April 30, 2021
There’s a mind-blowing stat, 40 cents of every VC dollar goes to Google, Facebook, and Amazon advertising. Even with the death of-the third-party cookie and increased privacy efforts (aka iOS 14.5), it’s not expected that this number will change…anytime soon. But now there’s a new game being played. One accelerated by COVID and the growth of the creator economy.
Rather than dump money in traditional ad channels, the new playbook consists of brands shifting their VC dollars and budgets to partner or acquire creators that have ample distribution and troves of first-party data through their owned and operated channels.
Prior to COVID influencer marketing spend was growing YoY but COVID accelerated the pace. In 2018, 39% of marketers planned to leverage influencer marketing. In 2020 that number increased to 65% as brands reallocated budgets during the pandemic. In total, influencer marketing has grown from $1.7 billion in 2016 to $9.7 billion in 2020, to $13.8 billion in 2021. When defining influencer marketing, this mostly includes brand and influencer sponsored post. It’s unsure how much flows into omni-channel creator marketing efforts such as tapping into a creators SMS list, email lists and community.
Still, the growth in influencer/creator budgets skyrocketed with the help of COVID but it’s the $5.78 for every $1 spent ROI that keeps brands coming back. With incomplete tracking, the uncertainty of how advertising will be impacted long-term, and the growing shift in consumer behavior (people trust people more than brands), brands are doubling down on owning as much first party data and distribution as possible by leveraging creators.
The B2C, C2E (creator to everyone), and B2B playbook of today is being built by leveraging creators. By partnering/acquiring creators, brands are able to purchase a community with enriched first party data and tap into a growing pool of new customers.
In essence that process looks like the following:
Examples of this can be seen with the following:
Step, the bank geared towards gen-z, leveraged equity partnerships with big names such as Charli D’Amelio. The company has raised $50M to date and leverages her 100M followers for advertising.
Zapier, the unofficial group of any no code app, acquired Makerspad, a growing and thriving no code community. It’s almost impossible to play in the no code space without using at least one zap (seriously go try if you don’t believe me). By acquiring Makerspad, Zapier can continue to acquire new customers and improve the core product experience.
HubSpots acquisition of The Hustle, a daily business newsletter, shows that you even newsletters are up for grabs. Even though this not a single creator, the newsletter is a thriving business with subscribers that fall into their target demo, aka direct access to new customers.
The number of examples of creator and community acquisitions are growing. It’s the reason for growth of the audience first business model. When you have a community, that’s engaged and growing without a central point of leadership, you have a direct channel to new fans and the ability to build and improve your product.
When done correctly, your customer acquisition cost (CAC) lowers, your lifetime value (LTV) increases, and you build a MOAT. As code gets commoditized, one thing that can’t be copied regardless of how much money is thrown at it, isa community. A poor community experience and people leave, a great one and you have their trust. This is why brands tap into the distribution of creators that have audiences that fall into their creator target audience fit. If you can’t afford to buy a community out of the gate, you can siphon a creators followers and have them join your own community.
Over the next 5-10 years the amount of money being thrown at creators will grow exponentially. Regardless if you’re a startup or incumbent, your budget sand overall growth strategy will benefit from strategic creator partnership sand internal creator program. There’s also the potential for incumbents to begin signing exclusive non compete deals with creators. This way, they aren’t able to work with competitors.
Every SaaS and commerce company became a media company. Now, every company will become a talent company.
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