EXPRESS: Buying Future Endorsements from Prospective Influencers on User-Generated Content Platforms

Abstract

Excessive monetary compensation and existing contractual agreements of influencers limit the ability of many firms to engage in effective influencer seeding. We suggest a forward-looking approach of targeting prospective influencers—while they are still largely unknown (e.g., a few months after their platform registration)—and signing them to endorse the firm in the future (e.g., more than a year later). This approach has the potential to significantly reduce costs. However, as only rarely do newly registered users ultimately become influencers (and as signals are weak), we propose a novel framework to cope with this rare-event problem. For empirical demonstration and application, we conduct data-based simulations using a dataset from a worldwide leading audio platform. Every wave of newly registered users is associated with a profit potential stemming from future endorsements by prospective influencers. With knowledge about the order of magnitude of the return on successful influencer spend, applying the framework can extract around 20% of this profit potential (if the return is around three times the spend).