Performance pricing fails to catch on in influencer marketing

Cost-per-engagement is seen by many agencies and influencer networks as a more transparent pricing model. Agency RPA recently tested CPE for a big consumer product client for the first time, where it collaborated with more than 40 Instagram creators — whose followers range from 2,500 to over 165,000 — on two campaigns.

This experiment over-delivered on the campaign goals with tens of thousands of engagements each campaign (including likes, shares, comments and reposts), according to Mike Dossett, manager of digital strategy for agency RPA. But for the industry as a whole, this is a rare case.

“It’s a muddy picture. CPE is a good start to measure influencer marketing just like we do on other more established channels, but many brands still write influencers a check based on their followers,” said Dossett.

Conversations with a number of marketers for this article show that while CPE sounds nice in theory, it’s challenging in practice. In comparison, the two most prevalent pricing models today entail either paying influencers by impression or by flat fees for content based on their follower counts.

Influencer marketplace Popular Pays started selling its services to brands and agencies on cost-per-engagement in 2014. But within a year, the company quickly switched from CPE to the traditional cost-per-impressions.

“We could still do CPE today, but we haven’t had anyone who wants that pricing model for over a year now,” said Corbett Drummey, CEO of Popular Pays.

This is mainly because it’s hard to structure a campaign with CPE, Drummey explained. For example, if a brand works with an Instagram influencer on one post with a goal of 50,000 likes, while the post ends up getting 80,000 likes, who will pay for the additional 30,000 likes? Ad agencies usually don’t pay for “bonus engagement.”

“Either the brand has to pay extra or the influencer network has to absorb the risk. Remember, brands usually come to you with a set budget,” said Drummey. “Most of the time, brands don’t know what a good pricing for CPE is but they know what a good pricing for CPM is.”

Kingsley Taylor, managing director of agency Organic, echoed the sentiment. While he personally thinks that CPE is a stronger metric than CPM to measure a campaign, he has never run an engagement-based influencer campaign on behalf of clients.

“With CPE, it’s more difficult for brands to make a direct comparison between influencer marketing and other parts of the marketing mix such as traditional media,” said Taylor.

For influencers, CPE also means uncertain income. When they are forced to take on such risk, they could game the system and employ tactics that can harm their authenticity and devalue their content, including buying likes and shares as well as enabling repeat-sharing, according to Holly Pavlika, svp of marketing and content at influencer-marketing platform Collective Bias.

“On occasion, an influencer might also incentivize their audience to engage by using sweepstakes and giveaways,” said Pavlika, who said influencers should never get paid by CPE. Instead, influencer networks should take on the risk and work to match the best influencers to campaigns, as well as motivate them to produce creative work and disclose sponsored posts.

Influencer marketing is estimated to be a $5 billion-to-$10 billion market over the following five years. As it’s gaining popularity, influencer marketing is becoming a more regulated industry with the Federal Trade Commission issuing more complaints against brands that fail to insist on complete disclosure.

For example, in March of this year, the FTC approved the final order requiring gaming network Machinima to disclose payments to YouTube influencers surrounding its Xbox promotion. This recent crackdown indicates that more enforcement actions could take place.

No matter whether CPE will take off in the future or not, the focus on influencer marketing is definitely moving toward paying for likes, impressions, views and other outcomes. The bottom line: In spite of all the challenges, CPE is much better than paying flat fees solely based on followers, said Drummey.

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