Social Media Influencers and the Business of Fraud

In today’s online and in-demand world, marketing strategies are always changing. Back in the early 2000’s, it was still fairly common to see advertisements of celebrities talking about their favorite products and why people should buy or use them, today’s advertising is much different. Though television and radio ads still exist, they are no longer the norm. Influencer marketing has been on the rise since 2010 and shows no signs of stopping; however, does the practice really work and can it cause more harm to your business than good?

What is influencer marketing? Influencer marketing began in 2006 and currently remains on an upward-moving trend for many brands today. Basically, influencer marketing involves social media personalities or “influencers” who have gained a substantial following online. These “influencers” are paid to promote products and services in a variety of ways. While marketing via another’s social media following can be successful, problems have cropped up with the popularity increase in influencer marketing. Many of the problems have come about because influencer fraud is becoming a very tangible thing. Influencer fraud, which can involve purchasing fake followers and/or creating fake personas, is expected to cost businesses $1.3 billion in 2019, according to new findings from cybersecurity firm Cheq.

While the findings measure tangible financial loss from fraudulent influencer marketing, Roberto Cavazos, a professor at the University of Baltimore who conducted the analysis for Cheq says, “the indirect costs are much harder to measure.”

Influencers are often described as people with large social media followings, whose tastes in consumer goods and services are held in high regard by their fans. Companies spend roughly $8.5 billion annually to collaborate with influencers to market their products. As much as 15% of this $8.5 billion in influencer marketing is going to fraud, as influencers are often untruthful about having as many real followers as they claim to.

According to Edelman’s 2019 Trust Barometer, 63% of consumers trust influencers more than a brand’s own advertising efforts. This is one of the main reasons influencer marketing has become a key component of consumer products promotional strategies, as it is often more appealing to digital audiences.

Richard Edelman, the president and CEO of the PR firm Edelman told CBSN recently, “Influencers are much, much more powerful — six times more powerful — than celebrities,” and, “people are saying, ‘I want to hear it from someone who I identify with, not somebody who is just famous.’”

Brands typically select influencers based on their reach, which can be measured by how many followers they have. Unfortunately, some influencers have fake followers or continue to count followers who are no longer engaging with them on a given platform as active. This means a brand can wind up paying for an influencer to advertise to people that simply don’t exist.

“The influencer marketing industry has grown and become a more complex ecosystem, and the more intrinsically complex an ecosystem becomes, the more opportunities for fraud arise,” said Cheq’s chief strategy officer, Daniel Avital. “It used to be that advertisers picked up the phone and called Kylie Jenner,” he said. “Today, people are approaching influencers and buying followers through tech platforms. This is immediately an invitation to anyone in the ad-fraud business to create fake accounts and start meddling.”

Mega-influencers, whose follower counts are in the millions, can often earn up to $250,000 per social media post, about $37,500 of which is lost to fraud, according to Cavazos. For reference, even larger influencers, such as Jenner, are estimated to make millions per single post.

According to the Cheq report, “many influencers have no access to 90% of their audience simply because it no longer uses the social network where they were followed. This doesn’t stop them from touting millions of followers, who will, of course, never see your content.”

Rampant fraud can erode companies’ trust in influencers — and influencer marketing as a practice, Cavazos said.

Fraudulent influencer marketing red flags can include recently created accounts with lots of followers but very little engagement, Cheq’s chief strategy officer, Daniel Avital said. “The easiest thing to do is look at discrepancies between how many followers the influencer has and how much engagement they get on the page because followers are easy to generate, but creating engagement is harder,” he said. “If you see 1 million followers on Instagram but posts have 80 or 100 likes, that is immediately suspicious.”

Houston Fraud Attorneys

As a business owner, dealing with fraud and misrepresentation can be frustrating and complex. Accusations of fraud and/or misrepresentation are also very serious. Ensuring you have an experienced Houston business attorney by your side to protect your businesses best interests is essential. At Adair Myers Graves Stevenson, we help you protect your business from fraudulent activity. If you are considering an ad campaign utilizing social media influencers and you want to protect yourself from fraud, contact us today for more information.