If the name Txunamy doesn't ring any bells, you're probably not a tween girl. The 7-year-old fashionista has nearly 700,000 Instagram followers. But Ezra Dabah knows Txunamy well: When the former Children's Place exec was looking to bring brand awareness to his startup, Kidpik, he decided the best way to reach his target audience of young girls wasn't with print ads or Facebook posts, but by enlisting a small army of pintsize social-media stars.

"These influencers are celebrities within their own circles," says the CEO of Kidpik, which sells clothes, footwear, and accessories. When Kidpik hired a handful of young influencers, including Txunamy, for a livestreamed fashion show, the video hit 10,000 views within an hour and racked up more than 250,000 social media impressions within a week. "Working with influencers means you're able to build a brand in ways that you were never able to do before--in a much shorter time and for much less," says Dabah, who doesn't spend any money on traditional advertising.

Later, Madison Avenue
The case for influencers as the new ad platform
22 percent
of businesses say influencer marketing is their fastest-growing customer-acquisition channel, beating out search and email marketing.
70 percent
of consumers say they would rather learn about a new product through content, such as an influencer post, than through a traditional ad.
$21.03
The amount of earned media alcoholic beverage brands got from influencers for every dollar spent on paid media. Similarly, travel and tourism brands got $18.98.
75 percent
of 600 marketers and communications reps surveyed think influencers are effective for lead generation.
$255 million
The amount companies are investing in Instagram influencer-sponsored posts per month.

Tens of thousands of social media influencers--people who develop followings of at least a few thousand followers who are open to endorsing a product or service--are being hyped as the latest media property. According to social-media analytics firm Captiv8, companies are shelling out an estimated $225 million per month for sponsored posts on Instagram alone. While mega-stars like LeBron James and Kim Kardashian rake in hundreds of thousands of bucks from big brands for a single tweet, it's the smaller companies--from health and home goods to travel and transportation--that are really fueling the influencer craze. "Instagram is almost like a new form of Google," says Michael Heller, founder of Talent Resources, an agency that represents 2,000 influencers. "When consumers reach for their mobile phones, they're looking at social media first, and companies want to be part of those comments, pictures, and videos."

In the early days of influencer marketing, reach reigned supreme. But marketers now understand that finding the right fit is more important than buying the biggest audience. If those millions of eyeballs aren't actually engaged--if they're mostly sports nuts and you're selling cupcakes--influencers are never going to impact your bottom line. "We've had influencers with 10,000 highly engaged followers drive tons of sessions and sales to our site, and we've had influencers with 10 times as many followers drive very few sales," says Claudia Naim-Burt, head of content for custom framing startup Framebridge, who has hired home decor and lifestyle influencers. Before you get swept up into the follower frenzy, ask for an influencer's demographic details and engagement stats, suggests Talent Resources' Heller.

When considering cost, influencer fees typically correspond with the scale of their following. On average, those with 50,000 to 500,000 followers charge $2,500 for YouTube, $1,000 for Instagram or Snapchat, and $400 for Twitter--per post--according to Captiv8. But many startups have found that influencers are willing to work for far less, often in exchange for a company's product or service. Framebridge has offered influencers free picture frames in exchanged for sponsored posts. "Every single influencer we've worked with is different, in terms of expectations, how you can work with them, and how much they charge," says Naim-Burt. "It's a unique aspect of the beast."

Content also needs to stay flexible. Zev Ziegler, head of global marketing for ingestible cosmetics company Lycored, says a marketer's instinct to rigidly control the message can trip up even the most seasoned professionals. "At first, we'd approach every influencer with a very specific idea and all of the details nailed down," he says. "Then we started to hear from them: 'We'll work much harder for you if you let us have a voice and feel like we're part of this campaign too.'"

To promote a recent video on "rethinking beauty," Ziegler hired 15 social influencers for a month-long campaign and asked them to promote the video along with sharing their own thoughts around what makes them feel beautiful. The video was watched more than 63,000 times and racked up 1,000 comments--"engagement at a much deeper level" than the small company's other campaigns, he says.

If the thought of entrusting your brand to social-media stars makes your palms sweat--Does that beer can in the background send the wrong message? Is this photo sexist?--you can still give guardrails. Simply include a review clause in the contract or ask the influencer to submit three potential posts to choose from. "You can cede some creative control and still protect the brand," says Heller.

No contract will safeguard you from every potential embarrassment--say, a headline-grabbing DUI the day after a sponsored post--but that's a risk companies run every time they hire someone for a print or TV ad as well. "The difference with social posts is that you can get it deleted almost immediately," says Heller. "That's harder to do with a billboard."

Still, don't be afraid to pull the plug if the influencer's posts start to diverge from your target demographic or the expected engagement doesn't. "There's a lot of hype going on with influencers," says Kidpik's Dabah. "You have to be willing to experiment, but you also have to be careful."

FROM THE FEBRUARY 2017 ISSUE OF INC. MAGAZINE