Grapevine Logic Inc. is a world leading end-to-end influencer marketing platform that was recently acquired by client Ideanomics.
When Sahara Lotti started her lash extensions company, Lashify, in 2017, she didn’t know what she was getting herself into. It wasn’t making and selling fake lashes that stumped her—she was more than prepared for that—but rather the bizarre and shadowy industry that seemed to envelop her.
The suggestions started early. Months before Lashify had officially launched, one of her investors, who had ties to the cosmetics industry, pulled her aside. He told her to prepare to pay influencers to speak positively about her lashes on YouTube and Instagram. She thought he was being dramatic. He wasn’t.
Lotti recalls the investor saying that if she wanted Lashify to succeed, quality didn’t matter, nor did customer satisfaction—only influencers. And they didn’t come cheap. She was told to expect to shell out $50,000 to $70,000 per influencer just to make her company’s name known, an insane amount for a new startup. There was no way around it; that’s just how things worked.
At the time, Lotti found the suggestion absurd, bordering on offensive. She thought paying some random person on the internet tens of thousands of dollars just because they had a lot of followers was beneath her, so she brushed off the suggestion. Looking back now, Lotti realizes how horribly naive she was. She may have avoided forking over cash, sure, but she ended up paying for her decision nonetheless.
Lotti found herself thrust into the wild world of influencer marketing, where prices and pressure are high, and hundreds of thousands of dollars change hands daily on murky terms, seeking sway over the posts in your feed. “It was literally like the mafia,” Lotti says. “[It] was a total nightmare because I didn’t understand the climate.”
Social media influencers ply their trade in realms far beyond fake lashes. Marketers of literature, wellness, fashion, entertainment, and other wares are all hooked on influencers. As brands have warmed to social-media advertising, influencer marketing has grown into a multibillion-dollar industry. Unlike traditional television or print ads, influencers have dedicated niche followings who take their word as gospel.
There’s another plus: Many users don’t view influencers as paid endorsers or salespeople—even though a significant percentage are—but as trusted experts, friends, and “real” people. This perceived authenticity is part of why brands shell out so much cash in exchange for a brief appearance in your Instagram feed.
Many influencers with substantial followings “are not promoting products without being compensated,” said Kevin James Bennett, a cosmetics developer and consultant who works with brands interested in influencer marketing. “That doesn’t make them bad people, it makes them salespersons—and you, the consumer, deserve to know when you’re being ‘sold’ something.”
The Federal Trade Commission agrees. As the practice has become more popular, the agency has adopted rulesgoverning the disclosure of paid endorsements on social media. The text is long and complicated, but can be reduced to two essential concepts: If an influencer has received anything—be it cash, free products, or something else—that could affect how a viewer interprets their mention of a brand or product, they must disclose it; and the disclosure must be displayed prominently, and plainly, in the video, photo, or blog.
In interviews, more than a dozen people involved in influencer marketing expressed concerns over the ethics of the burgeoning industry, where brands routinely shell out well over $60,000 in exchange for one video review—or upwards of $85,000 to publicly disparage a competitor’s product. The activity is not confined to reviews. Influencers with a sizable following rarely have to purchase products in their niche. Makeup, clothing, plants, books, you name it—all come free, often delivered to the influencer’s home or office in a highly Instagrammable box. That’s given rise to a new variation of the influencer game, similar to product placements in movies or television: Brands pay influencers to position products on their desks, behind them, or anywhere else they can subtly appear onscreen for a few seconds. Payouts increase if an influencer tags a brand in a post or includes a link to the company’s site, but silent endorsements are often preferred.
Sanders Kennedy, a popular YouTuber with over 200,000 subscribers and known for chronicling the drama within the influencer community, was once offered a couple of thousand dollars to leave a particular beverage on his desk while filming. He does not recall the brand but says a representative told him he only needed to make sure the drink appeared within the frame to get his paycheck. And he would not need to tell his audience that he was being paid for the placement, Kennedy says the rep told him.
Thataylaa, a beauty influencer with nearly a million followers collectively on YouTube and Instagram, says she’s turned down over $100,000 in brand deals in the past two years because of concerns over what she’d have to say. “In most [influencer advertising] campaign briefs, there are ‘talking points’ or things the brand would like you to hit on in your own words,” she says. “If a brand requires that I say certain things that I don’t feel compatible with”—like use language she doesn’t think is accurate or hype a product she thinks is subpar—”I decline the sponsorship.” Kennedy says contracts often dictate not just specific language, but the exact time a post must be published, the number of follow-up posts to be made, and the expected reach.
Influencers with millions of followers usually have management teams or agents dedicated to identifying the best advertising deals. Most others turn to sites and apps that operate as digital marketplaces, connecting brands with content creators looking to craft the perfect #ad. There are thousands of these marketplaces; two of the most popular are FameBit and Grapevine. FameBit in particular took off after YouTube bought it in 2016. Brands interested in hiring YouTubers as promoters post an ad on FameBit detailing their goals for the campaign, then influencers on the service can submit proposals detailing how they’d tackle the ad. The marketplaces have grown more popular since YouTube limited content creators’ ability to generate revenue from preroll ads in 2016. Through FameBit, YouTube has partnered with over 9,000 brands and countless influencers, generating revenue from each deal.
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