Will Selena Gomez's Instagram Army Buy Coach Handbags?
(Bloomberg Gadfly) -- The image of Selena Gomez, clutching a Coach bag, is everywhere right now.
Tapestry Inc. has splashed out millions of dollars to sign up the singer and actress to be the face of the brand and launch a product range.
She might have 130 million Instagram followers, but will she drive handbag sales? That is the question not just for Tapestry, but for the companies from Adidas AG to Asos Plc, that are rushing to work with influencers as they chase the millennial dollar.
Advertisers worldwide may have spent $570 million on Instagram influencers in 2016, according to research firm eMarketer. That's still tiny compared to their overall digital spending, but it's set to keep growing.
The problem for brands and investors is that it's hard to know if they are getting value for money. It's all down the digital drain unless they're selling products that their followers actually want to buy.
Intermediaries such as rewardStyle can help. The platform enables influencers to receive a commission every time a retailer sells a product they have promoted on Instagram or Pinterest. Consequently, rewardStyle can track the sales that are generated by individual influencers, even down to specific posts. Companies can access this information -- but that's another cost.
At the other end of the spectrum are high profile tie-ups driven by brands to ensure creative control and exclusivity.
If this relationship involves, say, teaming up to produce a fashion line, or promoting a particular product, sales may be simpler to track. Take SuperGroup Plc, a British clothing retailer. It recently drew heavily on content created by influencers, including short films and Instagram posts, to raise the profile of its winter jackets, a very specific type of product. The campaign drove an increase in sales of the category in the U.K. and Germany.
But influencer marketing is also about creating a buzz about a brand and introduce it to new consumers -- something that's crucial when digital shopping is possible for even the most expensive luxury goods.
In the case of Coach and Selena Gomez, who is charged with speeding the label's recovery in addition to marketing a special range of goods, there seems to be a clear pickup in social traction. The company said last month that a red Grace bag featured in its advertising had virtually sold out -- but it remains to be seen if Gomez can lift broader sales in the crucial holiday season.
Tribe Dynamics, a marketing technology company, estimates the monetary value of publicity generated for brands by third-party digital influencers, including individuals, publications, retailers and other brands. The majority of this Earned Media Value (EMV) comes from the amount of likes, shares and comments that their posts attract.
This seems to be a pretty decent measure of the value created, but it doesn't always have a strong correlation with sales growth. That's because, ironically, influencer marketing is not just about influencers.
Take Gucci, part of Kering SA, and Adidas AG, whose EMV has overtaken that of Nike Inc. for the first time this year. Gucci has been a canny social media user, for example promoting its collaborations, including with artist Trouble Andrew (also known as GucciGhost). Adidas, meanwhile, has been moving away from sponsoring some football teams to working with individuals, such as footballer Paul Pogba, with more than 19 million Instagram followers. And of course, there's its tie-up with Kanye West.
But their savvy use of social media helped to propel products that were already striking a chord with consumers, from Alessandro Michele's embellished designs at Gucci to Adidas's hot sneaker styles.
Investors need to see a clear correlation between influencer campaigns and sales growth -- or as clear as possible given the limitations that still exist -- so they can judge whether companies are getting value for money from their marketing dollars. They also need to be aware that the hottest name can't replace retail basics.
So, they shouldn't be distracted by the whizzy glamour of celebrity tie-ups. Influencers can have a zillion Instagram followers, but if the products they're hawking fall short, the brands paying for their endorsement won't see the sales come through.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Gadfly columnist covering the consumer and retail industries. She previously worked at the Financial Times.
Elaine He is Bloomberg Gadfly's data visualization columnist in Europe, focusing on business and markets coverage. Before joining Bloomberg, she was a graphics editor at the Wall Street Journal and the New York Times.
©2017 Bloomberg L.P.