The Money And Trade-Offs Involved In The Influencer Economy

Jun 10, 2019
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AUDIE CORNISH, HOST:

Time now for All Tech Considered.

(SOUNDBITE OF ULRICH SCHNAUSS' "NOTHING HAPPENS IN JUNE")

CORNISH: This month, All Tech is all about social media influencers. We heard last week from college student Cosette Rinab. She posts content to Instagram and TikTok, and she hopes to turn that into a full-time career.

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COSETTE RINAB: People are making more money off of YouTube than they could be if they were going to medical school and studying, you know, pursuing a career in medicine.

CORNISH: We're going to talk now about the influencer economy, the money involved and the tradeoffs required. Taylor Lorenz writes for The Atlantic. She's covered the business of influencers for a decade. Welcome to the program.

TAYLOR LORENZ: Thanks for having me.

CORNISH: So how much money changes hands? What are we talking about?

LORENZ: Billions and billions of dollars. It's estimated that brands are going to spend upwards of $10 billion on influencer marketing efforts by 2020, which is just next year.

CORNISH: Can we talk about the companies for a second? Why would a company the size of a Walmart or a major clothing chain even need to advertise in this way, through social media, right? Like, having some person pose next to something or wear the clothes. What's the payoff for them?

LORENZ: Well, influencer marketing is very powerful because, you know, people have very close relationships with these influencers. You know, they often follow people who they aspire to be like, or people that seem like them and resonate with their lifestyle. So, you know, Walmart, for instance, paying a mom in Kentucky to speak to other moms in the South is much more powerful than them just running spammy banner ads, most of which get ignored.

CORNISH: Right. I mean, part of the thing that makes it appealing is it doesn't always feel like an ad.

LORENZ: Exactly. It doesn't feel like an ad. And often (laughter), because there's not a lot of regulation around this, it's often not even disclosed as an ad.

CORNISH: Who has the upper hand, the brands or the influencers?

LORENZ: The brands, absolutely. I mean, they're ultimately the ones that control the purse strings. So they're often the ones dictating the terms of these agreements and sometimes screwing over, (laughter), the younger, you know, smaller influencers who often don't even have management or any power to negotiate.

CORNISH: What do you mean by that? What kind of contract can be structured in a way that would be at a disadvantage to a young person trying to come up in the business?

LORENZ: Well, most of these people don't even have formal contracts. That's the first problem. I mean, brand deals are negotiated over direct messages on different platforms. It's very fluid and very casual. You know, if you're the top 1% of YouTubers or Instagram stars, you're likely to have management or maybe you're repped by a talent agency. But for the vast majority of so-called influencers, they're doing it all themselves.

CORNISH: Right. Basically, they're independent contractors. And what are the pitfalls for that in this particular business?

LORENZ: I mean, a lot of these influencers will work with middlemen, which are essentially influencer management agencies. So Walmart will work with one of these social media influencer agencies and say, we want to run a social campaign with, you know, 10 influencers between these ages that have these qualifications. And the agency will then pull from this massive pool and, you know, pull influencers to work with the brand. And the brand will pay the agency directly, and the agency doesn't always pay the influencer.

CORNISH: Wow. So they'll just take the money (laughter)?

LORENZ: Yeah. I mean, we saw Speakr, which is actually the biggest and oldest social media influencer agency, actually, you know, fail to pay hundreds of influencers just last year. These are people with millions of followers in some cases, and they were owed tens of thousands of dollars in others' cases - so yeah.

CORNISH: You're describing an industry and players that are basically regulating themselves, right? And you've even described some abuse. Is there any effort by the social media companies or the government to have any kind of regulatory influence here?

LORENZ: Well, the FTC did attempt to kind of regulate it by, you know, saying that if you post an ad, you have to disclose that it's an ad. The thing is, is that all of these ad deals are structured very fluidly. You know, you can get a lot of free product and become a brand ambassador and post about that product all the time, but maybe you're not receiving direct payment. You know? And so I think that regulators need a much better understanding of this industry in general in order to regulate it.

On the platform side, actually, Instagram and YouTube and all of these social media platforms definitely realize that there's a lot of commerce happening on their platforms. But I think their stance on it is to kind of just try and get a piece of that pie rather than help the influencers themselves.

CORNISH: Taylor Lorenz is a staff writer at The Atlantic. She covers Internet culture. Thanks so much.

LORENZ: Yeah, thank you for having me. Transcript provided by NPR, Copyright NPR.