The economics behind becoming an Instagram influencer

The economics behind becoming an Instagram influencer

Not too long ago, it was unimaginable that posting content on social media could classify as genuine employment. But the notion that digital platforms can’t provide an occupation for its users hasn’t aged well. Some of today’s most successful pop-culture icons rose to fame on platforms like Instagram rather than the silver screen. In light of this, what does the rise of Instagram, its influencer economy and digital media marketing on Instagram mean for our economy? At a glance, Instagram’s existence has impacted the labour market and living standards.

Digital media marketing has proven itself as an invaluable tool for the success of firms. Platforms such as billboard and magazine advertising once consumed large portions of corporate marketing budgets, and yet arguably did not provide businesses with the intimate access to potential customers that Instagram and influencers now do.[1] Indeed, Daniel Wellington, which sells watches, bypassed all traditional forms of marketing and harnessed influencers by gifting them watches in the hopes of exposure.[2] Their innovative marketing strategy certainly contributed in making them one of Europe’s fastest growing companies throughout 2013 to 2015.

The intimate reach of Instagram makes it attractive and cost-effective to firms. Equally important are the sophisticated data analytics tools available and the highly committed userbase. Instagram users spend approximately 28 minutes per day scrolling their feeds, of which a high proportion are ads. Nowadays firms can reallocate their precious funds to appear on these feeds through stories and posts which target highly specific communities.[3] Firms can also select segments from Instagram’s overwhelming potential advertising base of 849.3m users which translates to boosted sales if their offerings are attractive.[4] Instagram’s ad revenue is projected to be at $12.32b in 2020, indicating just how willing firms are to pay for access to this huge pool of potential customers. This expenditure is the reason being an Instagram influencer is considered a legitimate vocation.

Would you trade your nine to five job for the unconventional gig of flaunting your life’s vibrant highlights reel? Many would label this a foolish aspiration, yet current monetary incentives refute this. The trend of blogging was given a new life post-2010 when Instagram launched, as the platform enabled users to produce more concise, frequent, and attractive content. US firms these days spend 69% of their influencer budget on Instagram and pay up to $3,500 per post depending on the influencer’s engagement and following. What’s worth considering is that individuals who amass such an audience have virtually no limit to the amount they can post[5]. This is why we are seeing more people than ever around us becoming Instagram influencers – it comes down to economic fundamentals, which we illustrate in Microeconomics 101 graphs some of you may be familiar with. The higher the wage that is offered, the higher the number of candidates in the labour supply that are willing to work.[6] We represent this with the ‘LS’ curve. Theoretically, we could hypothesise that following Instagram’s launch in 2010 and subsequent growth as a major promotional platform, real wages have risen from w (2010) to w (2010+). This has led to employment levels rising from E (2010) to E (2010+) which is a fairly intuitive reason as to why more people than ever are pursuing the influencer lifestyle.

Whilst the trend above may have been the case when Instagram first burst onto the scene, things may have changed since then. The second diagram illustrates the hypothesised response overtime from Instagram influencers. As individuals began to realise the fruitful opportunities available through Instagram, a gradual oversaturation of influencers has likely occurred. If so, this would cause the Labour Supply curve to shift down and to the right to (LS2). As a consequence, employment levels would increase to E(S) whilst real wage levels decrease to w(S). Without hard and fast data on the wages of influencers, it’s hard to tell for sure what the industry is like exactly for influencers currently. In any case, it’s clear that becoming an influencer is a more legitimate and widespread vocation than ever.

Brands utilise celebrities with millions of followers all the way down to Nano-influencers which have 1,000 to 10,000 followers which opens up the door for many.[7] Whilst being an Instagram influencer might not be the most conventional path to take, the return makes it an alluring option for many.

As most of us probably reside in the group of normal Instagram users, how does Instagram marketing impact upon us? Arguably, Instagram enables a wider range of people to criticise and have their input on new products. Anyone can heart-react the launch of a new product, but negative reviews can also be seen instantly by millions. One could argue that brands need to be more aware of customer desires than ever. The ability to target highly specific communities through Instagram advertising also means that brands have the opportunity to differentiate their products and really cater to individual needs more than ever. We would hope that the consequence of this is that we as consumers are exposed to a greater variety and higher quality of product. In saying that, Instagram also has the capacity to decrease our non-material living standards by deteriorating our mental health. It is widely known that watching other people’s highlight reels on Instagram and comparing ourselves to these unrealistic images is a key factor in diminishing mental health.[8] We must be aware of the illusion that social media can play on us to bypass these potential issues.

The rise of Instagram is heavily intertwined with how firms increasingly leverage digital marketing strategies. It now also provides a viable alternative to traditional forms of work, and influences society’s (non-)material living standards. Its wide-ranging impact on how we live and do business signals that the dynasty of Instagram is in full swing.

[1] Darma, E., 2018. How Instagram Influencers Make $1,000 Per Post & How You Can Too – Elise Darma. [online] Elise Darma. Available at: <>.

[2] Brooks, A., 2018. 7 Unexpected Ways Instagram Has Changed The World. [online] Social Media Today. Available at: <> [Accessed 23 March 2020].

[3] Conick, H. (2019). From Knowing Alexa, to Following @Alexa, to ‘Hey, Alexa’: THE EVOLVING MARKET MAVEN. Marketing News, 53(4), 40–49.

[4] Newberry, C., 2019. 37 Instagram Statistics That Matter To Marketers In 2020. [online] Hootsuite Social Media Management. Available at: <> [Accessed 22 March 2020].

[5] Johnson, T., 2020. How Much Do Influencers Charge?. [online] Tinuiti. Available at: <>

[6] Mishkin, F., 2016. The Economics Of Money, Banking, And Financial Markets. 11th ed. Pearson.

[7] Mediakix. 2019. What Are Nano-Influencers? Definition, Top Nanos, Campaigns, More. Available at: <> [Accessed 23 March 2020].

[8] Macmillan, A., 2017. Why Instagram Is The Worst Social Media For Mental Health. [online] Time. Available at: <>

Photo by Georgia de Lotz on Unsplash