Start-up connects companies with online influencers
Firm shows new way to audiences
Small, Tony Tran believes, is beautiful.
Co-founder of a Milwaukee-based start-up planting its stake in the increasingly fertile field of “influencer marketing,” Tran is taking a less-ismore approach.
Yes, Kim Kardashian has 93 million Instagram followers who eagerly applaud her plugs for Atkins Diet recipes, Hype Energy drinks and SugarBearHair chewable gummy vitamins. And a single photo of fellow Instagrammer Selena Gomez sipping from a bottle of Coca-Cola through a straw has been “liked” 6.5 million times.
But celebrities with millions of social media followers, marketing firm Captiv8 told The New York Times in August, can command fiveor six-figure fees for just one post.
That’s beyond the reach of many companies that want to promote their products by wrapping them in the air of authenticity that a review by a blogger or a mention by an Instagram star provides.
And it opens a door for entrepreneurs like Tran and his small firm, Lumanu.
“Our theory is you don’t need to have that many followers in order to influence people’s buy-
ing decisions,” said Tran, a 27-year-old Milwaukeean by way of Vietnam, South Carolina, Massachusetts (he’s an MIT grad) and San Francisco.
So Lumanu connects its clients — a video-game developer in Pittsburgh, a children’s fashion designer in the Milwaukee area, a subscription-box company in New York — with social media “micro influencers.”
These are people who are far from Kardashian/ Gomez popularity but still have maybe 5,000 to 50,000 online followers. They can be mommy bloggers, men’s fashion writers or even popular sorority sisters.
What they have in common is that they write about, say, that hot new brand of selvage jeans or post a photo of themselves wearing them in exchange for the product, and often a payment too.
Marketers are increasingly excited about using influencers because they offer an alternative to advertising and a new way to reach audiences, Jessica Liu, a senior analyst with Forrester Research, said via email.
Tran believes micro-influencers, specifically, are the way to go. Lumanu finds them, amid the ocean of Instagram, YouTube and Facebook posters, using algorithms Tran developed.
Hashtags, keywords
Analyzing hashtags, keywords and levels of response, Lumanu’s process identifies people with interests aligned to those of a client.
For example, Lumanu has been talking with Stock Mfg. Co., a menswear manufacturer and retailer that makes all its clothing in Chicago. Lumanu’s software would look for people whose posts use words that track with Stock’s aesthetic “rugged,” “vintage,” “outdoors.”
At least 70% of the person’s content must be relevant to the brand, Tran said. People in the Midwest, Stock’s home, get extra points.
That produces a list of potential influencers to use. Lumanu’s system also calculates how much each influencer likely is worth, which helps in negotiating with the person, Tran said.
From there, Lumanu would arrange for the influencer to receive either a gift card or the targeted product itself — perhaps a pair of Stock’s new charcoal moleskin chinos.
Those retail for $98, so the compensation to some influencers might end there. Depending on how much interest in the chinos they generate, though, they could get paid too.
It might be 10 cents per Instagram “like.” But in one case Lumanu paid a single influencer $1,400, for producing content across multiple channels for a cookware subscription-box company.
Lumanu has worked with about 200 influencers. Most are true enthusiasts for fashion or whatever else they post about, Tran said. A few are just out for a quick buck.
“The ones that are more in it for the money tend to be your scrappy college kids,” Tran said. “And the nice thing about our system is we can match the right type of people to the right type of campaign.”
Lumanu connected Schell Games with influencers who uploaded YouTube videos of themselves trying out the Pittsburgh firm’s new virtualreality game, “I Expect You to Die.”
The result: more than 700,000 views of the videos, and a happy client.
“We were really pleased with that, given our limited budget,” said Jill Sciulli, director of marketing for Schell.
'Dangerous trend'
The rise of social media influencers has generated some controversy. Federal Trade Commission rules call for them to clearly disclose if they receive free products or payments for their posts.
But most of the time influencers don’t do that, said Kristen Strader, who coordinates an effort by advocacy group Public Citizen to combat advertising it views as unethical.
In a letter to FTC officials in late November, Public Citizen called nondisclosure among smaller-level influencers “a dangerous trend.”
People trust their friends more than strangers, and “micro-influencers feel less like strangers to us than the celebrities, who feel kind of out of reach and not on our level,” Strader said.
The FTC likely won’t be cracking down on bloggers with a few thousand Instagram followers. The agency says its focus usually is on advertisers themselves — last year it brought cases against Lord & Taylor and Warner Bros. — or the agencies they work with.
Tran said his understanding is that the FTC is concerned not about the kinds of people Lumanu hires but about “macro-influencers who make tens of thousands of dollars.”
Lumanu encourages its influencers to disclose, but doesn’t police them, Tran said.
“If someone’s getting paid more than, like, $200, we do ask that they disclose it, but otherwise it’s up to them,” he said.
Tran is among entrepreneurs attracted to Milwaukee by the start-up accelerator program at gener8tor, which he completed last fall.
A friend from MIT had gone through gener8tor training earlier. So had a teaching assistant for one of Tran’s algorithm classes at MIT, and those two, coincidentally, had been on the same high school math team in South Carolina.
“Small world,” said Tran, who came to the U.S. from Vietnam as a child with his parents.
He said the gener8tor program proved very helpful.
Exit strategy
“I’m more technical,” he said. “I know how to build products, and I would like to think I know how to build a business, but there are certain aspects of being a founder, like fundraising and so forth, that I just never had experience with.”
Gener8tor has invested in Lumanu, and both have offices in the same co-working space, Ward 4, at 333 N. Plankinton Ave.
Lumanu has five fulltime employees, including Tran and co-founder Paul Johnson, and three who work part-time.
“I think we’ve proven that people really want to buy what we have to offer,” Tran said. “It’s a matter of scaling it up.”
That’s the immediate task at hand. But he said he and Johnson already have spoken with potential purchasers of their barely-year-old company.
“I think there’s a real possibility within, say, three years, that we get acquired by a big agency or a big social media management platform,” Tran said.