Niche: Winning the Race to Become a Digital Advertising Marketplace for Social Media Stars

How digital and social media have spawned a new generation of advertising agencies, and why companies like Niche have been able to capitalize.

Social media celebrities can reach a lot of people with a single post.  Each new platform has turned dozens of “normal” people into online personalities that command the attention of millions of eager listeners.  Whether it’s beautiful pictures on Instagram, bedroom song covers on YouTube or funny 6-second clips on Vine, creators have found endless ways to captivate the attention of their legions of followers.

The time that people spend consuming this content is time that they used to spend consuming more traditional forms of media: TV, magazines, newspapers.  The consistent thread between these mediums is that they are all funded heavily by advertisements.  So as engagement has shifted, so have advertising dollars.  The problem is, these brands don’t have the bandwidth, or the means, to get in touch individually with content creators.  And the content creators aren’t experienced or business-savvy enough to properly conduct regular negotiations for their services.

Enter companies like Niche.  The New York Times describes niche as “a talent scouting service and advertising agency rolled up into one – it matches social media stars with marketers and advertisers who want to reach the young users who inhabit those platforms full time.”¹  Niche has successfully capitalized on the convergence of two market forces: digitization and social media.  Niche has been able to build its business around the traditional agency model, where it takes a cut of all of the advertising deals it brokers, while taking advantage of its digital nature to do so at a scale much larger than its headcount would normally indicate.  Niche can manage all of its clients from an office in New York City, despite the fact that its clients are spread around the entire world, because it operates in the digital world, the same world in which its clients live and breathe.

It’s working out pretty well for Niche.  The company was acquired by Twitter for a rumored $50 million, and prior to acquisition was already at a $1 million per month revenue run rate.²  It manages over 6,000 clients despite it’s small operating team, and has signed some of the biggest clients in the industry.  Names like Nash Grier and Jerome Jarre may not have the same cache as Taylor Swift or Beyonce, but they have social media followings that rival that of any traditional celebrity.  These online celebs can earn over $100,000 per sponsored post, which spells good news for companies like Niche in this new digital economy.³

If companies like Niche and the clients they work with can maintain authenticity for these paid endorsements, everyone stands to gain.  Brands will reach a highly concentrated, highly segmented group of users that should translate into more effective advertising campaigns.  Content creators will be handsomely rewarded for their broad reach.  Social media platforms will become even more cemented into the fabric of our lives.  And companies like Niche, with their powerful “influence algorithms” will be able to efficiently represent thousands of clients across the globe, earning their keep as the new generation of advertising agency.  One can imagine that they could continue to expand and take on other parts of the value chain, including campaign creation, analytics, and execution.  All of which positions them to win for many years to come.

 

¹ https://www.niche.co

² http://recode.net/2015/02/11/twitter-buys-niche-a-social-media-talent-agency/

² http://www.capitalnewyork.com/article/media/2014/03/8541139/niche-hit-1-million-revenue-month

³ http://www.racked.com/2014/5/28/7596421/niche-social-media-celebrities

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Student comments on Niche: Winning the Race to Become a Digital Advertising Marketplace for Social Media Stars

  1. Nice write-up. I hadn’t heard of Niche, but I think the company is targeting a very interesting market. I’ve tinkered with similar ideas (more from a software platform angle) providing celebrities and regular individuals with the ability to tag items in their posts (IG, FB, twitter, etc) and in turn, get compensated for it. What Niche does, that you point out, is definitely more people focused. While I think it’s easier to get off the ground with this approach, I’d be interested to find out what/how much work goes into each additional client and whether they can continue to scale. Thanks for sharing.

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