How Brands and Influencers Can Make the Most of the Relationship

It’s a reality of marketing: People dislike advertising. They fast-forward through commercials in prerecorded shows and pay premiums to avoid them on streaming services. Do people similarly dislike it when the influencers they follow on social media post sponsored content—endorsements for products they have been paid to promote? A new study tackles the question. Shunyuan Zhang, an assistant professor of marketing at Harvard Business School, and Magie Cheng, an HBS doctoral student, recognized that even though companies devote increasing shares of their marketing budgets to sponsoring content on YouTube, Instagram, and other platforms, very little research has been done gauging the effectiveness of the tactic or its overall impact on influencers, followers, platforms, and brands. To investigate those issues, the researchers focused on the interaction between influencers and their followers. “Surveys have shown that some followers don’t like sponsored content, but there wasn’t hard proof,” Cheng says. “Influencers understand that there may be some cost to them of doing sponsored posts, but they’re not sure how high it might be.” Zhang and Cheng identified 861 English-speaking YouTube influencers in the beauty and lifestyle category and analyzed the 85,669 videos they posted from August 2019 to August 2020. They collected engagement data on each video—how many people viewed or “liked” it—and noted whether it was sponsored (U.S. regulations require influencers to disclose paid arrangements). They also analyzed qualitative information, including the influencer’s voice, emotion, and appearance, along with each video’s visual aesthetics. They tracked each influencer’s number of followers before and after each video was posted. To isolate the effect of sponsored content, they divided the influencers into two groups—those who posted at least one paid promotional video during the study period and those who posted only organic, unaffiliated content. Then they examined what happened for influencers after they posted a sponsored video compared with their unsponsored counterparts, who served as a control group. Posting a sponsored video, the researchers found, caused influencers to lose an average of 0.17% of their followers over the subsequent three days. That might sound like an insignificant number, but over time it adds up: An influencer with 1.5 million followers who uploads 150 sponsored posts a year—the average among the paid influencers in the study—stands to lose as many as 382,000 followers annually. Influencers track their follower counts closely, and seeing that number decline can be painful: The rates they can charge sponsors are based largely on the size of their followings. Follower counts are also a marker of status in social media, even for people who aren’t influencers or trying to monetize a personal brand. Minimizing the Fallout Influencers shouldn’t turn their backs completely on sponsored content, the researchers say. But they should be strategic about which partnerships they enter into; the wrong ones can erode their authenticity and cause followers to decamp. Three factors affected how much the influencers in the study were punished for paid promotions. First, influencers with large followings experienced greater repercussions than less popular influencers did. They lost more followers, garnered fewer likes and comments, and received a greater proportion of negative comments. “Influencers with smaller audiences often form stronger ties,” the researchers say, “so their audiences are more receptive to sponsored content.” Second, sponsored content was less damaging when the product aligned with the types of things the influencers typically touted in unpaid posts. Previous work by other researchers has found that similar issues of fit come into play when companies use celebrity endorsers in social and other media: The closer the product is to the celebrity’s area of expertise, the more persuasive the advertisement is to viewers and the less apt they are to resent it. Third, sponsored posts featuring large, well-known brands elicited a stronger negative reaction than those promoting smaller, less visible ones. That makes sense, the researchers point out: Followers often appreciate being introduced to products they might not otherwise hear about. The study’s findings have clear implications for influencers. By recognizing that sponsored posts can cost them followers, understanding how many are likely to leave, and having an awareness of mitigating and exacerbating factors, influencers can make smart decisions about how often to accept sponsorship deals, which brands to endorse, and how much to charge. They should carefully select products that mesh naturally with their personality and presentation style and that followers will appreciate learning about. They should also ask themselves whether the payment is substantial enough to compensate for the reputational hit. Cheng says that the findings confirm anecdotal concerns about paid content that she’s heard from her influencer friends, some of whom are finding ways to counter the downsides. “Every time one friend posts a sponsored video, she immediately follows with original content to give her fans something of high quality to keep them engaged,” she explains. Zhang has several influencers among her MBA students, one of whom came to regret a recent deal after reading the research. “She told me, ‘I wish I’d known all this before taking on that sponsorship,’” Zhang says. “This Business Is All About Instant Feedback” Yang Tianhao is a cofounder of Erka Media, a Beijing-based multichannel network company that connects brands with influencers and creates video content for social media platforms. He spoke with HBR about the risks influencers face when they promote brands. Edited excerpts of the conversation follow. Shawn Koh Tell me about your company. We have an office in Los Angeles, but we work mostly in China; the market is 10 times larger than that in the U.S. We represent established influencers, and we also incubate talent—we create influencers. One of our talents has more than 50 million followers, but we’ve been working with him since he was at zero. We have 400 employees, most of whom work in teams of writers, editors, photographers, and producers to help influencers create content and deliver e-commerce livestreaming. Does the finding that followers dislike it when influencers post paid content surprise you? It doesn’t. The difference between a celebrity endorser and an influencer is that an influencer is a normal person, like you and me. When influencers take a lot of sponsorships, they may lose credibility and appear inauthentic. How do they mitigate that risk? One way is to push for “soft inserts.” In “hard inserts,” the influencers begin talking about the product as soon as the video starts, and the brands will insist that they say certain things. It’s obviously a commercial, and a lot of users swipe away immediately. A soft insert is more subtle and creates less damage. The influencer tells a story and refers to the product in the middle. If influencers have a lot of followers, they can push back on brands and avoid hard inserts. How else can influencers prevent backlash? Price is an important tool. In China, brands use coupons or codes that let followers buy a product at a lower price. Followers view that positively: The influencer has gotten them a special deal. But the influencer needs to be sure it really is a good deal. It’s easy to compare pricing online, so influencers often ask for exclusive arrangements in which the brand can’t offer a lower price elsewhere. Some brands customize packages to avoid price competition. They might pay one influencer to sell a $100 package containing three main products and two special gifts, and another to sell a $50 package containing one main product and four gifts. Part of what we do is help influencers manage the complexity of such deals. The research also found that followers prefer sponsored content from lesser-known brands. Does that ring true? Not for China. Here, big brands have much more credibility. If you’re a well-known influencer with a large following and you start promoting an unknown brand, people will think you’re cheap. Are you concerned about the long-term sustainability of influencer marketing? I’m not. This business is all about instant feedback. When companies buy traditional ads, nobody really knows how they performed or what the results were. With an e-commerce platform, you can see the data immediately, which creates accountability. Many of our influencers post content with a click-to-buy link; the brand can tell exactly how many purchases resulted from a particular ad. Last summer we helped an influencer create a 70-second sponsored post that drove more than $500,000 in sales in two weeks. The return on investment for campaigns like that can be very high. Brands, too, can benefit from the findings. Instead of signing influencers who have hefty followings, as is often the case, they might partner with less prominent ones, whose followers are less likely to respond negatively to the content. (Another reason to do so: Smaller influencers usually charge less.) Brands should also work hard to find influencers who are a natural fit with their products. For platforms, the implications are less clear. Platforms such as YouTube want to draw in more users who will spend more time on the site. When people tire of sponsored content and decide to unfollow an influencer, they may shift that viewing time to other YouTube videos—or they may reduce the time they spend on the site altogether. The research may signal larger strategic implications, Zhang notes. In a recent conversation she had with a company in China, where influencer marketing is more mature than in many other countries, including the United States, the company worried that it was relying too much on influencers and that their usefulness as a marketing tool might wane if companies flood social media with sponsored content—a valid concern, she says. “Our research raises concerns about the sustainability of influencer marketing over the long term,” Zhang concludes. “This form of marketing depends on influencers’ reputations, so if brand sponsorships hurt those, it’s an open question how strongly companies can continue to profit from the tactic.” About the research: “Reputation Burning: Analyzing the Impact of Brand Sponsorship on Social Influencers,” by Mengjie (Magie) Cheng and Shunyuan Zhang (working paper)

How Brands and Influencers Can Make the Most of the Relationship

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