In 2026, a brand deal is no longer reserved for Hollywood actors and top celebrities. A teenager posting their makeup routine for school, a chef who shares quick and easy recipes, a gamer who streams late into the night are all possible vehicles for advertisement. The global influencer marketing industry is worth an estimated $34.1 billion this year. This is an industry which is ever-growing, with the supply of influencers steeply increasing. As the creator economy booms, and platforms multiply, basic supply and demand theory should predict falling prices - so why are top influencers earning more than ever? To understand this, we must think beyond a standard supply and demand analysis, and recognise the unconventionality of the influencer market, as one that is split between two main sectors, each of which behave differently.
Traditional advertising is in crisis. Influencers are increasingly being used to promote brand deals due to declining trust in traditional advertising. Platforms like Tiktok and Instagram mean we are being fed hundreds of short clips a day, whilst banner ads are ignored and television audiences decreasing. This means that the only way to get through to younger audiences is through influencers: trusted and authentic voices who have already built an audience of engaged followers. In economic terms, this represents a rightward shift, or increase, of demand. Brands that once spent their entire marketing budget on television spots or magazine spreads are allocating vast sums to creator platforms. For example, gymshark operates on an almost entirely influencer based advertisement system and has built its entire brand almost exclusively through Instagram and Tiktok. Not only is demand for influencers increasing, but it also represents a structural change - brands are committing to this new form of advertisement. A rightward shift of the demand curve, ceteris paribus, leads to an increase in price level. And for a while, influencers were being paid vast amounts for short clips promoting brands, until supply responded.
Theoretically, there is no barrier to joining the influencer market. Anyone with a smartphone can make a video, and, with enough perseverance, could become viral. The result of this is a vast increase in supply - tens of millions of people call themselves influencers. This leads to an outward shift of supply. This increase in supply should, in theory, if demand remains constant, decrease average prices as more influencers compete for the same brand deals. This can be seen among creators with fewer than 100,000 followers, known as micro-influencers. On platforms such as Tiktok and Instagram, many creators charge between £100 and £500 for a sponsored post. Others accept products or commission based payments instead of a fixed fee. The vast number of creators means that brands have an abundance of substitutes to choose from if an influencer demands too much. Companies can easily find others with a similar audience and engagement rate. At this level, supply is highly elastic, even small increases in potential earnings attract thousands into the market. Yet despite this apparent oversupply, the influencer economy has not experienced a universal decrease in prices.
This creates a paradox. Despite such a dramatic increase in supply, influencers are earning more than ever. The answer lies in market segmentation. The influencer market is not a single market but a collection of interconnected markets with different competitive conditions. While micro-influencers operate in an environment that resembles perfect competition, mega-influencers occupy a very different position. Their supply is highly inelastic because their personal brand, audience and reputation cannot be replicated. These influencers benefit from strong product differentiation and this makes them imperfect substitutes for one another. This is similar to a monopoly, where firms sell differentiated products and therefore retain some degree of pricing power. As a result, brands continue to pay enormous premiums for access to elite creators. For example, Kylie Jenner reportedly charges around $1.8 million per instagram post. This price has risen over time despite market crowding. Prices at the top end have remained remarkably resilient because scarcity still exists where it matters most, in attention and influence.
Platform dynamics further complicate the economics of brand deals. Although influencer marketing is often regarded as a single industry, platforms such as Tiktok, Instagram and Youtube each operate under different market conditions. Youtube rewards longer content, requiring greater investment of time, editing and production quality. These higher barriers to entry limit the number of successful creators and allow established channels to maintain stronger market positions. As a result, advertising rates and sponsorship fees tend to be higher. On the other hand, Tiktok has one of the lowest barriers to entry on social media. Its algorithm allows unknown creators to achieve viral success quickly, increasing competition. This places downward pressure on prices, particularly among smaller influencers. Instagram occupies a middle ground. Historically, its emphasis on photography has favoured established, polished creators. However, the introduction of Reels has pushed the platform towards Tiktok style short-form content, once again increasing competition and supply. Therefore, the elasticity of supply greatly varies across platforms. This helps to explain why sponsorship rates vary even among creators with similar audience sizes. Barriers to entry differ by platform, affecting supply conditions.
However, it is important to consider whether influencer pricing truly reflects a free market. A number of factors distort the standard supply and demand. Talent agencies negotiate on behalf of creators, often securing higher fees than would emerge through direct competition alone. Social media algorithms determine which creators receive visibility and therefore access to lucrative sponsorship opportunities. Furthermore, exclusivity agreements can restrict supply by preventing influencers from working with competing brands. As a result, market prices are not determined solely by the interaction of buyers and sellers. The industry appears to be evolving into a dual structure: near-perfect competition among small creators, and an oligopoly at the top, where a relatively small number of influencers hold a disproportionate share of advertising expenditure. Looking ahead, these dynamics may be transformed further, through the emergence of virtual influencers. Lil Miquela proved that AI generated personalities can attract audiences without the costs associated with human influencers. This could potentially reduce the scarcity that currently supports high influencer earnings.
Ultimately, the economics of influencer marketing reveals a more complex picture than a simple supply and demand diagram can illustrate. Rising supply has undoubtedly lowered prices for many micro influencers, yet this has not affected mega influencers in the same way. Their audience loyalty creates an inelastic supply that allows them to command high prices despite increasing competition. Economics helps to explain why the market is structured this way, but culture determines who possesses influence in the first place. Attention is the scarcest resource in this market, and those who capture it hold extraordinary market power.
Ava Twum-Ampofo