Deep within the jungle, an unspoiled city of boundless gold, bursting with treasures. A city of unlimited potential just waiting to be exploited. Such was the alluring description of the fabled city of El Dorado, which sent many a greedy, overly ambitious yet simple-minded conquistadors to their deaths within the depths of the Amazon. It is the most beautiful fiction I have ever seen, as it is everything for everyone. For academics, a pristinely preserved site of mesoamerican culture, for adventurers a thrilling foray into the jungle but for most, it was an endless repository of economic value in gold. El Dorado is perhaps the purest form of unadulterated wishful thinking, the likes of which have never been seen ...  until Influencer Marketing.

Influencer Marketing is using endorsements from Social Media Influencers to advertise a product. For the uninitiated, ideally, Social Media Influencers are people with the power to affect the purchasing decisions of others because of their authority, knowledge, position, or relationship with his or her audience which is often dependent on the size of their following. They usually range from niche influencers with a respectable 50000+ followers in a particular demographic to mega influencers like the Kardashians. Just like El Dorado, it was seemingly the answer to all problems and needs at once.

For startups, it was a rather cost-effective way to gain word of mouth appeal, for brands serving niche markets it was a good way to be in direct contact with their target demographic, for bigger companies it was a way to visibly associate their brands with a particular lifestyle. All at a time when traditional marketing was showing diminishing returns despite lofty price tags. It has increasingly become the gold standard in the past decade for companies targeted towards Gen Z and millennials.  But a critical examination of this phenomenon reveals that it might not be as economically effective as we think, more importantly in an increasingly brand-conscious world they might just end up corrupting your company’s very identity.


The Psychology of the Influencer Marketing

Marketing Researchers have been espousing the exploitation of the so-called highlight reel effect of social media since at least 2014. The idea is that when ‘influential’ people tend to post mostly flattering or humblebrag-worthy stuff about themselves, they create an aspirational aura around them. Given the inordinate amount of time we spend absorbing these gilded depictions of other people’s lives eventually, albeit subliminally, we go from appreciating them to emulating their lifestyle.

Here’s a thought experiment, who would you rather believe:  the multi-millionaire legendary scream queen Jamie Lee Curtis, who lives in a mansion on Beverly Hills, telling you that she consumes Activia Yogurt to keep herself ‘regular’ and hence so should you- or - your favourite Instagram mom of 3 telling you the same, while her Social Media page visibly documents her maintaining a healthy lifestyle. Probably the latter. Unlike conventional celebrities or paid product endorsers, influencers tend to be viewed by their followers as trusted peers. But at its core, it is the same concept as celebrity endorsements - just in a more relatable wrapper.  Which means that just as the popularity of celebrity endorsements of the 90s and 00s have faded away so will Influencer Marketing. Once the novelty of your influencer wears off and they become celebrities themselves the whole exercise becomes banal.

However, in the meantime, you are building your brand image by a dangerous tool. While the intention of social media was honest communication, the reality has become hyper curated pastiches of manufactured-authenticity that is actively distorting your consumer’s viewpoint.  Being exposed to the selective reality of influencers has its psychological costs. According to the social comparison theory, discussed by psychologist Doreen Dodgen-Magee - author of Deviced!: Balancing Life and Technology in a Digital World, human beings naturally compare themselves to others in order to form self-evaluations. But if the others - usually the people you consider your peers vis a vis now influencers- you’re comparing yourself to are perpetually styled, chiselled, or glamorous, social comparison theory suggests your perception of your own looks or lifestyle can seem shabby by comparison. The mental toll of the ‘highlight-reel’ is becoming increasingly known and evident. Some of the early studies linked the highlight reel effect to symptoms of depression. Your product when posted by influencers on Instagram — may be fuelling the kinds of negative social comparisons that make people feel bad about themselves.

That kind of association, in the long run, is detrimental to your brand. It is no secret that our younger generation, Gen Z in particular, is suffering from a mental health crisis in large part due to this ‘highlight-reel effect’. As we become more aware of the causes of this crisis, companies should be invested in the business of trying to solve this problem instead of leaving a legacy of fuelling it.


The Fyre Festival Conundrum

While the societal implications can be too abstract for many companies to perceive, the pitfalls regarding the influencer’s character may not. In 2017, the Fyre Festival sold the dream of an idyllic, VIP-style party on a remote island in the Bahamas primarily through a vast network of influencers - the reality of the event however is now well known. This bold scam bolstered the voices calling for curtailing the unchecked power of influencers. It also highlights the unscrupulous and almost insidious nature of such marketing to the mainstream audience.

It takes a lot of time and effort for brands to find the right influencer for their campaigns. If you don’t collaborate with the right influencers, it can cause great damage to the reputation of your brand. Currently, there is almost no oversight on how influencers operate – despite the fact that they are paid for their "work" on social media platforms. More worryingly Bloomberg reports that the new regulations put forth countries post the Fyre Festival debacle, have actively and frequently been flouted by most influencers. Which means you are associating yourself with a person who effectively controls your narrative.

Most influencers rise from relative anonymity to their ‘influencer’ status through frequent collaboration, partnerships, endorsements and features. It is practically built into their DNA. Which means that once they start getting compensated by brands, it only incentivises their instinct to take on more collaborations and endorsements. With little or no regulations they can make impassioned endorsements for any product imaginable ( a lot of times without even having to disclose that the post is sponsored), hence your product could be endorsed by the same influencer who in the future lies about a fitness tea which was actually a laxative, or by an influencer who goes on to promote the Fyre festival. Eventually, when these influencers get their comeuppance, which may happen sooner than one would imagine, your brand gets associated with their lies. It casts a doubt on your product's authenticity. Forbes mentions the oftentimes ignored fact that when you work with a digital influencer, your narrative becomes intertwined with theirs, forevermore. If a particularly loquacious influencer you worked with (and paid) spews some racist, sexist, problematic vitriol your brand will take a hit.

In fact, scepticism regarding influencer endorsements has already been growing. According to a report from Influence.co, on average 61% of respondents said influencers should research the products or services they shared on their platforms. Perhaps a more damning study from media agency UM, only 8% of people believe that information shared on social networking sites is true, and that drops to 4% when the content comes from influencers. In light of this, it is time for the industry to evaluate if the ROI is really substantial enough to take on the potential risk. This can be hard to ascertain for a company as thanks to sophisticated technology influencers could just be inflating their following and engagement using bots.

Which leads us to the most important argument of all.

The Economics of Influencer Marketing doesn’t make sense

Despite the facts mentioned above many marketers tout influencer marketing as the most fiscally responsible path to take. Studies show 80% of marketers find influencer marketing to be an effective strategy and a further 89% of marketers say that influencer marketing offers ROI that is comparable to, or better than, other marketing channels. These assertions of marketers are true only from the narrowest of metrics. Taking a  more comprehensive look reveals the true cost of this naive frugality to be much larger.

We have already touched upon how arduous and lengthy the process of finding the ‘right’ influencer for your brand is . This act of scouting alone comes with a huge Opportunity Cost in a day and age when efficiency is the operative word. Hypothetically, say your effort into finding the right influencers pays off and you launch a campaign using them; your efforts will be in vain if you can’t track and monitor the performance of that campaign. Measuring results can be tricky when it comes to influencer marketing.

According to Edelman UK head of influencer Philip Trippenbach, “Brands should not use influencers for reach campaigns because the return on investment, as measured by cost per thousand impressions (CPM), compares poorly to other channels”. Trippenbach rightfully pointed out that the industry has two major investment problems when it comes to influencer marketing – there’s too much focus on an influencer’s audience size (the reach - which is "basically meaningless" at this point thanks to bots) and not enough stock is given to, if talent can even influence an audience (social proof) - an opinion shared by Jennifer Powell, head of Next Model Management’s influencer division. We should also remember that unlike most as campaigns, influencer marketing is often tied with content creation - appreciation of which is subjective. If an influencer lacks the ability to create impressive content, or misfires when dealing with the product they might fail to resonate with your target consumers. In such cases, the time and money you invest will be in vain.

Despite this uncertainty of ROI, a  survey showed that approximately two-thirds of companies will increase their influencer marketing budgets in 2019. This may be due to the sunk cost fallacy, wherein many managers and marketing heads have already committed vast resources with little to show for it that they keep spending more money in hopes that they will eventually conjure up results even if it means through sheer willpower and determinations. Given the new data, the industry should be reconsidering the balderdash that is the legend of influencer marketing.

We should also remember that Digital Influencers are becoming really expensive. When the influencer industry was still relatively unknown earlier in the decade, most “Digital Influencers” were more than happy to negotiate payment in a way that suited the campaign and the scope of the work that they were doing, but that is no longer the case. There is an unspoken compensation structure being formed in the industry which is getting bolder by every marketing cycle.

Honda had to pay an influencer $10,000 to test-drive a car and L’Oréal chose to lock their influencers in seven-figure contracts, so standard practices began to change. We have overinflated their value where now influencers and those who represent them are less likely to negotiate down. One influencer wrote in to Who Pays Influencers and mentioned how Starbucks, which was represented by the marketing agency “Swift” paid them a total of $3,300 or $1,100 for each of the 3 animated GIFs that they had commissioned for their Frappuccino sub-brand. The project was completed and paid for within 30 days. Said influencer went on to state how the project went well, however they wished that they had requested even more compensation. How much compensation, they didn’t say.

That being some influencers do have a lot of substantial power. Kylie Jenner has 24.5m Twitter followers. Any brand she endorses feels the effects immediately. Snapchat was reported to have lost more than $1bn of its market value after she posted: “soo does anyone else not open Snapchat any more? Or is it just me . . . ugh, this is so sad”. While correlation is not causation, her and the power of these mega-influencers are undeniable, however, they are far too expensive and very limited in number.

If not influencers then?

While ‘influencers’ started life as a new-age brand ambassador, but as their popularity increased, so has their desire to diversify, straying into areas that require talent and training. Writing, singing, acting among other interests and I say we should let them explore those avenues in peace and slowly decouple them from our marketing strategy.

In 2020 in response to “fake news” and digital fatigue, there has been a resurgence of new and existing niche print titles. Luxury glossy magazines like Vogue are holding up, allowing for companies to show actual marketing skill instead of outsourcing it to a 20-year-old. Thanks to companies like Google, AWS, Facebook targeted web ads are proving to be very effective. Even beyond these very reliable mainstream options, there is an interesting marketing landscape forming, driven by innovation and collaboration among companies. Airbnb and Sleepy Owl seem like an obvious example of such symbiotic relationships. It brought coffee enthusiasts and travel aficionados together as an unlikely pairing. People who enjoyed a good cuppa in the morning chose to stay at houses with the full range of Sleepy Owl coffee available, increasing the name recognition for Sleepy Owl and attracting a unique clientele for Airbnb. Interdisciplinary brand collaborations can be very effective in reaching different, even niche, demographics. These strategic partnerships are more reliable and risk-averse compared to Influencer Marketing where you neither have control over your narrative or monitoring mechanisms. Nowadays, there are entire platforms and websites dedicated for businesses to find other businesses to collaborate with, a Craiglist but less dodgy and for professionals.

With such effective channels for marketing, perhaps it’s time to stop chasing myths like Influencers Marketing. Instead, just like the conquistadors gave up on El Dorado, we need to focus on building an empire with what exists.