Is the influencer bubble about to burst?

With the ‘Fyre Festival fiasco’ highlighting the myriad risks of paying celebrities vast amounts of money to promote products and services on social media, we take a closer look at influencer marketing – and how advertisers can avoid scandal.

So far, 2019 hasn’t been a good year for social media influencers. In January, the UK’s Competition and Markets Authority (CMA) clamped down on how several prominent influencers were promoting brands on platforms such as Instagram, YouTube and Twitter.

The CMA elicited formal commitments from 16 celebrities and influencers, including model Alexa Chung and singer Rita Ora, who promised to change their approach by clearly signalling when they had been paid to feature certain products or companies in their posts. The CMA’s chief executive, Andrea Coscelli, said: ‘People could, quite rightly, feel misled if what they thought was a recommendation from someone they admired turns out to be a marketing ploy.’

Around the same time, two documentaries were released that lifted the lid on the infamous Fyre Festival. The 2017 event on a Caribbean island became a sensation before it had even taken place when a bevy of models and influencers took to Instagram to promote the event. Model Kendall Jenner, actress Emily Ratajkowski and other prominent figures were reportedly paid up to $250,000 (£193,156) each to publicise Fyre, which later descended into chaos due to massive organisational failings.

The organiser of the festival, Billy McFarland, was sentenced in October to six years in prison after pleading guilty to defrauding investors to the tune of $27.4m (external link) (£21.2m). Meanwhile, it has been pointed out that the influencers have largely escaped sanctions for their part in the debacle.

Sphere of influence

So what does this combination of regulation and outrage mean for social media influencers? Once heralded as the newest, most exciting, most powerful way of connecting companies and brands with hard-to-reach consumers, has the new-media bubble burst? Or perhaps the industry is merely experiencing a period of turbulence as it matures, and will continue to reach even greater heights.

According to Ana Thorsdottir, head of influencer marketing at MediaCom, ‘not much has really changed.’ The CMA’s recent announcement might have succeeded in making headlines but, Thorsdottir says, the guidelines it issued in January ‘are not very different at all from what they were already. I think it’s just a bit of fear-mongering and a chance to get a bit of press on the back of that list of celebrities that have been told off.’

‘Clients have asked us at MediaCom how it’s going to affect them,’ says Thorsdottir. ‘It’s not, because we’ve been disclosing [advertisements and sponsored content] in our campaigns the whole time.’ And the same will be true for similarly conscientious agencies, she adds.

Boom or bust

The sector has grown quickly. As brands have cottoned on to the impact that a well-judged post can have, the fees charged by influencers have reached eye-watering amounts. YouTube prankster Ben Phillips has been paid up to £2,000 per second of content (external link) to mention certain companies to his audience of 1.2 million followers. In 2017, Mediakix estimated that influencer marketing on Instagram alone was worth $1bn (£772.5m). The company predicted the figure would double in 2019. A key reason for that growth, says Thorsdottir, is the relationship that true content creators have with their followers. ‘When you work with a content creator, you’re essentially paying for access to a really highly engaged audience on their channel.’

As a result, social media is an effective means of reaching the consumers in their teens, 20s and 30s, who can often prove difficult to persuade with more traditional forms of advertising. ‘Millennials and Generation Z are spending a lot of their money through social media and making a lot of their buying decisions based on what they see there,’ says Thorsdottir.

Statistics from market research firm Gartner (external link) back this up. The company found that 84% of millennials said that their purchasing decisions were influenced by social media content, even if they didn’t know the person who had created it.

Striking a balance

However, the things that make social media influencers effective for reaching prospective customers – the unfiltered immediacy of the content they produce and the engagement of their followers – also makes it possible for them to embroil advertisers and sponsors in messy disputes. Disney’s Maker Studios cancelled its association with one of the most followed YouTubers in the world, PewDiePie, following his use of offensive content, while The New York Times (external link) recently the revealed the way in which fake accounts and so-called ‘bots’ can be used to exaggerate the true effectiveness and reach of social media campaigns.

According to Thorsdottir, who is also a board member at the Business of Influencers, which aims to establish best practice for the industry, the best way for advertisers to avoid scandal is to work with experts in the field. ‘Make sure you hire the right team – preferably specialists. They’ll have the right contacts and brand protection in place. They will know what the guidelines are, how to get the best out of the influencers, how to get the best out of the brief and the budget. The other advice is to have a bit of faith. Do a test-and-learn, which you can still do with a small budget. See if it works with your brand and then, once you have some proof, you can scale it.’

But, Thorsdottir warns, that doesn’t mean you should try to do influencer marketing ‘on the cheap’. ‘It’s not going to be done right and the due diligence is not going to be there.’ As we’ve seen recently, that’s how things go awry.