#How Influencers Get Paid

#How Influencers Get Paid: Understanding Monetization and Legal Compliance

First, what exactly is an influencer? According to Merriam-Webster, which added the term "Influencer" to the dictionary in 2019, an influencer is "One who exerts influence: a person who inspires or guides the actions of others." More specifically: "A person who is able to generate interest in something (such as a consumer product) by posting about it on social media". Today the influencer industry is valued at hundreds of billions, making it the largest (and one of the most effective) advertising channel and including brand partnerships, sponsored content, and creator-led campaigns.

But how exactly does an Influencer make money?

• Direct Brand Partnerships & Sponsored Content. This remains the most common revenue stream. When a brand wants to reach an influencer's audience, they pay the influencer to create content featuring their product or service. Compensation typically depends on the influencer's follower count, engagement rate, niche, and campaign complexity.
• Affiliate Marketing. In this model, influencers earn commission-based income. They share unique links or discount codes with their followers; when someone makes a purchase through that link, the influencer receives a percentage of the sale. This appeals to brands because they only pay for conversions, and it appeals to influencers because their earnings scale with audience engagement.
• Platform Revenue Sharing. Many social platforms offer revenue-sharing or creator-fund programs, such as ad revenue sharing, app revenue sharing and others. These programs pay influencers based on specific views and engagement metrics.
• Product Sales & E-Commerce. Many influencers create and launch their own products (apparel, beauty products, digital courses, services) and leverage their audience to drive direct sales, meaning they keep a much larger share of revenue than traditional brand deals.
• Licensing. Influencers may also license their content to media outlets, get speaking or appearance fees, host events, or create sponsored merchandise.

Legal Compliance.

There's a critical framework to all of the above revenue streams: legal compliance. Compliance in the influencer world isn't just about the legal rules, but protecting influencers and brands, consumer trust, and avoiding serious consequences.

Enforcement:

The primary enforcer of influencer compliance is the Federal Trade Commission that requires influencers and brands to provide to clearly disclose when content is sponsored or when there is a "material connection" with a brand (payment, free product, discount, affiliate link, etc.). The FTC's "Guides Concerning the Use of Endorsements and Testimonials in Advertising" were revised in June 2023 and directly address influencer marketing, social media, and new formats (including virtual influencers).

Contracts and Agreements.

A clear written contract is absolutely essential. The deal should specify deliverables, payment terms, content usage/ownership, exclusivity, approval process, disclosure requirements, metrics, cancellation/termination rights, and so on. Contracting not only protects the influencer (scope, payment schedule) but also protects the brand (usage rights, content quality). Without a contract you risk ambiguity, delays, and legal exposure. Contracts should address tax obligations, intellectual property and ownership rights, as well as clearly allocating legal risk and responsibilities including FTC compliance.
What are the risks of Non-Compliance? Non-compliance can have serious repercussions for both brands and influencers. The FTC can issue warning letters, injunctions, and require disgorgement of profits as well as civil penalties. Brands and influencers may also face class actions under state consumer protection laws for undisclosed or deceptive endorsements. Failure to disclose sponsorships or other material connections can also result in reputational damage.

Best Practices.

Influencers should always assume that a material connection must be disclosed if you receive something of value (payment, product, discount, affiliate). Store contracts, invoices, approval emails, content versions—document everything. For brands and influencers, engage a lawyer for your brand deals, especially when content usage, exclusivity, and distribution are involved. Stay updated: the landscape evolves (new platforms, AI-generated content, live commerce) so what complied last year may not comply today. Brands should vet influencers for history and style, define deliverables and schedules, and have a clear understanding of your rights and obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.