One of the most common question we get asked is how we make money as influencers. Not how to become an influencer but how to actually make money doing it.
It’s not as straightforward as it sounds. Most people think once you get a certain amount of followers the brands and money will just start flowing in and you can live the high life staying at luxury hotels and getting freebies in the mail. Yes, that’s definitely possible, but not a reality for every influencer out there.
And you might be surprised to find out that some of the people asking us these questions are actual influencers with hundreds of thousands and millions of followers. Yes, they sometimes struggle making enough too.
Why?
Because, the truth is, brands actively try to get influencers to work for free or “in exchange for product.” Not only that, but they take pride in being able to get influencers to promote them for free. Don’t believe me? Here are just some examples of the responses we get all too often when we send our rates to brands that want to work with us:
[screenshots]Now, you might think, well you’re staying at amazing villas and hotels around the world, getting thousands of dollars worth of clothes and perks for free… in exchange for taking pictures? What’s the issue? You’d feel bad even asking for money too on top of that?
If you think like this and you are an influencer, this just might explain why you are still not making enough.
As long as you have a certain amount of real followers, you should be getting paid to actively promote things, not just brands but also hotels. Yes, hotels too.
How It All Starts
This might sound obvious but we know how easy it is to fall into this trap. You start out small, you have just a few thousands of followers and all of a sudden brands are reaching out asking to send you some of their products as gifts.
At first this is very exciting, and you just accept everything. Wow, all these brands you used to pay money for are now willing to send you gifts simply in exchange for an Instagram post or story. Sounds pretty cool huh?
You’re thinking, this is fine, I’ll just do it until I get to 100k followers and then I will start charging. But then you get to 100k and even pass it a few times over and some brands still tell you “we don’t have a big budget”, “we’re just a small family company”, “we really can’t afford it.” You’re used to this so you just keep doing it thinking you need to get to a million now, 100k is not big enough. It’s your insecurity speaking and brands know how to take advantage of it.
But this is where you’re wrong.
If a single post on your feed reaches 100,000 people, that’s worth something! About $1000 to be exact. If your posts reach even just 10,000, that’s still worth $100!! That’s about what you would pay for Facebook Ads or Google Ads for the same amount of people so see your ad. Granted, you have a lot more control over who gets to see your paid ad on Facebook or Google, but you get the point. Even with a discount, these eyeballs on your content are worth money.
If brands didn’t have the free advertising channel of influencers, that’s exactly what they would have to do to get exposure – pay for ads. They don’t really have that many other alternatives to get in front of people. Luckily for them, they now have social media and a LOT of influencers willing to promote them for free or in exchange for very little.
Don’t be one of them.
Don’t Work For Free
The first step towards making money on Instagram (once you have a decent following) is to tell yourself you will make money on Instagram. You have to be in the mindset that your work is not free and you have to convey the message to brands.
Brands are very aware of the fact that plenty of influencers are willing to accept product in exchange for promotion and they take advantage of it. They will tell you they don’t have a budget right now. Or that they never pay influencers, or something else.
We will say something “controversial”: usually that’s not true.
Of course they have a marketing budget! What brand doesn’t have a marketing budget? Who makes something and tries to sell it without marketing it?
They have the budget, they just don’t want to give it to you. Because they know most likely you’ll agree to work for free or in exchange for some clothes or bags. It could also be because they have already spent their budget for this quarter/year. But that doesn’t mean they don’t have a budget, they just don’t have it right now. They can consider you for later.
The important change in mindset is that you have to decide for yourself that you are not working for free.
The most important thing you need to learn as an influencer, is your own value.
Know Your Value
The reason so many influencers agree to work for free is that they don’t really understand their own value. They don’t understand how much their organic reach is actually worth in $$, how much they convert, or that the work they do is even more powerful than advertising.
Don’t believe me? Ask Revolve, which became a billion dollar company on the backs of influencers. Ask Bali Body, which makes $2 million a month in sales solely thanks to influencer power. Ask Fashion Nova with its hundreds of millions in revenue. These are all companies that saw meteoric rise in just a few years by simply pushing hard on influencer collaborations. And there are many many more. It’s no coincidence that the traditional brick and mortar brands are going bankrupt one after the other.
Now, let’s talk about your value.
Reach Value
The most straightforward way to calculate your value is by using your reach. The average CPM (cost per 1000 impressions) for Instagram is between $5-$10.
That means you can divide your average reach for your posts by 100 (for $10 CPM) to 200 (for $5 CPM) to calculate how much a post on your feed is worth. So if your average post reach is 100,000 people, a single post on your feed is worth around $1000 with a $10 CPM or $500 with a $5 CPM. Of course, this varies depending on where your audience is from, how engaged your audience is, etc.
For comparison, the average CPM for Facebook ads is around $10.
If brands didn’t have influencer marketing as an option, that’s what they would have to do to reach customers – pay for ads on Facebook, Google or Instagram. And those companies don’t accept barters 🙂
Click-Through and Conversion
The second thing you need to know to understand your value is your click-through rates and conversion rates. When you promote something and 100,000 people see your promotion, how many of them actually click the link or get to the page you’re sending them to? And how many of those people convert and purchase the product you’re advertising?
This is a little trickier to learn because Instagram does not allow links in post captions and is a notoriously difficult platform to track stats on.
But there are a few things you can do and you should actively work on them.
1. Use affiliate links
Whenever possible, use affiliate links when promoting products on your stories. These don’t even need to be collaborations. Sign up for platforms like RewardStyle and use their affiliate links to promote products you like and use. People always like it when influencers share their favorite products and it will help you understand what your followers like, what they click on and how often they convert.
RewardStyle is great as it will show you how many people clicked on the link and how many people bought something. Add to this your own stats on how many people actually saw your story and you can calculate your conversion rate:
click-thru rate = number of clicks / total number of views
conversion rate = number of purchases / total number of views
2. Use promo codes
Whenever you work with brands, ask them to provide you with a unique tracking link or a promo code with a discount for your followers. After the collaboration is over, ask the brand for your stats – how many people clicked the link and how many people ended up using your unique discount code.
This can also help you calculate your click-thru and conversion rates.
Once you have a good understanding of these numbers, you can use them to negotiate your rates for collaborations by
Making Projections
When a brand comes to you asking for promotion, it can be hard to know how much you should ask for. And that’s why knowing your numbers makes all the difference.
Let’s say your post reaches 100,000 people and your conversion rate is 2%. Notice I say “post reach” and not followers because 100,000 followers does not guarantee you will reach 100,000 people.
Now that 2% conversion means 2000 people will buy what you are advertising. Even if your conversion rate is 0.2%, that’s still 200 purchases. Let’s say the product you’re advertising costs $50, that’s $10,000 in revenue for the brand.
Once you know how much money you’re making for the brand, it’s time to learn how to negotiate your rates.
Negotiating
Now, even if you know all of these numbers and projections, you might still struggle getting paid deals or getting paid the amount you deserve. And that can be due to poor negotiating skills. Learning how to negotiate can change the way you work with brands.
Learn To Say No
Saying no can be hard, but it’s the first thing you need to learn. If you are only offered “product” in exchange for your work, just say no.
Can you imagine walking into a restaurant and saying “hey, can I give you a t-shirt in exchange for this meal?”
Society moved away from the barter economy a LONG time ago. Why are influencers still accepting it as normal?
Yes, it can be hard. Yes, you need content, you need new clothes to show and new places to visit for your account to grow. But unless you learn how to say no to free work, you won’t start getting paid.
The exact opposite happened! After a while most of the brands we said no to, came back later. This time they had a budget. And little by little the budgets got more and more generous when we showed good results.
The difference was, we now knew how to negotiate. And more importantly we knew our value.
