this is not sustainable
you might have noticed a trend amongst
modern social media influencers they are
getting incredibly rich just 10 years
ago the very top youtubers on the
platform were mostly filming out of
their modest apartments doing average
skits and living lives pretty similar to
you or i almost all of them had regular
day jobs and posted to the internet
because they found it fun or at the very
most because it could earn them a little
extra side money contrast that with
today where some influencers have the
same reach notoriety and income as top
athletes singers and movie stars as this
new breed of celebrity has grown even
wealthier they have been able to
broadcast even more elaborate content
whether it be showing off their new
mansion giving away millions of dollars
to strangers or simply spending more
money on the production of their videos
but this whole ecosystem is predicated
on something of a marketing gold rush it
is a unique and delicate blend of
circumstances that made houses like this
possible and that easy money situation
is coming to an end faster than these
people might expect so it's time to
learn how money works to find out how
the influence bubble will pop and what
it will mean once it does
in the late 2000s companies had a
problem a key demographic for consumer
goods people between the ages of 18 and
35 were becoming harder to place into
neat little marketing buckets if you
can't pin down the specific preferences
of a group they are very hard to market
towards and to make matters worse
younger people were watching less
television and listening to less radio
which were at that point the foundation
of consumer advertising you might think
oh well 18 to 35 year olds don't have
any money anyway so what's the problem
well the problem is that while this
group may have less income and wealth
than older generations they spend more
of what they have and they spend it more
compulsively they do this because most
of them are not yet burdened with
financial responsibilities of raising a
family of their own and are making their
own money for the first time in their
lives so accessing this demographic was
hard but potentially very lucrative
fortunately for the marketers around the
world a new group of pseudo celebrity
was being formed on micro blogs and the
early video sharing sites of the
internet these people were perfect for
brands who wanted to tap into this
difficult market of consumers the
marketeers job was easy their consumer
base was already compartmentalized by
interest if you wanted to appeal to
young mothers work with young mommy
bloggers if you wanted to sell tools
give a video mechanic a set for free to
use on their new fancy youtube channel
this all got even easier when companies
like youtube introduced advertising
features that allowed marketeers to
bypass a direct relationship with the
creator entirely and instead choose from
a wide variety of parameters to show
their ads using adsense and other
similar offerings internet influencer
marketing was also really cheap a large
company could reach out to 100 million
viewers for less than a hundred thousand
dollars the same kind of exposure on
commercial television would likely cost
millions smaller companies could also
get in on the action too the internet
was not limited to a few large tv
channels or radio stations so a small
business could work with a small
influencer to promote their product on a
modest budget but all of these other
benefits were insignificant compared to
the greatest selling point of early
influencer marketing people trusted
influencers if a first-time parent is
reading a mommy blog about how to get
their children to stop crying they are
already looking to that blogger for
their wisdom on the subject of raising a
baby if the blogger recommends a certain
type of formula or stroller it is going
to have a huge advantage over the
competition because it is being
recommended by someone that the parents
trust the same trust extends to all
influencers in any other specific niche
a 2016 study found that twitter users
trusted their favorite online
influencers nearly as much as their
close personal friends and that was
twitter one can only reasonably imagine
that the level of trust would be higher
on a platform that is not a cesspool of
people's brain farts so on the surface
influencer marketing is a dream to
companies it can be tailored to target
specific audiences it is cheap and it is
effective so why is this a bubble the
first problem is that it's not that
cheap anymore as more businesses rushed
in to capitalize on the promises that
influencer marketing offered the more
competition there was for influencers at
all levels some youtubers now charge
over half a million dollars for an ad
placement on a single video that is
still slightly cheaper than commercial
television for a similar number of views
but not by much early on influencer
marketing was dominated by small agile
businesses that were willing to take the
risk on a new form of advertising today
large companies and businesses backed by
endless amounts of capital dominate the
space
some businesses with enough investment
backing don't even care if they spend
more on advertising than they gain in
revenue because their investors are
primarily concerned with seeing business
growth think about the brands who
sponsor your favorite online influencer
most of them are new companies with a
lot of investor money backing them up
the reason they spend so much money is
because this marketing strategy can
launch huge businesses practically
overnight but it can also be incredibly
risky i work as an investment banker in
silicon valley so i am fortunate enough
to have the direct exposure to market
dynamics in the startup capital of the
world let me tell you firsthand that the
investment appetite for
direct-to-consumer businesses is
starting to wane the channel modern mba
did a great video on these businesses so
i will leave a link to his video below
for anybody who is interested in
learning more if these businesses fail
to raise fundraising then they won't
exist to pay millions of dollars every
month to influencers across the internet
for now it's hard to say if or when this
will happen but with increasing interest
rates and a slew of high profile
business failures weighing on investors
minds easy money might not be as easy to
come by for the businesses which have
been propping up the influencer bubble
the cost of influencer marketing is
insignificant compared to the bigger
problem that these online celebrities
are now facing people don't trust them
anymore it should have been obvious from
the start but a lot of influencers do
not even care or understand what they
are promoting if businesses can pay
their fee they will get their
recommendation
i am now a youtuber and i can tell you
from experience that the hardest part
about working with sponsors is simply
finding businesses that i feel
comfortable promoting my good friend
richard over at the plane bagel was once
offered 30 thousand dollars to do just
one video on a cryptocurrency richard
obviously declined that offer because it
was an obvious pump and dump scheme but
many influencers wouldn't richard's
channel has just over 500 000
subscribers so one can only imagine how
much these shady operations are offering
people with audiences of millions of
younger more impressionable viewers
there have been countless scandals
surrounding influencers that have been
caught advertising to children promoting
failed music festivals and pumping and
dumping crypto projects over and over
and over and over again young people are
not dumb and they can see through
influencers who are just saying
something to make money without
believing what they are promoting
influencers that target young children
can prey on the naivety of their
audience for a little bit longer but
audiences this young are going to need a
parent to do their shopping and they are
going to be harder to fool in a
beautifully ironic twist the wealth that
has been accumulated by top influencers
over their careers is also eroding the
trust that they once had with their
audience ten years ago when a top
influencer was talking about a product
in their basic apartment it felt like
they were talking to a peer or maybe
even a friend
now as david dobrik dances around his la
mansion talking about sea geek he just
comes across as a celebrity sponsor
people like this struggle to genuinely
recommend products because they are so
wealthy and famous that they no longer
need them do you think david needs to
get his concert tickets on the resale
market or do you think that he gets
invited to these events before tickets
even go on sale some of the savvier
influencers will try very hard to convey
an image of a normal lifestyle and maybe
that's because they don't care for an
ostentatious display of material wealth
or maybe that's because that they know
that it helps them better to connect
with their audience the clear divide
between an online friend and an online
celebrity was only accelerated during
early lockdowns this show coupled
with the distasteful messaging of being
hashtag in this together saw a rapid
decline in the public's interest in
influencer marketing now not only are
consumers losing trust in influencers
but so are businesses if a business uses
an influencer as a spokesperson for
their product they become inextricably
linked to that person's reputation this
can be a good thing if a brand wants to
position itself as a fun loving product
for young people it would do well by
working with fun-loving young
influencers but it can also go very
wrong as well online influencers are far
riskier to align with a brand than
traditional celebrities traditional
celebrities only really appear in
carefully curated settings where their
managers get to make sure they don't say
anything out of line and even if they do
it is likely to get cut out before being
released to the public influencers on
the other hand make their living by
broadcasting their entire lives on the
internet the good the bad and the ugly
eventually something bad is bound to
happen businesses also take on
significant risk with influencers
because of other businesses if an
influencer takes on sponsorship from one
brand that turns out to be fraudulent
then logical questions will be raised as
the legitimacy of all other businesses
they promote so what does the future
hold for our multi-millionaire
influencer overlords well if the gold
rush does come to an end they are all
likely going to make a lot less money
but that's probably a good thing the
days of throwing money at online
personalities and hoping for the best
may come to an end but it doesn't mean
that the practice is going away entirely
instead it will hopefully mean that
online marketing can become something
better than a cheaper alternative to
traditional celebrity endorsements on
traditional media platforms there is
nothing wrong with relatable people
giving advice that they believe in about
products that they understand and
getting paid for it and the metrics will
soon make companies realize that this is
what made internet marketing great in
the first place now if you want to see
what a big fat hypocrite i am go and
watch my video where i reveal how much
money i made on this youtube channel
after gaining 100 000 subscribers in
less than a month thanks again for
making it possible to keep on learning
how money works