Calculating the Value of Influencer Marketing and Impact of Infringement

Influencer Marketing
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Influencer marketing has gained in popularity as YouTube stars and Instagram models have given rise to a new type of celebrity. Businesses hoping to tap into these audiences to sell their products or service will create endorsement deals with influencers, but how much is their reach really worth? Using Internet analytic and intangible asset valuation tools, you can determine both the value (and also potential damages following infringement) of using influencers to market your brand.

Before the internet’s rise in popularity, for celebrity endorsement valuations or infringement damages calculations, often the main factors taken into account were the perceived fame of the celebrity and the amount of time it would take them to do public appearances, film commercials, and other marketing activities.

This is because with traditional media, fame was based on perception and the number of people who could have seen a billboard, newspaper ad, or even a television show could only be estimated at best. Now with internet analytics, not only has it opened up similar opportunities for brands to partner with influencers, we now have significantly more information about how to calculate the value of their brand based on data, not time spent. Any case of Internet infringement has the possibility of being seen by anyone in the world, and a social media post can immediately go viral. In 2014, over $7.4 billion in advertising revenue was spent on social media advertising. By 2020, this figure is expected to reach $21.2 billion.

Thus, when incorporating all the Internet analytic data available today, the impact of influencer marketing can be predicted and measured using four factors, rather than the traditional two. We use these four factors, or measurement dimensions when evaluating the possible benefits of proposed endorsements and when measuring damages in cases where influencers right of publicity has been infringed upon.

Factor 1: Level of Celebrity

In addition to traditional measures of fame, we collect data regarding Internet search trends, social media following and reactions to quantify an influencers fame and compare these measures to comparable influencers.

Factor 2:  Level of Endorsement

The value or benefit of the influencer will likely be connected to the celebrity’s commitment to the product and marketing campaign.  Photos next to the product are worth less than the celebrity’s name on the product.  Exclusive use agreements are worth more than brief appearances with the product. Here a review of existing agreements with other celebrities and comparison of terms in the agreements drives the evaluation.

Factor 3:  Level of Use

To analyze use we gather as much online data as possible to measure where the celebrity appeared in marketing and how the public was exposed and reacted to the celebrity. We use website analytics to measure visits and commerce on campaign-specific websites and Social media analytics to calculate the number of impressions and reactions to social media posts. Search data and trends, combined with vast amount of social media data allow us to quantify use rather than estimate how many eyeballs may have seen a billboard or TV ad.

Factor 4:  Level of Connection

Past evaluations of celebrity and influencer marketing indicates endorsements are more likely to succeed when the celebrity has a strong connection to the product. Connection evaluates the influencer’s perceived knowledge and expertise of the product. Michael Jordan is obviously a stronger influencer for basketball shoes than for consumer electronics, and celebrity chefs are stronger endorsers for food than for athletic shoes. To measure connection, we use traditional comparable transaction and case study analyses to compare the proposed transaction to past influencer transactions, but also incorporate Internet search trends data.

Together, these factors provide a useful framework for evaluating and predicting the future success of influencer marketing campaigns.  For a rock-band with a global following, we applied these four factors to guide the bands managers in evaluating a proposal to endorse a clothing line. These factors informed our recommendations on product pricing, distribution channels and likely success.  We also used these factors to “score” other apparel endorsements from other bands and musicians to create easy to compare case studies.

Using the Four Factors, we were able show the celebrity was a strong fit with the product and that the company had benefited financially from the celebrity’s social media posts.

In one litigation case, a company hired an influencer, then failed to compensate him for the social media marketing he provided for the product launch. The classic market approach would have been to review endorsement fees paid by comparable companies. Using the Four Factors, we were able show the celebrity was a strong fit with the product and that the company had benefited financially from the celebrity’s social media posts.

As business and marketing more often occurs on social media, valuation analysts need to employ new analysis tools to stay current. By incorporating search results analysis, Internet analytics tools, optimization tactics analysis, and social media activities analysis you can create a more compelling valuation than professionals who only use more traditional methods. However, it is important to note that every case will have a unique context and the best methodology for each case will vary depending on the situation. Savvy analysts need to understand the limits of their calculations, make appropriate judgments, and consider other factors that may be influencing the data. Doug Bania and Brian Buss

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