Recently a top executive of an ad-tech firm that deals with connected TV advertising met the management of a carmaker to explore the possibility of a deal. The auto giant leaders told him blandly that they don't have money to advertise on connected TV.

Interestingly, only a week ago, the same auto major had held a lavish event with influencers flying them to a five-star hotel at a tourist destination. At least 40 top auto influencers, including regional ones, along with their production crew, were present at the event.

“Those influencers charge anywhere from Rs 20 lakh to Rs 1 crore to create and produce a promotional video. The cost of influencer marketing alone could be in the range of Rs 10 crore, even if we ignore the cost incurred on organizing the event and bearing travel and boarding costs of over 120 people,” the advertising executive told e4m, requesting anonymity.

Large and small brands are increasingly allocating a significant chunk of their digital AdEx to influencer marketing which skyrocketed during the pandemic and continues to grow by leaps and bounds. Even digital advertising platforms like Flipkart recently reached out to top influencers like Shaurya Sinadhya, Gabriella Charlton, Karan Wahi, Sakshi Sindwani and Vaibhav Kundra for its latest campaign ‘TurboMania’ offering AR-VR experience for Vivo T2 5G Series.

Going hyperlocal, Myntra has on-boarded hundreds of “campus ambassadors” to connect with millions of young students studying across Indian universities. Sunder Balasubramanian, CMO, Myntra, says, “Creators and influencers are the first adopters of the trends. They don’t only help us with learnings about our collections but take our message to GenZ across.”

Influencer marketing has emerged as a “middle of the funnel” activity which not only drives branding but also sales for brands, industry experts say. Gala ceremonies with influencers/creators are the new norms. YouTube and Myntra have set the trend which is being picked by many. Even for brand launches, more influencers than journalists are invited these days.

“On an average, brands are spending 7-10 percent of their overall annual marketing budgets,” says Ahmed Aftab Naqvi, Global CEO and Co-founder, GOZOOP Group, who has been championing Influencer marketing since 2012.

Today, marketers are conscious about allocating budgets separately in their entire media mix for influencer marketing, says Vishal Chinchankar, CEO, Madison Digital and Madison Media Alpha, adding, “Some digital brands may spend up to 30 percent of their digital ad spend on influencers but that’s case to case.”

Rahul Vengalil, Executive Director of Everest Brand Solutions, a Rediffusion Group company, echoes the sentiments. “Leading D2C and ecommerce brands, especially those in foods & beverages, fashion, apparel and personal care segments, are currently spending up to 20 percent of their digital AdEx on influencers, some even spend 30 percent,” he added. “Though some brands don’t spend on influencers at all, he mentions.

It's noteworthy that many digital first brands are spending 50-100 percent of their marketing budget on digital marketing only.

The overall influencer marketing business in the country had already touched Rs 1,275 crore in 2022, roughly 1.5 percent of estimated total ad spend Rs 90,000 Cr. It has been projected to grow by 25% CAGR for the next five years, according to the INCA-e4m Influencer Marketing Report released last year.

Ad agencies at receiving end

The exponential rise of influencer marketing has started hurting revenues of ad agencies, many experts admitted.

“Most brands, startups mainly, are reaching out to influencers and influencers’ agencies directly,” Vengalil says, adding that some brands are routing influencer spends via ad agencies only.

Vikram Kari, Product Head – INCA India (GroupM), notes that influencer Marketing has garnered much more significance than ever. However, he insists that we can not make a blanket assumption that the spends on influencer marketing are negatively impacting clients' spends on digital or ad agencies.

“In our observation, while influencer marketing has become a primary medium for quite a few new age brands in the D2C space - these influencer campaigns are usually backed by robust digital amplification on and outside the primary social media platform. Hence, the relationship between influencer marketing and digital marketing is evolving into a symbiotic one,” explains Kari.

He also noted that ad agencies are often involved in creative direction of influencer content and many agencies are also launching influencer marketing divisions – so as to offer the full service to their client.

How influential are they?

Are influencers really better than other forms of digital marketing? Opinions are divided. Some experts believe that influencers are far better connected with their communities compared to celebrity brand ambassadors.

“I believe it’s the audience that trusts influencers. Brands recognize this and therefore use them to create authentic, believable, and relatable content with influencers. Many mega influencers have a higher social media following than celebrities, but their content remains grounded and identifiable. Hence a creator integrating a product in his/her content and mentioning his/her preference for the brand, is far more believable than a celebrity doing the same,” Kari notes.

Surbhi Arora, Strategy Director, DDB Mudra, says influencers are capable of delivering twice the effectiveness viz. paid ads. “They work hard consistently to engage their fanbase, experiment with content formats, stay active on multiple platforms, and always try to deliver what their audience likes. They’ve built substantial credibility to influence and empower people to make better purchasing decisions,” she explains.

She, however, points out that brands don’t give creative control to the creator. On why brands have so much trust on influencers, Arora retorts, “What we see now are highly produced, inauthentic influencer campaigns that scream “scripted”. I also see influencers wanting long-term, effective and more collaborations now whereas most brands tend to pick a new bouquet of KOLs with every campaign they launch. I wouldn’t call that trust, I’d call it influencer tokenism.”

With the right collaborations and strategically chosen media vehicles, influencers can accelerate brand growth; however, sadly, brands tend to pay to get posts and partnerships than actual results, she said.

Kari further notes that there are a host of specialist creators, in areas such as tech, food, etc. These are masters in their domains, who the audience trusts for their expert advice. The creators’ audience (affinity, demographics, location) too plays a big role in this. Brands see this (influencer content) as the perfect opportunity to reach out to their TG without much overspill.

Some experts however point out issues in the influencer measurements and insist that “all that glitters is not gold” citing bots that dominate on social media platforms.

Interestingly, a 2022 study published in the Journal of Interactive Advertising suggested that sponsored posts by influencers had lower engagement rates compared to non-sponsored posts. The study also found that the more followers an influencer had, the more likely they were to have lower engagement rates on sponsored posts.

That’s the reason why brands and celebs often avoid declaring their “paid partnership” deal while promoting a brand on social media. They want the content to appear organic, as commercial posts often turn off social media users resulting in poor engagement rates.

“The engagement rates on social platforms witness an immediate fall when posts are tagged as ‘paid partnership’ or ‘sponsored’”, says Vineet Bajpai, Founder & CEO, Magnon Group.

Rahul Vengalil, Executive Director of Everest Brand Solutions, warns that the brands must check the credibility of influencers before working with them. “Very often influencers endorse one brand one day, another brand in the same category a couple of weeks later. Such a situation may put both the brands in a fix.”

Global recession fuelling the trend

Brands are forced to rationalize their spending amid global economic constriants. Expensive creative/ content productions face much deeper scrutiny as brand managers will look for smarter and more economical approaches in meeting the same objectives. This is exactly why creators should continue to bloom as their low cost of production can help them become recession proof, says Siddhant Mazumdar, Head of Mediabrands Content Studio – India.

While advertising spends may be cut, brands would still go ahead and engage with content creators that clearly demonstrate good fit –relevance of brand to creators audience, says another expert.