- Influencer marketing is booming, with brands spending billions of dollars to promote their products with a personal touch.
- However, the industry is unregulated, creating challenges for brands, audiences, and influencers alike.
- Influencer ads can be deceptive, discriminatory, and unethical, leaving viewers with no way to resist.
Paying internet icons and local influencers to promote their products to their loyal fans seemed like the perfect plan for marketers to get their products into the hands of their target audience.
And for most of the past 20 years, it worked like a charm.
But lately, the influencer marketing industry has gone completely off track. According to analysts and experts interviewed by Business Insider, influencer brand deals and advertising are subject to unethical business practices, in part due to limited regulation of the practice, which is rapidly increasing over the years. is said to be widespread.
Since 2016, the dollars driving the influencer marketing industry have grown from $1.6 billion annually to an estimated $21.1 billion by 2023, according to Influencer Marketing Hub. The outlet predicts the industry will reach an estimated value of $24 billion by the end of 2024.
In a recent Harvard Business Review article, researcher Emily Hand, author of the book Influencer Industry: Exploring Social Media Credibility, argues that new regulatory guardrails should be applied to the industry. He argued that: Marketers and regulators alike often turn a blind eye to bad behavior by brands and influencers alike, from discrimination and unfair business practices to outright fraud.
“While the industry has evolved into a sophisticated if chaotic space, it has largely operated outside of regulation and professional oversight,” Hund wrote. “The lack of boundaries opens the door to multi-directional exploitation. Marketers, brands, influencers, and platform companies all have the opportunity to exploit each other with varying degrees of harm.”
It's a big deal for brands
David Camp, co-founder of marketing firm Metaforce, told Business Insider that while there's nothing new about influencer marketing, it's a refined version of the classic celebrity endorsement scaled down for a niche audience. However, he said the industry faces even greater challenges. It contains a high proportion of fraud, misrepresentation, and clearly unreliability.
Fake influencers can defraud brands by buying followers, manipulating metrics to appear to have more engagement than they actually receive, and inflating asking prices for partnerships and ad deals. The practice costs companies about 15% of their advertising spend, totaling more than $1.3 billion in 2019, CBS News reported.
“This kind of negative impact is more likely in this space because a lot of online influencers are independent and are basically hustlers,” Camp said. “They're trying to build an audience so they can monetize it, but they're not typically represented by very sophisticated publicists and agents who represent them to marketers and agencies. In the traditional celebrity and influencer realm, there is an entire doujinshi mix of people involved in evaluating, vetting, and negotiating potential spokespeople and influencers.
In traditional celebrity endorsements, the people promoting a brand's products are well-known, well-represented, and have predictable results for the companies that employ them. A loyal audience of followers will pay top dollar for the products they endorse. . Think Michael Jordan of Nike, George Foreman of Salton Electric Grill, Brooke Shields of Calvin Klein. With influencer marketing, that's not always the case.
For brands, this means their investment in influencers could be wasted. Or worse, social media celebrities could use an inconvenient moment, like the 2018 California wildfires, to promote themselves or their brands and damage the reputations of those around them.
It's not good for consumers
Despite all the money flying around, the FTC provides only basic guidelines regarding influencer marketing disclosure requirements to protect consumers of content.
But only the big names seem to get caught misleading viewers, and generally only if they violate rules about disclosing paid partnerships. Camp noted that the rules governing digital media sponsorship and paid advertising are the only rules he knows of.
In 2022, the SEC settled with Kim Kardashian for $1.25 million for failing to disclose a $250,000 payment she received for promoting Ethereum Max crypto tokens on Instagram.
Similarly, influencer Chiara Ferragni was criticized for what Italian authorities described as a misleading charity campaign in which she encouraged her followers to buy a cake and donated the proceeds to a hospital. He was fined $1 million a month, but the promise was never fulfilled.
Lindsay Lohan, DJ Khaled, and Naomi Campbell are also the subject of federal investigations for failing to disclose paid partnerships, Hund noted in the HBR article. According to the nonprofit Consumer Reports, celebrities received warning letters from the FTC and were required to provide information about their relationships with the brands they were secretly promoting.
“Kardashian was an easy 'get' for regulators because she is one of the most high-profile celebrities in the world,” Hund wrote. “But there is too much sponsored content and too many influencers for government agencies to effectively oversee it all.”
Not to mention examples of influencers duping viewers into buying branded products by posting overly positive reviews of the companies they are paid to ignore quality issues and even labor abuses.
contradictory for influencers
It's not easy for influencers either. According to NBC News, Black and Hispanic content creators face a 35% pay gap compared to white creators. There have also been reports of fake talent management companies asking for a $299 “deposit” as part of a scam to scam would-be influencers.
“Creators are bearing the brunt of the uncertainty pervading the industry. Creators are faced with changing content norms, new platforms and tools, unequal contracts, high expectations for audience engagement, and the challenges of becoming a public figure. “There is little professional protection,'' Hund wrote in HBR.
Business Insider previously reported that some influencers faced racism during in-person trips sponsored by brands. Additionally, influencer Dylan Mulvaney, who has worked with brands like Nike and Bud Light, faced a barrage of anti-trans hate and harassment after posting company-sponsored content on his social media pages.
Her partnership with the brand was a reason for right-wing figures like Ben Shapiro and Donald Trump Jr. to call for a boycott of Bud Light, and the resulting threats were so bad that they even moved abroad to escape the backlash. , she said.
There's no end to the chaos in sight
Camp noted that despite known issues in the industry, influencer marketing is still perceived as preferable in some cases. Because when someone you follow and trust is promoting a product, it has some credibility over just an anonymous ad.
Although the FTC's disclosure guidelines provide some guardrails for the industry, regulators have not paid much attention to the issue.
And there are no signs of ethical conflict slowing down, especially in the world of digital marketing and advertising, with Camp saying, “There's so much smoke and mirrors that it can be hard to understand what you're actually looking at.” To tell.
“Obviously, some influencers have a higher awareness of the brands they choose to work with, but for influencers who simply want to make money off their eyeballs, They usually rush in every way possible,” Camp told BI. “Anyone with an internet connection and an idea can write about their idea and get attention, so there's a lot of shit floating around in that space, because there's really no filter or barrier. So , that tops where a small portion of the cream will rise.'
