Options for paying creators: Affiliate commissions vs. contracts vs. full-time
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Partnering with creators to promote your brand is invaluable. Stats show consumers look directly to creators for product discovery, to learn what’s trending, and to make purchasing decisions. Especially big ones.
In fact, 74% of consumers say they would spend up to $629 on purchases recommended by influencers, according to Rakuten. And Social Media Week found that 74% of consumers would buy something based on the influence of social media.
“Influencer marketing advantages include lower cost high-quality content for brands, better ROI in comparison to many other forms of paid marketing, the ability to conduct niche-based campaigns and reach highly specific audiences directly, can boost engagement of brands' socials, can help build authority and credibility,” says content creator and CEO at Mad Marketing, Madison Masterson.
To lend even more context to how significant creator influence is, Variety found that 60% of millennials are more likely to take advice from YouTube influencers than traditional media personalities.
The question isn’t whether or not there’s value in hiring creators—even over celebrities—to promote your brand. There is.
The question is: what’s the best way to compensate creators so you can secure more mutually-beneficial partnerships and grow your brand?
There’s no creator compensation playbook
Before diving too deep, let’s make something clear: There is no right or wrong answer regarding how to pay creators.
Creator marketing is new and social media trends change continuously. As such, payment structures and amounts vary from brand to brand, influencer to influencer, and even from season to season.
“The best way to pay influencers depends on what kind of content they create—and that means it varies from person to person. If an influencer posts sponsored content regularly, they might prefer payment in cash or gift cards. If an influencer tends toward more organic content, they might prefer payment in trade—like product samples,” says Brian Greenberg, CEO and founder of Insurist.
Regardless of payment preference variations, there is one rule of thumb: Brands who want to survive must work with creators to find a mutually beneficial compensation model.
1. The affiliate payment model
Affiliate marketing is everywhere and is a good payment model for creators with large audiences. For example, when you listen to the popular podcast, Crime Junkie, you’ll hear Ashley Flowers talk about how safe she feels with the alarm system, SimpliSafe.
Then, she’ll ask you to use her unique discount code to sign up for SimpliSafe. If you sign up using Ashley’s code, SimpliSafe sends Ashley a commission. Cha-ching!
This particular affiliate partnership model works well for Ashley Flowers, SimpliSafe, and consumers.
Why? Because everybody wins: Assuming the brand's website works well and the products the creator is pitching are in stock.
SimpliSafe gets direct access to its target audience (the jumpy crime community) via a podcast with more than 500 million downloads. Ashley Flowers records an ad one time, rebroadcasts it over and over, and gets a chunk of change every time she makes a sale. And, consumers? They get an awesome discount.
While the affiliate model is a good option for creators with large audiences, it can also be a good model for startups with a lot of time, but not much up-front capital.
“A huge benefit of the affiliate model for businesses is that there is almost no upfront cost to ‘hiring’ affiliates to market for you,” says Madison Masterson.
“Performance-based campaigns provide a safety net for the brand. If the campaign does not perform well, they don’t stand to lose much as they only payout on sales. Most SMBs can’t afford to run influencer campaigns that are not ROI positive, so a commission structure aligns incentives between them and the influencer,” adds Paul Burke, director of business operations at Groupshop.
While it’s true you only pay when a creator brings you business, it’s also important to remember the opportunity cost of this model. You’re fronting the costs for finding creators, conducting influencer outreach, and handling product logistics, and tracking sales—which can be expensive.
“There are some challenges to the affiliate model. Not all conversions will be captured, it can be difficult to track performance and measure results, and finding the right affiliates can be tricky,” says Stacy Elmore, co-founder of The Luxury Pergola.
Additionally, effective influencer marketing is all about fostering mutually-beneficial relationships, and many creators who don’t have an Ashley Flowers’ sized audience don’t benefit enough from affiliate commissions. Some larger influencers aren’t interested in doing affiliate deals.
“The biggest con is that most large influencers and well-experienced content creators will not work on an affiliate-only campaign. Large influencers will want to be paid for their time and content regardless of the possibility of compensation for performance,” says Madison Masterson.
2. The influencer seeding model
Influencer marketer, Taylor Lagace, tweets often about “seeding.” Seeding is a unique way to suss out creators who are genuinely interested in becoming brand ambassadors.
The essence of seeding is to organically reach out to a handful of creators, compliment them on their content, and ask to send them a free gift from your brand.
If the creator says yes, you send them one of your products—no strings attached. If they like your product and choose to post about it, then you can reach out again and ask them to use their posts as UGC.
Additionally, once a creator has shown genuine interest in your product and starts posting about it, you set them up with an affiliate tracking link so they get paid a commission for every sale they send your way.
The last step of seeding is to identify the top performers from your affiliate program and then set these creators up with a contract that pays them upfront for monthly deliverables.
“Seeding should be the foundation and core pillar of every successful influencer marketing program. We are initiating the relationship by giving and not asking for anything in return - you want to lead with the relationship, not a transaction. This is at the core of what seeding is,” says Lagace.
Lagace has seen a lot of success with this model in terms of getting high-quality content—and then compensating creators for high-performing content.
While there are many brand benefits to the seeding model, there are also some caveats to consider.
First and foremost, you may not be paying out of pocket for high-performing user-generated content, but this process requires extensive outreach that either needs to be managed in-house or by an agency. That can be expensive.
Additionally, many creators want payment up-front for their user-generated content—not after it proves to be useful to the brand. The idea of content for free product is certainly waning, as creators become closer to independent contractors and startups in their own right.
In fact, according to FYPM, an organization whose mission is to bring more transparency, accountability, and fairness to the influencer industry, offering product instead of payment is one of many red flags that can turn off high-quality influencers. It suggests that not only is your brand avoiding business basics like having a budget, but that you don’t value the other party’s time.
3. The contract payment model
The contract model is a popular way to compensate creators. When done correctly, the brand sets out a clear list of expectations and determines a pre-arranged fee for those deliverables. And when both the creator and brand understand the terms of the contract, it can lead to a valuable partnership.
“The best way to partner with influencers is to have a contract with them. This way, you can be sure that they will be delivering what they promised. It also allows you to set the terms and conditions of the contract,” says Krittin Kalra, founder of Writecream.
“The benefits of a contract are a long-standing partnership. When you are both aimed at the same goal some great creativity can thrive,” adds Hannah Nash, co-founder at Lucy Nash.
While some brands and creators believe a contract is the most mutually beneficial way to set expectations and pay creators, this model doesn’t come without its caveats.
Firstly, it can be difficult to clearly define terms of the contract. “The challenge is if the contract is not based on performance, there can be a misunderstanding of goals and what each person brings to the table,” says Nash.
To make a contract relationship work for both creators and brands, “be sure to outline the goals of the campaign and the metrics by which success will be measured. Additionally, make sure all deadlines are clearly outlined in the contract so there is no confusion,” says Stacy Elmore.
A platform like #paid makes that process of outlining deliverables and schedules much easier, and provides a sense of security and accountability for both the creator and brand.
But, clear contract terms isn’t the only potential caveat of this model. Marketing Brew recently reported that TikTok Creator Marketplace (TTCM) is showing gross inconsistencies with what creators say their rates are and what their rates actually are.
The publication gave the example of how the influencer marketing agency Sway Group contacted a creator about a brand partnership. The creator’s starting rate was listed as $250. But, when the agency got a hold of this creator, she “said her range was between $15,000 and $25,000—at least 60x the rate listed on the TTCM,” according to Marketing Brew.
The good news is while the TTCM is a popular marketplace for brands and creators to find each other—it’s not the only place. There are several other ways for brands to find creators with a more transparent rate and to waste less time on outreach.
And, if rates are transparent and fair, experts suggest it’s often worth the initial investment. “If you believe the contract cost is low enough and it’s sure to be a successful campaign, it’s likely worth a bet of paying the upfront cost [of a contract],” says Paul Burke.
The last thing to consider comes from a recent insight from #paid author Danny Desatnik. In a recent article and podcast episode, Desatnik makes the point that all creators want long-term contracts with brands, but not all creators deserve these long-term deals.
“Just because you have an audience on social media doesn’t mean you’re entitled to a long-term deal with the brand you’re working with,” says Desatnik.
The answer, according to Desatniki, is to focus on creating long-term partnerships—built on trust—where the brand sees a valuable return on investment.
4. The blended model
The ultimate goal of a creator and brand collaboration is a long-term partnership where the brand gets exposure to new potential customers and sees a positive ROI and the creator has creative license and makes a healthy living.
To illustrate the importance of this, let’s quickly return to Desatnik’s ideas. He says, “Getting the long-term brand deal is a balancing act. It’s about acknowledging that the brand needs to see value as much as the creator needs to be valued.”
And, the way to accomplish this is often not through a strict payment model. As mentioned earlier, creator marketing is new and nuanced. To foster long-term, trusting relationships, payment models also need to be flexible.
Some creators and brands recommend testing a blended payment approach that is rooted in performance and rewards creators heavily for bringing in new business.
“The biggest thing brands need to keep in mind for both models is to foster relationships with their influencers. Influencers will always go above and beyond for brands they respect and they know that respect them, their talents, and their time,” says Paul Burke.
I think about the structure of influencer campaigns in terms of a floor (it doesn’t work) and a ceiling (it works). To mitigate your risk, look for a blended approach. Paying some cash upfront with an affiliate commission serves both parties and often helps lower the risk for both parties.”
Burke provides an example of how this worked for Groupshop. Groupshop ran an influencer campaign with a blended payout structure where they negotiated a lower upfront cost for content but gave a higher commission percentage for conversions.
“The campaign was, and actually still is, a huge success. The influencer made about 20x what they would have made if we paid their asking fee,” says Burke.
5. Hiring full-time creators
Permanent, full-time positions for creators are not that common—yet. But, as more brands see the value of long-term partnerships, more brands are showing interest in bringing content creators in-house and paying them a full-time salary.
Jay Acunzo, author and host of the podcast Unthinkable, predicts that even B2B brands will start staffing teams of creators.
The reason brands will bring in full-time creators, Acunzo explains, is because more and more people will realize success is about the people. Namely, creative people.
Stats and case studies already prove that creators are worth their weight in gold for brands in terms of customer acquisition and influencing purchases.
With creators holding this kind of influence and endless creative ideas, it makes sense for brands—not only to partner with creators—but to bring them in-house.
James Buchan, co-founder of The ITL ENM Dating App and CNCT Digital, has already hired a full-time creator to promote his company.
“The main reason we hired a full-time creator was alignment with brand stance and vision. We operate several entities in supporting niches so having a person immersed in that makes symmetry much better,” says Buchanan.
I asked Buchanan about how this decision benefited his brand and the creator. He told me it works because he has a known budget and the creator has the security of a full-time salary. Additionally, the creator has a vision and ties everything together. As a result, the brand has seen increased traffic across all sites.
As influencer marketing continues to grow, experts predict that so will full-time, in-house creator roles.
“I think we have already really seen this in the last year, especially with TikTok accounts. Hiring content creators as full-time employees to run brand social media accounts is something I predict to keep growing in popularity in the upcoming years,” says Madison Masterson.
Above all, pay your creators (and charge fairly)
Creator marketing is hugely beneficial to brands right now. And, as social media marketing and video marketing continue to grow, influencers will continue to play a huge role in influencing purchasing decisions.
Charging fair rates and fairly compensating quality creators will help form long-term and mutually-beneficial relationships. Follow the golden rule and win together.