Amidst the plethora of social media channels (Facebook, Twitter, Snapchat, etc.) and the decreasing impact of the traditional advertisement strategies, a new type of marketing gurus, the social media influencers, have debuted in the marketing scene and talent and advertising agencies are facing a terminal battle unless they adapt to utilizing this new breed of marketing stars. This article is the first of a duo that discuss who are these influencers, how can agencies collaborate with them to maintain their relevance within new advertisement channels, and what kind of agreements govern this collaboration?
An influencer is an individual who has built a strong relationship with a significant number of followers online through one or more social media platforms, and whose actions and recommendations simulating the traditional word-of-mouth impact the behavior of his/her followers. On the other side of the equation we have the advertiser, usually a brand or a company that engages the services of the influencer to promote its products or services. In the middle connecting the two we find the agencies, be it advertising agencies, media agencies or talent agencies. A combination of the three is often employed to identify and employ the correct influencer within a framework of a marketing campaign, and produce media content around the deployment of the influencer work. Talent agencies in particular identify the best influencers for different niche markets and usually acquire exclusive rights to market and sell their services to companies/brands by building strategies and campaigns around them. In 2015, when eMarketer launched a survey about influencer marketing, 84% of marketers surveyed said they planned to launch an influencer campaign within 12 months. These figures increased and continue to increase at a great speed in 2016 and 2017.
The agreements that govern this 3 or 4 party relationship are commonly are (i) the Influencer Representation Agreements, entered between the influencer and the agency (mostly a talent agency); and (ii) the Influencer Promotional Services Agreement, entered between the advertiser (directly or through an agent). Even for lawyers who have been in media practice for decades, these agreements are a new territory. Below we set out the main terms commonly seen in an Influencer Representation Agreement:
The Terms of Influencer Representation Agreement
- Appointment of the Agent: Naturally, the agency appointment provision is prominent with the agreement. It is the provision through which the influencer appoints the agency to act on his/her behalf in the marketing of the influencer’s works and obtaining campaign mandates for him/her. This term commonly covers the parameters of the appointment, including its exclusivity and the media channels through which the agent will procure campaigns.
- Compensation: With the appointment comes the compensation of the agent for its work. Agents commonly charge between 20% and 30% of the total fees received by the influencer for services rendered through the agency. Agencies are also commonly authorized to collect payments from advertisers for influencer services deduct their fees, and pay the remaining to the influencer.
- Proprietary Rights: An important provision to include in Influencer Representation Agreements is the agency’s right to use all intellectual property produced from projects or campaigns procured through the agency. This is commonly carried out through a license provision, and while some influencers restrict such provision to the duration of the agency, agents tend to request a perpetual license.
- Duties of the Agent: To ensure that agency is contractually obliged to seek work for the influencer, it is important that the agreement carries a provision placing on the agent the obligation to undertake commercially reasonable efforts to promote the influencer’s services, and to represent him/her professionally and diligently. Prominent influencers may negotiate expanding this provision to include priorities in tendering the influencer’s services in a specific sector or to specific clients, or to oblige the agent not to represent closely competing influencers.
- Duties of the Influencer: Because the agencies payout is tied to the influencer receiving and carrying out promotional services, the agency will seek to place obligations on the influencer to act with diligence in maintaining its influencer status and public good will, and to devote reasonable time and effort to the carryout of promotional services or fulfilling requested marketing services. Agencies also seek protection from potential infringement claims by placing an obligation on the influencer to ensure that all work provided by the influencer is original and doesn’t infringe the proprietary rights of others.
Naturally, these are the major terms an influencer or an agency is expected to see in an Influencer Representation Agreement. Because of the contingent payment structure commonly followed in this market, it is advisable that parties consult attorneys familiar with these types of agreements to ensure that they are contracted pursuant to a clear and protective agreement that can provide strong grounds for redress in cases of violation or breach.
In our next article, we will discuss what advertisers and influencers expect to see in Influencer Promotional Services Agreements, and how each party may look to protect its rights with relation to the advertising campaign.