Advertisers are realizing that working with social media influencers is more cost effective than traditional forms of marketing.

As an Instagram food influencer and social media manager, Philip Tzeng makes triple the income he did selling timeshares in Las Vegas.

While working at Somerpointe Resorts, Tzeng began posting reviews of local restaurants to Yelp. He established a reputation as a credible source in all things Las Vegas food, built a following on the platform and created his Instagram account @LasVegasFill in 2016. His Yelp followers naturally followed him to Instagram, he said. By 2018, he began managing social media accounts for local restaurants. The next year, he reached 50,000 followers posting food reviews and restaurant promotions to his own account. He quit his job at Somerpointe that year.

Tzeng now has 283,000 followers on Instagram and almost double that on TikTok. Alongside his wife, he manages social media for 15 restaurants in the city. He expects his earnings to increase again this year.

While the Las Vegas Strip gambling did break revenue records last year, Tzeng’s success isn’t only due to his location, but to the increased spending from advertisers on creators during an economic downturn.

Tech and media industries were hit hard by the economic decline that began in 2022. Inflation reached a 40-year high, advertising spending slowed and economists estimate a recession in 2023. Social media and journalism companies that rely on advertising instituted cost cuts and layoffs, including Meta, Google, BuzzFeed and Gannett, which owns hundreds of local newspapers. Other publications shut down altogether.

While creators rely on sponsorships and advertising to earn money, the creator economy has fared better than the traditional media industry. Many advertisers have increased their spending on creators, according to interviews with influencer marketing companies. In the last year, Tzeng has posted ads for Fogo de Chão Brazilian Steakhouse, Dave and Buster’s and the city of Anaheim, California. He rejects 80 percent of paid posts companies pitch him, he said. Every year since he began creating content, including this year, he has raised his rates and gotten more sponsorship opportunities, he said. But while more money is flowing into the creator economy, not all creators are seeing it.

Advertisers are shifting budgets to favor creators
Companies might be lowering their overall advertising budgets, but many are shifting their spending towards creators. More than 60 percent of marketers expect their influencer budgets to increase in 2023, according to a report by Open Influence, a social media marketing company. And many agencies are already seeing the effects.

Obviously is an influencer marketing company that has worked on campaigns with Lyft, Bumble and Ulta Beauty. Its 20 highest spending clients are doubling their advertising budgets with the company this year, said Mae Karwowski, CEO of Obviously who founded the New York-based company in 2013. Two years ago, it was a big deal to receive a $1 million campaign proposal from an advertiser, she said. Obviously now receives proposals for $5 million, she said.

“As a company, we will double our revenue this year,” said Karwowski.

HireInfluence, an influencer marketing agency that has worked with McDonald’s and the NFL, has seen increased interest as well. Most of its advertising clients are raising their budgets to work with creators, according to Chris Jacks, director of growth strategy. It’s the same for the Influencer Marketing Factory, an agency that has worked with Amazon and Google, said CEO Alessandro Bogliari.

The creator economy isn’t totally immune from financial setbacks. Other aspects of the industry have faltered, as venture capital funding for creator-focused startups fell by one-third within the last year. Some experts predict many of the companies that built tools for creators will fold in 2023, unable to return their investments. But creators aren’t feeling the same effects as startups are.

Covid drove growth in the creator economy
During the pandemic, advertisers increasingly relied on creators to promote products because actors and models couldn’t get together to do photoshoots or make commercials. As a result, companies learned how cost-effective creators can be over traditional advertising mechanisms, like television and print, said Nick Reisch, vice president of talent at Viral Nation, an influencer marketing and talent agency. Viral Nation represents creators like Steven He, who has 8.38 million YouTube subscribers, and Cole Walliser (11.4 million, TikTok).

“The creator economy is less impacted by the ups and downs of the economy because ultimately, creators can get a lot of scale with slimmer budgets than, say, TV commercials,” Reisch said.

Tiffany Yu is another social media creator benefiting from the advertising economy. Yu advocates for disability awareness to a TikTok following of 118,000 and an Instagram following of 27,300. Despite not being a full-time creator, she grossed $105,000 from social media last year, 60 percent of which came from sponsorships, she said via email. That almost doubled her 2021 earnings of $55,000.

She currently has $29,900 in sponsorships lined up for 2023. For the last two years, the bulk of her deals came through in April, she said.

Companies have a new relationship with creators
As spending has increased, the relationship between companies and creators has changed. Companies are becoming more selective with their influencer campaigns, said Jessica Waxer, vice president of agency services at NeoReach, an influencer marketing company that has worked on campaigns with Netflix, Airbnb and Walmart. NeoReach has also seen an uptick in spending, with more than half its clients increasing budgets by at least 20 percent, said Waxer. The clients that didn’t commit to increased spending are keeping their budgets consistent year-over-year, rather than decreasing them, she said.

But rather than paying for seasonal or holiday-based campaigns like they did in the past, advertisers are taking a more evergreen approach, she said. Creators are becoming spokespeople for companies and modeling in print campaigns, she said. Sharlize True, a dancer and lifestyle influencer with 3.1 million TikTok followers, shot a print campaign last year for Tillys, a retailer with 250 locations concentrated on the east and west coasts. The back-to-school photos appeared in stores, and the company now sells True’s fashion line, TrueWrld.

Creators are also making videos promoting products for businesses that post them on their own social accounts, in response to data that shows user-generated content leads to increased viewership and sales, Waxer said. By repurposing creator content for advertisements, companies don’t have to spend as much time and money creating their own ads as in the past.

Ever since Apple’s iOS 14.5 update, released in April 2021, iPhone users can opt out of data tracking on its apps. As a result, advertisers have limited ability to target specific audiences and determine if their ads are working. Paid marketing on social media continues to be a challenge for advertisers, said Karwowski, the Obviously CEO. It is more cost effective to use creator-generated content on a site’s own social media and in targeted ads, she said.

Resident creators are also becoming increasingly popular, said Denver McQuaid, a gaming creator who also works at his own social media marketing and management company. These creators are exclusively signed to a company and produce a number of posts in a certain period of time. Tzeng, the Las Vegas food creator, has been a resident creator for local restaurants Partage and Golden Steer Steakhouse. According to Open Influence’s report, 77 percent of marketers prefer long-term relationships with influencers.

The creator economy also offers companies more data than traditional advertising mediums. Advertisers can track consumers from a post to a click to the website to a sale, knowing how much time a user spends on each step. Television, radio and print aren’t as trackable. While a magazine ad might lead to a sale, the advertiser won’t know where the sale originated.

“Brands are realizing marketing with creators isn’t just about brand awareness anymore, but about driving their audience down the funnel (toward a sale),” Waxer said.

The different sponsorship and ad opportunities for creators also help stabilize their incomes. Revenue for creators is notoriously unstable. But wages from these jobs are more predictable, because influencers can produce a large amount of content and schedule it ahead of time, Waxer said.

Increased ad dollars aren’t being spent on all creators
But not all creators are benefitting from the increased interest from advertisers. The creator economy is already lacking a middle class—creators that aren’t necessarily household names but earn livable incomes. As companies become increasingly selective about which creators they work with, that miniscule group of middle class creators are in jeopardy. Many influencers who have been working for years are making less money than ever before.

Andrea Mathis (144,000 Instagram followers) began posting nutrition and body positive content in 2017. Her following started to multiply the next year, and her income from social media caught up to her salary as a food and nutrition director at a long-term care facility, so she quit the latter job. Her earnings increased the following years, but in 2021, her income took a hit. Companies canceled sponsorships with her, saying they didn’t have the budget, Mathis said. She didn’t disclose which companies these were as she hopes to work with them in the future. In 2022, two companies canceled contracts worth a total of $34,000 due to budget constraints, she said.

Food photographer and recipe writer Amanda Powell (17,700, Instagram) had a similar experience. She left her insurance job in 2013 and has been running her social media accounts full time for a decade. In 2021, she signed and executed a $10,000 contract to develop four recipes and to film accompanying videos. The contract was supposed to be renewed, she said, but in 2022, she received a contract worth half the money for the same output. The company told Powell it is not moving forward with this year’s contract, but it plans to reach out later in the year with a short-term opportunity, she said. Powell also didn’t want to disclose the company to preserve her relationship with the advertiser.

“Brands are spending a lot more, but they’re also really savvy to what they want and picky for who they want to work with,” said Karwowski. This is in part because many companies have already experimented, and they have engagement data to reference rather than just follower count. A creator with 10 million followers might receive the same number of views as someone with 1 million. Companies could pay the latter creator less than the former, based on follower count, even though they would be reaching the same number of consumers, said Brian Sorel, a NeoReach executive.

Because there are so many social media creators, it is also more difficult to start out as an influencer than in the past, said Reish, the Viral Nation executive.

“The good part is there’s more money,” said Karwowski. “The bad part is there’s more people playing for it.”