Earn More from Brand Deals: Equity Compensation

The rise in popularity of TikTok has allowed individuals to grow their NIL in new, unimaginable ways. This fosters an intense competition among influencers for the best brand deals, and more importantly a paycheck for endorsement. So how can influencers earn more from brand deals?

Compensation is the main draw for influencers to enter a brand deal agreement. But what exactly does compensation mean? Compensation refers to the income an influencer receives for fulfillment of services. The compensation section of an agreement will outline the monetary payment, method of payment, and timeline of payments. Typical compensation is a sum of money, either in a lump sum payment or scheduled payments over time. However, compensation is not limited to sums of money. Compensation can come in the form of equity, with the three main types being stock options, restricted stock units, and performance-based equity.  

Stock options in this context is a brand offering an influencer the opportunity to buy shares of their company at a set price after a certain period of time. This option will require the influencer to purchase these shares with their own money in order to own them, with the risk falling on the influencer. This option would typically be coupled with some other type of compensation, since it would not be a sufficient form of payment by itself. When a brand offers restricted stock units, they are granting actual shares to the influencer though after a certain specified time. This option does not require the influencer to contribute their own money, but to wait until the shares have vested. An influencer may be offered performance-based equity, where they are able to earn shares as long as they meet specific performance goals. While this will be specified by the company in the agreement, examples may be certain sales goals or engagement metrics. In this sense, the influencer’s compensation is directly related to the success of the brand.  

Why is this important? Many new influencers will focus on short-term profits like lump sum payments. However, it is important to understand the potential long-term gains with equity compensation. With equity compensation, influencers will earn passive income for as long as they hold these shares, likely well beyond the term of their brand deal. It’s key that influencers know their options and negotiate their terms to their best interests. Learn more with CEJ Deals.