Brands Rethink Use of Influencers Given Widespread Fraud

Companies that have been paying social media influencers billions of dollars to promote their brands are thinking twice about the practice given there is no practical way to measure its impact. Some influencers have also alienated brands by deliberately inflating their number of followers or angered consumers by promoting products they don’t actually use. Early adopter Ipsy, an online cosmetic brand, for example, has recently pulled back on using online influencers, whose posts have been compared to 30-second TV ads.

The Wall Street Journal reports that, “HypeAuditor, an analytics firm, investigated 1.84 million Instagram accounts and found more than half used fraud to inflate the number of followers.” University of Baltimore statistics professor Roberto Cavazos estimated that, “influencer deception will cost advertisers $1.3 billion this year,” even as influencer marketing agency Mediatrix reported that influencers have earned 50 percent more per year since 2017.

Ipsy chief executive Marcelo Camberos noted that, “the loss of trust undermines the power of influencers.” InfluencerDB, which provides tools for brands to manage influencer campaigns, reported that engagement rates are “down this year, compared with the same period last year.” Still, “advertisers can’t ignore social media” with Mediakix estimating that, in 2019, companies will spend between $4.1 billion and $8.2 billion worldwide on influencers.

Media buying agency Zenith reports that figure is “up from $500 million in 2015, but still a fraction of the $624.2 billion companies will spend globally this year on advertising.”

On Instagram, an influencer with 10,000 followers can earn $200 for a post, up to “more than $500,000 for celebrities with millions of followers.” Just how big these payouts can be was revealed when singer Ariana Grande, who has 165 million Instagram followers, sued Forever 21 for using a look-alike model for its Instagram posts and website. Her lawsuit stated that, “the market value for even a single Instagram post … is well into the six figures.”

Among those companies rethinking their use of influencers is Banana Republic, which has used “Olivia Palermo, a socialite with 6.2 million Instagram followers.” It’s now using “real-life shoppers pos[ing] in their favorite Banana Republic outfits on Instagram, in exchange for $150 gift cards.” Online stationery retailer A Good Company, pays its 4,000 influencers in cash or gift cards in exchange for social media posts.

Meanwhile, it is cheaper and easier than ever to buy fake followers; so-called click farms “sell 1,000 bogus YouTube followers for as little as $49,” and the same number costs $34 on Facebook and $16 on Instagram, according to GoSecure cybersecurity researcher Masarah Paquet-Clouston.

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