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April 2, 2024
By: Larry Dong
Just over a decade ago, people creating content on the internet were mostly living modest lives, often working a full-time job while pursuing content creation on the side. Nowadays, many influencers create content full-time, live in massive mansions, and even give away millions of dollars. Social media and entertainment platforms have given rise to a plethora of content creators and influencers. No matter what niches there are, there’s likely someone who makes a living as an online creator whose content revolves around them whether it’s commentary, beauty, gaming, vlogging, or conspiracy theories. The presence of social media has not only paved the way for such a riveting, unorthodox profession, but also has caused ripples in businesses, and subsequently, their marketing strategies. These influencers are not only able to promote their products but also advertise other businesses, products, and services. Through sponsorships and paid ad placements, businesses around the world are taking advantage of these opportunities to push their products toward new audiences.
While influencer marketing has proven to be relatively successful, moral issues have risen surrounding the types of products and services that influencers have been promoting. Whether it’s products with mediocre attributes and quality, online courses to sell a dream of being rich or even a pump-and-dump crypto scam, some of the promotions that influencers undertake are morally questionable. This begs the question: how can consumers, marketers, and influencers themselves navigate the influencer marketing landscape today?
Through analyzing the intricacies around influencer marketing and a conversation with an NYU Professor in the marketing department, it may be possible to determine whether influencer marketing is morally justified, and even more importantly, if it’s here to stay.
To start, I decided to pose a broad question to the professor, who preferred to keep her identity hidden:
Q: “What is the Telos, or the final aim, of marketing?”
"A typical view of marketing is to generate as much revenue as possible. However, the more encompassing definition of marketing is 'creating and serving consumer needs.' The importance is to meet their needs, rather than pushing a product onto customers"
The Role of Influencers in Marketing
Now that we’ve identified the end goal of marketing, it’s essential to observe trends within the influencer marketing space. In the late 2000s, marketers found that people between 18 and 35 were harder to group into marketing buckets. The younger generation was watching less TV and listening to less radio, making their preferences very difficult to pinpoint. Accessing this demographic was very lucrative, however, as they were earning money by themselves for the first time, leading to them spending more compulsively. It was very easy to compartmentalize these customers through influencers. Want to sell tech products to customers? Send a free sample to a tech YouTuber and have them review it. Want to sell products for families with children? Partner with a family channel.
Furthermore, influencer marketing was also relatively cheap compared to television. Companies were able to have access to 100 Million viewers for less than $100K. Subsequently, smaller businesses could do the same with smaller influencers, allowing them to work with a more moderate budget. Finally, one of the biggest selling points of influencer marketing was how people generally trusted influencers. A 2016 study showed that out of 800 Twitter users, 49% of users relied on influencers for product recommendations, while 56% of the same users relied on friends, which shows why influencer marketing became so prevalent around that time. Not only were influencers an easy and inexpensive way to target customers but they were also trusted almost as much as friends were.
Courtesy of Yahoo Finance
Problems Arise
While influencer marketing has proven to be effective, recent trends have made it a riskier investment. Firstly, there is more competition for influencers at all levels, with some charging up to $500K for ad placement on one video, making it slightly less expensive than traditional television advertising. This means that influencer marketing is often dominated by companies who are willing to spend a significant amount of money, which undermines smaller businesses that struggle to accumulate the capital needed to compete.
Furthermore, brands associating themselves with influencers could be very risky. While traditional celebrities are in a carefully curated space nearly all the time, influencers are not and may occasionally say or do things out of line. This could greatly hurt brands and sponsors that associate themselves with those influencers. The reverse holds true too: influencers that associate themselves with a brand that turns out to be fraudulent also face damaging consequences.
In addition, there’s now been a disconnect between influencers and their viewers. A high-profile influencer who promotes a product like a ticket reselling service may likely never use that service themselves, as they’d likely just get invited to the events before tickets are even sold to the public. Lacking an understanding of their consumers, wealthy influencers may fail to have their viewers’ best interests in mind and may very well erode their trust over time. To take it a step further, some influencers may choose to take money from questionable businesses and sponsors, obviously not having their followers’ best interests in mind.
Q: "In the age of social media, how does online interaction shape consumer behavior, and what challenges does it present for marketers?"
"Social media makes it easier for consumers to communicate with each other. If products are very good, it’s easy for consumers to share their experiences, and likewise for poor products. Before the existence of social media, word of mouth still existed. Social media merely amplifies it, with each consumer reaching many more consumers.”
Courtesy of YouTube
“Influencer Run” Businesses
Influencers aren’t just promoting other companies’ products though, they’re also marketing their businesses too. However, these businesses have their problems, which means that most of these businesses only work with high-margin consumer-focused products that have high marketing expenses. Some examples of these are liquor, fashion, cosmetics, and fast-moving consumer goods. These influencers can generate free publicity through their following and their cheaper marketing expenses compensate for other weaknesses, giving them a competitive advantage.
Based on this information, I asked the professor:
Q: “From a moral perspective, what should marketers consider when developing and implementing their strategies especially when it comes to social media and influencer marketing?”
“Social media itself is merely a tool, so it depends on the usage and is not strictly good or bad. However, players within social media have their incentive to do certain things, like monetizing their influence. Influencers may have to balance long-term goals and short-term revenue. While they can make money in the short term, if influencers promote bad products, the cost would be the trust amongst their followers. In this sense, influencers can also promote products they like, or help their viewers find the right products depending on their interests."
However, there are many problems with social media marketing as well, for example, products that aren’t great, but still get a great reputation because of their association with an influencer. In addition, there are many ways influencers and social media can 'utilize tricks to make a product "appear [better than it is]." This selectiveness in showing certain aspects of a product again ties in with the long-term vs. short-term goals.
Courtesy of Kylie Cosmetics
Problems with Influencer Businesses
With moral considerations in mind, we can better understand the inherent problems. One of the main issues with influencer marketing is that they’re only as good as the influencers themselves. If the influencer were ever to step back from the business, the brand would lose its free advertising, and subsequently, its competitive edge. When famous actor and Deadpool star Ryan Reynolds sold his share in Aviation Gin to Diageo, part of the deal was to remain as a media spokesperson for another 10 years. While Reynolds is more of a traditional celebrity than an online influencer, Diageo knew that if they lost Reynolds, the brand would become merely another premium gin in a competitive shrinking market. Furthermore, this becomes worse when a brand is linked to a controversial individual like Kanye, which was exactly what happened when Adidas was left with $1.3B worth of Yeezys after the split. With how dependent these businesses are on the influencer or celebrity backing them, it becomes extremely difficult to match up against competitors if the influencer were to ever leave.
Next, it’s also important to note that influencers often don’t own the business. For example, KSI and Logan Paul each only own 20% of their recently popularized sports drink company PRIME, while the rest are owned by their distributor. This may become extremely problematic for the influencers long term, as they can lose the brand’s direction or be forced to support or generate positive PR for decisions they are against.
A third reason is that there are now too many influencer businesses that need to compete with one another. If too many enter the market, they risk saturating their customers. Some customers may even gravitate towards products that are not aligned with any influencers or celebrities like traditional name brands, because of the potential negative stigma around celebrity and influencer endorsements.
Lastly, influencer businesses are generally just worse than their name-brand counterparts. Most businesses that are brought to market will fail and are not as good as existing brands that dominate their respective markets. However, products backed by influencers can be kept alive as a result of good marketing. For example, Beats by Dre had a recognizable design, and being developed by one of the best music producers made it seem like an attractive option for the average consumer. However, it was on average more expensive than its competitors, suffered from poor build quality and bad sound balancing, as well as emphasizing too much bass. The marketing behind it somewhat backfired as most image-conscious music consumers associate it with an inferior product sold to impressionable people.
Courtesy of CNBC
Given the increasing importance of aligning marketing strategies with societal values, I was also curious about her thoughts on how marketers navigate the challenges posed by particularly concerning issues of sensitivity and the changing cultural landscape. The professor stated that while brands must be aware of sensitive topics, political correctness is not necessarily a bad thing. Brands should show their brand value and stance. There are certain cases where it may be challenging to take a stance. What’s important is that brands are careful of what message they’re trying to convey, understand their customer segments and that the message they express aligns with their customers’ values.
I then followed up by asking:
Q: “What challenges and opportunities do brands face when aligning with or responding to social and political movements, and how can they navigate these complexities in a manner that is both authentic and ethical?”
"This is less about marketing and more about the management aspect of the business itself. For all businesses, there’s a social responsibility. It comes down to what the business itself thinks, and what stance they want to take. They’ll have to consider operational costs, brand image, etc. Again, does the business’s value align with its customers’ values?"
"With regards to authenticity, the more important question is how do you know if someone genuinely cares about a societal issue? Consider what companies do in the past, what they’ve said, and whether it's consistent with current actions. The question then becomes how a company can show their genuine support for societal issues, without being perceived by consumers as ingenuine."
"It’s ultimately hard to define what 'taking advantage' means. Is showing empathy necessarily a bad thing? What harm could a company realistically do if they are taking advantage of these social events? These are all additional questions we have to consider when thinking about companies and the influencers they partner with."
Without a doubt, influencers have grown to be a recognizable profession in the past couple of decades. As businesses and sponsors take advantage of their popularity as a marketing tactic, there are countless issues to consider around ethical practices, as many of these influencers are directing their content toward impressionable young people. However, the future of influencer marketing is still very vague. Is influencer marketing stuck in a bubble? Regardless, gone are the days of your favorite influencer being an ordinary person with a full-time job living in a regular apartment. As influencers become richer and gain more influence, the burden of their responsibilities is truly showing. Should they continue to garner and build the trust of their followers, or sell them out for a quick buck?
Larry Dong is a sophomore studying Finance and Data Science at NYU Stern. In his free time, he delves into social media content creation and music production, and actively seeks promising Pokémon card investments.
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