Social media has enabled the rise of the influencer—online stars with sway over the opinions of thousands or millions of fans. But while influencers have been a great way to reach audiences craving more authenticity from messengers, customers are becoming savvier about the people they follow in their feed. If Hailey Baldwin’s followers are skeptical that she really shops at H&M, what—other than the risk of a PewDiePie moment—makes her Instagram post any different from a print ad?
It’s tough to find an influencer who really cares about the product, someone fans recognize as a fellow fan. Someone invested in its success. So now, many brands are looking for more than an influencer. They want an investor.
"Without a doubt, the influencer-investor movement has never been bigger," said Tom Buontempo, president of Attention, the social arm of KBS. Indeed, there are few spokespeople more committed to a company than a famous personality with a financial stake in it, and brands are finding that a celebrity entrepreneur can be a much better partner than a celebrity endorser.
Of course, celebrities who want more than just a taste of the action have been putting up their own money for years. 50 Cent famously made more than $100 million from his VitaminWater stake when Coca-Cola bought out Glaceau in 2007.
But these days, even influencers who aren’t global superstars want in. "Creators of all sizes are looking to convert both their credibility and owned reach into dollars and cents," Buontempo said. "Influencers like the opportunity to monetize their audiences and lean into an entrepreneur-obsessed culture where everyone wants to have a side business." And that puts them within reach of smaller companies with less cash to throw around.
When Ember Technologies CEO Clay Alexander wanted to begin marketing a temperature-controlled mug, his plan was unorthodox. "My goal for the year leading up to launch, 2016, was to parade the product around LA and New York," Alexander said. A chance meeting with a neighbor in Los Angeles who produced music videos opened the door to the music industry. "Once he found out about the product, he shared it with his friends, and it started this snowball effect."
Alexander began systematically approaching managers of celebrities, specifically targeting people who had expressed an interest in investing. "A lot of celebrities now are actually really interested in putting their money toward investment and building their business skills," said Brooke Steininger, chief of staff at Ember. The pitch: Ember could be their first investment.
It worked. Philymack, which manages singers Demi Lovato and Nick Jonas, connected the brand, and both celebrities became investors and began leveraging their followings to promote the Ember mug. "As a new brand, we basically spent zero dollars on advertising," Alexander said.
An invested influencer is always on the job. Paparazzi snapped photos of Lovato around town with her mug, even when she wasn’t actively promoting the brand. Traditional influencers limit their interactions to keep their options open. "Many campaigns with brands have a posting limitation, allowing for more deals to be made with future brands once the cycle or campaign they are promoting ends," said Tiffany Au, director of communications and spokesperson for Collab, a digital talent network and entertainment studio that works directly with content creators.
At the same time, equity gives an influencer a louder voice in the organization and the messaging, and that can be a good thing. Certainly they know their followers better than the brand does. "They create content that resonates with their fans, and when promoting a product always strive to keep their audience in mind," Au said. Equity also guarantees the celebrity is in it for long-term gain.
"It’s no longer a pay-to-play endorsement deal, but rather a real partnership. So when the advocacy and marketing begins, you can guarantee it’s authentic," said Brian Salzman, founder & CEO of RQ, an agency that connects influencers and brands. "It also won’t stop when a particular campaign ends."
If an influencer is always promoting a brand, though, the line between selfie and sales pitch becomes even more blurred, so brands must take precautions against running afoul of the law. The Federal Trade Commission guidelines for disclosing influencer marketing are vague, but the agency always suggests erring on the side of providing more information to customers. "Is using #ad enough for viewers to understand an influencer is being paid or has a financial stake in a company? For now, yes," said a lawyer at the FTC. "But what about #paid or #promotion? If a significant minority of people don’t get it, it’s not enough. We’re always working on clarifying what needs to be disclosed."
Working with influencer-investors changes the game in other ways, too. It’s much tougher to get rid of a celebrity who goes off the rails, or into rehab. A traditional influencer can be cut loose, but an investor must be bought out. When Kevin Hart approached Tommy John to invest, after stumbling across the underwear brand in a department store and loving the fit, he had to convince them to take his money.
"Brands should always protect themselves," Salzman said. But they shouldn’t be scared away, he added. "It’s the risk that comes with anyone with an existing audience, isn’t it? Carefully crafted agreements created upfront are the most important part of any deal."