Influencers and audiences prefer endorsement deals without restrictions

In September 2018, Snapchat launched a new generation of its Snap Spectacles. Instead of relying on a traditional advertising campaign to promote the camera-enabled sunglasses, the brand chose an influencer, Luka Sabbat, to get the word out.

The terms of the deal were simple. Sabbat would create one Instagram post and three stories featuring photos of himself wearing the spectacles at New York, Paris or Milan fashion week. He would submit all the posts to Snapchat’s PR firm for pre-approval. In exchange, Snapchat would pay him US$60,000, with $45,000 upfront.

Sabbat made one Instagram post, a series of photos of himself in a hotel room wearing the glasses and holding a bunch of bananas up to his ear like a phone. He didn’t mention Snapchat or Snap Spectacles by name, nor did he submit the post for pre-approval. A month later, Snapchat’s PR firm sued him for breach of contract.

Other advertisers took note and began pressing for stricter contracts that would provide more clearly defined expectations for the influencers they hired.

But according to new research by Navdeep Sahni, an Associate Professor of Marketing at Stanford Graduate School of Business in the US, these restrictive contracts can undermine the impact of influencer marketing campaigns.

The appeal of influencer marketing to advertisers, Sahni says, is that “you get an agent, an advocate who is connected with the audience in a very unique way. The audience chooses to talk and listen to the influencer. The influencer knows the audience very well.”

Many influencers operate within specific niches, which is useful for a brand seeking to customise its ads. Yet influencers are extremely selective about which advertisers they choose to work with.

“Influencers pay a lot of attention to whose word they’re willing to relay,” Sahni says. “They’re more picky than the traditional media that we see. The audience can choose to unfollow an influencer. That’s a consideration when an influencer picks a contract.”

Followers expect their favourite influencers to be ‘authentic’ and to provide a genuine glimpse of their lives in their online content. That’s what makes them trustworthy and attractive to advertisers. Yet if they’re being paid thousands of dollars to endorse a product, what does that do to their authenticity, especially if they must work to a script provided by the advertiser?

Inside sponsored content contracts

With his Swiss-based colleagues, Reto Hofstetter of the University of Lucerne and Andreas Lanz of the University of Basel, Sahni studied the effects of ad contracts on influencer marketing. The researchers had two central questions: How did the influencers respond to contractual constraints, and how did these constraints affect the performance of sponsored posts?

They found that more restrictive contracts were less likely to attract influencers. Adding specific directions about how a product should be displayed, for example, reduced influencer participation by 28% – and the tighter the bond an influencer felt with their followers, the less likely they were to agree to such a contract. The researchers also found that influencers’ aversion to strict contracts wasn’t entirely groundless: Posts produced under more restrictive contracts had significantly less audience engagement.

Next, they conducted a field experiment with a group of 1,495 influencers. Here, the researchers found that the posts from the less-restrictive contracts generated an average of 53 clicks, while the posts made under the standard contract got just 14; they didn’t resonate as well with the audience because the influencer didn’t seem authentic in them.

Which leaves one big question, says Sahni: “Is the [advertiser] willing to lose some control and rely more on the influencer?”

Sahni believes it’s more beneficial to everyone – the advertiser, the influencer, the audience – if contracts allow influencers to retain more creative control.

“Research like this, from accumulating a lot of evidence, is communicating that concern in a more compelling way,” he says.

You can find out more about the research here.