Inc. Interview: Weighing in on Shifting Consumer Behaviors

Mat Micheli and Joseph Gagliese were among the first to recognize that social-media creators could become celebrities in their own right. In 2014, the two wanted to leverage their Instagram and Vine savvy to represent content creators–those now known as influencers. “We had a good grounding of what it meant to represent someone,” says Micheli, who had previously worked as an agent for friends who’d played in the National Hockey League. “So, we went out and started to build contracts as a talent agency for social celebrities.”

Since then, their Toronto-basedstartup, Viral Nation, has evolved into one of the largest social-media marketing firms in the world, on track to generate more than $15 million (U.S.) in 2018 sales, according to the founders. Some 80 percent of their business now comes from the United States. The company has grown to roughly 30 employees, who work to connect their network of more than 1,300 social-media stars with brands including Apple, Crayola, Microsoft, and the NBA.

“Back in 2014, influencer marketing was a space that the big boys weren’t playing in yet,” says Micheli, referring to traditional advertising agencies. The founders wisely decided to focus on talent first and on technology second. By the end of 2014, Viral Nation had signed more than 100 influencers exclusively, booking $200,000 in revenue to write up contracts and represent their business interests in entertainment.

The real turning point, though, came in 2016 when Micheli and Gagliese launched their own marketing shop as an extension of the agency, planning ad campaigns for corporations with their influencers, and taking a cut of the transaction. “After that,” Micheli says, “we saw more than 300 percent growth annually.”

Viral Nation is among the dozens of companies riding the wave of activity in the growing social-media marketing industry. Last year, U.S. influencer agencies brought in nearly $10 billion in revenue, a more than 22 percent increase from 2012, according to market researcher IBISWorld.

Experts say the growth has to do with the way younger consumers spend their time. “Millennials do not trust or respond to traditional marketing in the ways that they have in the past, or that previous generations have,” says Claudia Page, a vice president at the video-sharing service Dailymotion and a former executive at the influencer marketing firms Crowdtap and Sulia. “They discover products on platforms where they are spending most of their time. That’s not conducive to traditional advertising methodology.”

Here’s how an influencer marketing deal through Viral Nation works: A brand will tell the company what it hopes to get out of its campaign–for instance, reaching soccer moms in the Pacific Northwest. The Viral Nation team will then come up with several options for a creative campaign–say, getting an influencer to “unwrap” a raincoat on YouTube, and describe the product on Instagram–as well as a list of influencers who would be interested in getting involved. Once the concept is agreed on, the company sets a production schedule and prepares the desired influencers to go live with the series of posts.

The size of these deals varies widely. “It could be as little as, I’ll trade you a boom box, to a quarter of a million dollars for a couple of posts on Instagram,” suggests Micheli. “It all depends on the influencer’s following, clout, and celebrity status, and which platforms they are strong on.” (YouTube influencers usually command the heftier fees, since their following tends to be more engaged than those of content creators on Instagram, Snap, or Facebook.) Viral Nation’s fees also vary, depending on the nature of the deal.

For Devon Gibby and Rob Zimmerman, the couple behind the popular Instagram account Dads Not Daddies, signing with Viral Nation was the beginning of generating real revenue. Since May 2017, the agency has connected them with brands including Google, J.C. Penny, and the producers of the film Call Me by Your Name. The company takes a cut of 15 to 20 percent for every sponsored post, such as this one, on social media. “We have definitely been able to make some money,” says Zimmerman. “Viral Nation deals with the negotiations and contracts, so now this is a real side job we get to work on together.”

Challenges remain for these types of agencies, in large part because influencer marketing often relies on especially erratic people.Earlier this year for example, Viral Nation was preparing to launch a major Valentine’s Day campaign for the Chinese internet firm Baidu, when Micheli received an unsettling call. One of his anchor content makers said he couldn’t post his YouTube video because he was in the middle of a forest in Australia and there wasn’t any internet connection. With influencer marketing, Micheli says, “you always have this scary chip on your shoulder that something could go wrong.”

Meanwhile, independently owned agencies must increasingly contend with tech giants such as Google and Facebook, which are working to develop their own marketing shops, says Dailymotion’s Page. “The big platforms haven’t been ignoring the fact that [influencer marketing] has moved well beyond money between the couch cushions,” she adds, noting that Google and Twitter both have made strategic investments in the space, acquiring FameBit and Niche, respectively.

Still, if Viral Nation continues to be successful moving forward, Micheli and Gagliese will credit their network of fierce, if fallible, content creators. “Influencer marketing is people marketing–it’s not digital advertising,” says Micheli. “In order to scale, you need to have real relationships.”

— By Zoë Henry, Staff Writer, Inc.

This article originally appeared in Inc. on March 12, 2018.