Social media influencers are individuals who utilize social media platforms to build their own personal brand or influence their followers to act (including buying products, supporting a brand, or vacationing in a certain location). They can share anything from clothes and beauty products to make-at-home slime with their followers. While it might seem like frivolous fun, some influencers are making significant amounts of money from their connection to their fans, making them the modern entrepreneur. While not every social media influencer is an entrepreneur, the ones who have started their own businesses from the brand they created online have much in common with traditional entrepreneurs when it comes to driving the economy.
Are Influencers Entrepreneurs?
Entrepreneurs are people who organize, manage, and take on the risks of a business. They often start a new business in response to a perceived need for a good or service. An influencer, on the other hand, is someone who has the power to affect or change people and their behavior through social media—often to get them to buy something. Influencers who start their own business certainly fall under the first part of the definition of entrepreneur, as they are managing their business and taking on risk. But are they fulfilling a need? Many say yes: companies can target highly specific groups of people through employing an influencer—groups that might be missed by traditional advertising. And because influencers form a more personal relationship with their followers, the followers are seemingly more likely to buy what the influencer suggests.
One area where entrepreneurs and influencers differ the most is in their processes of starting a business. Nearly all traditional businesses have startup costs, which go toward buying materials to create goods, equipment to manufacture items or provide a service, or office space. But entrepreneurs do not always have to put their own savings into a business. They can get venture capital, or money to start or grow a business, from outside investors, often in exchange for part ownership of the company. Influencers, on the other hand, have fewer startup costs, though it can vary by the influencer’s specialty. Beauty and fashion influencers may have to get new clothes, buy the latest makeup, and hire a professional photographer to start out, but others only need their social media accounts and a smartphone. Additionally, many of the costs that apply to starting a business do not apply to influencers, like renting office space, as many work from home.
Building a Brand
Building a brand is critical for both influencers and entrepreneurs, but they do it in different ways. Entrepreneurs build their brands slowly over time as they create their business. First, they determine what sets their brand apart from others, then they figure out how to communicate that to consumers. While a lot of brand-building happens before a company goes to market, some of it happens when the product or service hits the marketplace and gets feedback from the consumers. For entrepreneurs, the profit-making product or service comes first, and the brand comes second. Influencers also develop their brand over time, but because their brand is their personality, it has to be honed and prove appealing to followers before there can be a profit stream. Influencers know how their personalities are different from other influencers. They develop a message to reach and gain followers, then monetize it through partnering with brands. For them, brand comes first, and the service of reaching followers comes second.
Most entrepreneurs make money from their businesses in a straightforward way. Profit is made when money is earned above the cost of producing and selling goods and services. Most businesses sell the good or service for more than it costs to make them, which creates profit. Influencers have a murkier path. After building up an audience of followers, influencers may enter partnerships with companies or advertisers where they are paid to post about a product or service. With social media channels, like YouTube or Instagram, influencers have the option of adding advertisements to their page, creating another revenue stream. Most influencers earn money through a combination of advertisements, company-sponsored posts, and sometimes creating their own brand of products (and of course, advertising them on their social media channels). Influencers need to strategize and work hard to make sure their work is turning a profit.
Driving the Economy
Entrepreneurship is a major driver of economic growth, and as influencers have grown in number and become more and more popular, it has become clear that they are helping to drive the economy as well. Entrepreneurs stimulate economic growth in many ways. By fulfilling a need for a good or service, entrepreneurs create new categories and markets, and create competition. For example, after Uber was created to fulfill the need of wider taxi accessibility, a number of ride-sharing companies sprang up in this new category. As new companies grow, they can create employment opportunities by hiring more people. Entrepreneurs also spur innovation—which is clear from the vast number of startups that introduce new technology to the world. Influencers can drive the economy in similar ways: in using social media to connect with followers, they have created a new market. Their need for professional help in creating content can create employment opportunities, and competition becomes stronger as more people become influencers. Influencers also drive followers to join new social media platforms to access their content, and provide marketing opportunities for companies, both of which stimulate larger overall economic growth. As entrepreneurs themselves, influencers bring many of the benefits to the economy that traditional entrepreneurship has, while adding a few unique drivers that continue to boost the economy in a socially connected world.