Influencer platforms are dying
Issue #12 - With the #CreatorEconomy booming, why are traditional platforms dying?
From 2015 to 2019, influencer marketing platforms were one of the best new ideas in the Creator Economy with VCs dumping over $175m into them. Creators followed suit and thousands signed up for these platforms in hopes of increasing their brand deal revenue. Fast forward to today and growth on these platforms has stalled with only one company (Grin) raising a funding round of over $10m in the last 18 months (while multiple others looked to debt financing).
Why? We take a look in this issue of Creator Industry Insights.
But the Industry is Boomin’
As many of you know the Creator Industry has been booming since the pandemic started. So naturally, that should have included influencer platforms as they have played an integral part in the Creator Economy over the last few years but that has simply not been the case. Why? Here are a few reasons:
Too Brand Focused - Almost all of these influencer platforms monetize via brand subscriptions/contracts, either monthly or annually (some as much as $50k/year) so the platforms are tailored to the brands. While that makes sense from a business standpoint, a lot of the platforms have left the influencers high and dry with very limited tools to secure collaborations.
Quantity Over Quality - As part of their pitch to VCs, a number of platforms raced to signup as many influencers & creators (or in some cases scraping profiles) as possible. This lead to claims of tens and hundreds of thousands of talents on each platform. Again great for brands but for the middle class creator, it became near impossible to land a paid collab with all the competition.
Free Product Addiction - Over the last 12 months, a concerning trend has formed and that is the rise of Free Product Exchanges. While this type of collaboration (where brands offer free products in exchange for a post/story) has always been used by brands, its nearly tripled in popularity during the pandemic. Our team recently reviewed 3 different influencer platforms and found over 90% of the open collaborations were for just free products. Again great for the brands but creators can’t pay their bills with HelloFresh meals.
Outreach Tools - Towards the end of 2018 and into 2019, the ‘matchmaking’ type platforms were extremely popular and new entrants looked to differentiate themselves by offering outreach tools. This allowed brands to outreach to talent directly instead of waiting for them to apply to a campaign. This method proved to be more scalable but required additional resources. Companies like Grin and Upfluence capitalized on this formed a new subset of Influencer Platforms called Influencer CRMs. While helpful to some brands, this created a cannibalization effect as the brand to talent conversations now started to happen off-platform.
Rise of Individual Monetization Tools
Influencers have started to realize the drawbacks and heavy competition on influencer platforms for a while now and have turned to additional forms of monetization to support their passion. Tools like Patreon, Cameo and Teachable have done an excellent job putting creators first and giving them the tools to monetize effectively and reduce the dependency on brand deals to make a living.
While this space is still very much in its infancy, many industry experts believe this is the next frontier for the Creator Economy. And frankly, the VCs have agreed by giving creator-focused companies over $800m in 2021 alone (full list here).
It’s important to note, that there are new monetization tools popping up every day so it can feel a bit overwhelming for the middle class creator but over the next few months we will see the space start to solidify and the most effective tools will rise to the top.
How Bad Is It?
Influencer platforms funding has decreased 70% since Jan. 2019. With companies raising just $28m ($16m of that from Grin), compared to the $95m raised in the 3 years prior. It is clear that VCs are backing the more creator focused tools as the industry rapidly expands.
What’s next? Companies like AspireIQ and Influential are not going to disappear overnight. They have raised a ton of capital for a reason and most generate significant amounts of monthly revenue but without new capital infusions, their burn rate ($ they spend every month) will start to become a problem. According to LinkedIn, AspireIQ has 113 employees, Influential 149 employees and IZEA has 244. With employee counts that high, their burn rate is in the millions per month.
I believe we will start to see some mergers and acquisitions over the next 12 months with influencer platforms merging together to capture more of the market. Or we could see a couple of the larger creator focused companies (Cameo, Patreon, etc) acquire the platforms to get access to some of the brand side revenue.
Questions? Comments? Find me on Twitter: @mzuvella or follow us @famepick.