24 November 2017 Startup 2018: The companies and issues to watch

How Instagram is creating its own marketplace

Startup 2018: Shop-as-you-scroll: a new level of technical sophistication is coming to Instagram’s billion-dollar influencer economy.

An Instagrammer with over 1,000 followers can get paid upwards of £130 for a single promotional post. Big social media stars with hundreds of thousands of followers can make thousands from one post. Being an Insta influencer is now a bona fide career.

As a result, hundreds of influencer agencies are sprouting up around this still-young industry, pairing up companies with travel, food and fashion-based Instagrammers in particular. Brands have enthusiastically turned to people with large followings to promote their products.

In exchange for posts endorsing everything from hairspray to hotels, influencers get free merchandise, free holidays, complimentary restaurant meals – and, often, get paid a large fee. Agencies take a commission, and brands get new customers.

Next year, three big changes are set to rock this evolving ecosystem:

1. The future is shoppable 

Instagram began running ads in 2013 and is rumoured to be working out the best way to make images ‘shoppable’. See a backpack you like? Click on it to instantly buy it. The expectation is that the company will soon offer this feature to brands and influencers in exchange for a share of customer spend. It will mark the first time brands will be able to see the direct return on investment that advertising with Instagram influencers brings.

It turns Instagram from a platform used to raise brand awareness and attract new customers to a full-blown revenue driver.

Mats Stigzelius, founder of influencer agency Takumi, reckons it will be good news for the growing sector. Takumi has matched influencers with over 500 brands since launching its platform in 2015. To date, those that have had most success have been ‘consumer brands of national scale in food, drinks, fashion and beauty’, with spare marketing money to experiment with.

However, once Instagram is shoppable, even small consumer brands will be able to test out influencer marketing to see if it’s worth their while, in the same way many currently experiment with Facebook ads.

The founders of Like to Know It, an app that lets people shop items via screenshots from Instagram, are likely to be less happy about the development – their business is designed around the very problem Instagram is now fixing.

2. Influencers get more influential 

It could also mean more gigs for influencers. ‘When Instagram rolls out e-commerce, it will give a lot more clout to influencers,’ says Rob Bye, founder of Away Away, a startup working with travel influencers.

Big brands have already started shifting marketing budget from one or two megastars to a small army of influencers. ‘A brand might have a choice between sponsoring an elite athlete with half a million pounds, or 10 influencers with 50,000 followers, effectively reaching the same number of people with a diversity of content,’ says Simon Freeman, founder of endurance sports influencer platform Freestak.

‘What’s new is the idea they can have a relatively short-term relationship with an influencer,’ he adds. Influencers, like advertising channels, can be tried and tested.

3. Brands develop products for Instagram

Several startups inside London incubator Founders Factory are working on more sophisticated ways to promote its partner brands through Instagram. A team is being built around a platform dubbed ‘Powder to the People’.

Although in early stages, the idea is for influencers to be able to design their own beauty products, which they can promote and sell directly to their followers.

It’s not dissimilar from the model adopted by e-commerce sensation Glossier, which has built a cosmetics business on top of its content and community.

Away Away – another idea from Founders Factory – lets people book trips that influencers have taken and written guides for. So far, they can book flights and hotels via the app through Easy Jet, although the vision is to add many more elements, such as car hire and restaurant reservations, through several providers from which customers can pick and choose. Away Away and the influencer will take a commission.

‘Influencers are new-age travel agents,’ says Away Away founder Rob Bye. In other spheres too – notably food, fashion and even parenting – Instagram stars, and their opinions, hold a lot of sway. The scope for big and small brands to cleverly use the power of the influencer to market and sell their products is enormous – and is only getting bigger.