Influencer marketing is an old-aged persuasive technique known now as the Holy Grail of marketing, thanks to the power of social media. For the first time in history, you do not need to take over the throne of England to exert influence on the populace.
With influencers, brands and businesses looking to boost brand awareness and double sales can do so through gifting or paid collaborations. But unfortunately, when it comes to Influencer marketing, it isn't always easy to get right.
Before you dip your toes in the water, you first need a strategy. For instance, you can't throw things randomly at a wall hoping that something sticks. If you haven't done this before, you mustn't do it alone.
If you stick to the end of this article, you will learn the difference between influencer gifting and paid collaboration and the best option for your brand. Read on!
Influencer gifting is when you send your product to an influencer or creator for free, hoping that they will share it with their audience. It's often referred to as unpaid collaboration since no payment is involved other than the sample products.
Mostly, it's nano and micro-influencers that wouldn't mind getting a sample of your product for a shoutout. However, note that they are not obliged to talk about your brand, and there are chances they might not like your product.
Some of the main reasons influencer gifting is still a thing today is, no doubt, the added benefit of featuring brand collaboration on their channels.
- Nano and micro-influencers offer an excellent opportunity for brands to create more awareness and reach a new audience. In addition, since they are often niched and loved by their followers, you have a chance to market your brands through the influencer's content.
- Influencer gifting is a cheap alternative, especially when you don't have a big budget for influencer marketing. Also, brands can gradually delve into influencer marketing through influencer gifting.
- Unlike celebrities with millions of followers, nano and micro-influencers tend to have more engagement and a strong relationship with their followers. For example, if you have given a sample of your product to a nano or micro-influencer and they love it, they'll make a post about it.
Sending out gifts is not new, but influencer marketing being a billion-dollar industry means you can't escape taxes. So, therefore, it is crucial first to have an agreement with your influencers.
Although it's a gift, there's a VAT risk, and you'll lose a few bucks on VAT deductions since your gift is regarded as a marketing expense by the Swedish Tax Agency.
In a situation where the influencer is not approved for F-tax, you become liable for employer contributions if the gift is wroth at least SEK 1,000. Also, the influencer will pay tax.
This makes influencer gifting unappealing since influencers will, in a sense, pay to receive a gift.
Unlike its counterpart, paid collaboration involves working with more prominent influencers to create branded content on their social media channels. In this case, you have a substantial influencer marketing budget, and you're looking to pull awareness and sales.
However, it is important to keep the Federal Trade Commission (FTC) rules since monetary compensation is involved. Failure to do so can lead to some hefty fines. Some of the guidelines to keep when running a paid collaboration are:
- Contract recommended
- Include disclosures like: #ad #sponsored and #gifted
- Use the 'Paid partnership with' tag on your posts and stories
- For brands looking to reach a wider audience, paid collaboration is a much better option. Compared to nano and micro-influencers, celebrities or mega influencers have a large following that could potentially make your content go viral.
- With paid collaboration, you're guaranteed content, unlike Influencer Gifting, where you hope and pray that the influencer shares with their audience. In this case, it's strictly transactions, and they must hold their end of the bargain.
- Also, paid collaboration offers you creative control over the content. That means if you already have a brand image you want to uphold, paid collaboration gives you a say in the process. You can decide the direction of the content, then sign off before it goes live.
- The final benefit, however, is that influencers will be more willing to work with your brand. There is zero chance of ghosting. Upon request, influences will also share their post analytics to learn how your content performed.
- Paid collaboration can be quite expensive
- Can create more administrative processes
- Difficult understanding the legal risks of paying someone without a company
Which Campaign Is Best?
If you're just getting started with influencer marketing, influencer gifting might be an ideal way to test the water. Your first or second unpaid campaign will give you the confidence to indulge in paid collaboration. However, make sure to stay compliant. Each and every country has their own rules. This is what you should think about when sending gifts in Sweden.
With paid collaboration, you have more at stake since you're paying influencers to represent your brand in a positive light. Before you begin, you must set a social media contract in place and establish copyright-ownership rights so you can safely repurpose content.
To get the most from this relationship, the best way to go is to set up a more extended partnership with your influencers, like making them brand ambassadors. Most importantly, you must also decide on the payment method for a smooth working relationship.
That is why influencer marketing networks and marketplaces like Memmo, Adrecord, INCA, Nelly, and many others use Gigapay to streamline their payouts to influencers and creators with and without companies, without worrying about compliance, knowing Gigapay will take care of it.
After a successful collaboration, don't let that be the end of the relationship. Keep in touch, and show that you value your relationship with them. Feel free to book a demo, and we'd be excited to show you how this payment system works.
Insights from our experts
Keep yourself updated with the latest news, insights and strategies about the finance side of the Creator Economy