platform that uses smart contracts to manage transactions between brands and influencers, enabling them to collaborate in a decentralized fashion without sacrificing security and reliability. SocialMedia.Market, whose platform is set to become available in beta mode in early 2018, also vows to lower the entry barrier to influencer marketing by making it possible for businesses and influencers of any size and type to work together.
Mavin is another startup building a similar platform. It also promises to enable anyone to become an influencer by connecting them with companies with relevant products to market and is designed to reward the most successful influencers.
Building a complete influencer marketing platform is not the only way to leverage blockchain technology to improve influence marketing. As Vivien Garnès, a co-founder of the influence marketing company Upfluence, noted , the simple use of cryptocurrencies can streamline payments for influencers and, through smart contracts, make payments contingent upon the fulfillment of marketing goals.
Influencer marketing is becoming the go-to strategy for marketers seeking to overcome the rising challenges associated with other forms of online marketing. To make the most of influencer marketing, however, certain inefficiencies need to be resolved. Blockchain technology could be just the solution that this market needs.