Why Influencer Marketing Spending Is on the Rise

Insider Intelligence

Influencer marketing spending is surpassing ad revenue growth on major social media platforms, according to a new report from Insider Intelligence. Facebook, Instagram, TikTok, YouTube, and Snapchat are all experiencing substantial growth in influencer marketing spending, with TikTok (27.8%) and Instagram (12.7%) leading the way.

In contrast, ad revenue is seeing limited growth on some platforms, with only a 0.1% increase on Facebook and a -1.8% decrease on Snapchat. However, TikTok is witnessing strong growth in ad revenue, with an increase of 23.1%.

Insider Intelligence

The report also estimates a 14% increase in influencer marketing spending this year, compared to a 4.1% increase for ads.

Even without this data, it's clear that influencer marketing is on the rise. You can see this through the increasing amount of sponsored content in your social media feed. This surge in influencer marketing spending signifies the maturation of the industry and its growing importance for brands. But why is this happening? There are a few reasons. Let’s dive into them below.

Creators Are Making Their Mark on Businesses

I helped a brand build its influencer marketing program a few years ago. When I initially started working with them, they allocated about $10,000 to $15,000 per campaign. However, in less than two years, we executed a campaign with a million-dollar budget for creators. This growth was only possible because of the value that creators were bringing to their business, in content, efficiencies, traffic, and sales.

This is one of the primary reasons for the increased investments in influencer marketing today. Creators have proven to be able to impact the bottom line for brands. Some brands like Chipotle and McDonald’s revealed that creators were substantial drivers of business growth this year. For instance, the former saw a 2x increase in quesadilla sales and some of its best digital sales days thanks to a new dish that was inspired by a hack created by TikTok creators Alexis Frost and Keith Lee.

Creator-Friendly Formats and Emerging Creator Types

The emergence of short-form videos is also driving up influencer marketing. As TikTok has shown, creators, not brands, helped birth short-form video. As a result of this, brands often tap creators for their short-form video needs, thanks to their ability to create snackable videos that resonate with audiences.

Due to the various tools available for short-form video creation, being a creator has become more accessible, resulting in a vast pool of creators that brands across all industries can partner with. This has provided opportunities for brands that may have been hesitant to invest in influencer marketing before.

On a related note, the introduction of name, image, and likeness (NIL) legislation has also expanded the creator pool to include student-athletes, attracting more influencer marketing dollars from brands looking to reach younger audiences and sports fans.

Mitigating the Impact of Apple’s Privacy Changes

Creators have also emerged as a solution for brands grappling with the impact of Apple's privacy changes, which have diminished the effectiveness of targeted paid ads. In light of this, and considering broader economic conditions, brands are increasingly shifting their focus toward creators, especially micro-creators, who have niche audiences and communities. This allows brands to reach more specific audiences, which paid media used to be much more effective for.

Creators Are Where Attention Is

Lastly, creators are taking center stage in the battle for attention. According to a Consumer Technology Association (CTA) report, Americans spent 39% of their time-consuming user-generated content on platforms like TikTok, Instagram, and YouTube, compared to 61% on traditional studio media like television. By partnering with creators, brands can position themselves where attention is increasingly heading and where consumers are engaged. Brands that want to be part of culture, communities, and conversations are best suited to do so through creators.

The Hollywood Strike Could Drive More Investment into Influencer Marketing

This shift towards user-generated content, coupled with the Hollywood strike, could signify an acceleration in influencer marketing spending. With delays in the production and release of new TV and movie shows, creators offer an alternative source of entertainment. As is often the case, brand investments follow consumer trends.

It’s Not Either/Or, It’s And

While we are witnessing a rise in influencer marketing spending, it should not lead marketers to focus exclusively on it at the expense of paid media. They should be leveraged in tandem, which I consider one of the primary keys to digital marketing success for brands. Furthermore, it's easier than ever to do so, thanks to various native advertising solutions such as Instagram Partnership Ads (formerly known as Branded Content Ads) and TikTok Spark Ads. These tools enable brands to boost sponsored content directly from the creator's handle, allowing them to leverage the authentic voice of the creator and benefit from the efficiencies of paid media.