Losses are currently at $1.3 billion a year, but could continue to increase
This year, influencer marketing spend is at $8.5 billion and is projected to hit up to $10 billion in 2020. But engagement on sponsored content from fake followers is costing brands $1.3 billion a year, according to research by cybersecurity company Cheq and Roberto Cavazos, professor at the University of Baltimore.
Left unchecked, this number could rise to a projected $1.5 billion by 2020. The researchers note that influencer marketing fraud could bring about indirect costs for brands, such as loss of consumer trust.
In defining fraudulent influencer marketing, the researchers consider inflated follower counts. This arises in businesses that specialize in selling followers like click farm, whose clients pay an average of $16 to gain 1,000 followers on Instagram. The researchers also define “grayer areas of deception which add to the economic losses in less clear ways.”
One fraudulent method is using automation to build follower counts. Nik Speller, head of campaigns at an influencer marketing agency, tells the researchers, “They use automated services to act on your behalf to follow people, unfollow them again, like content, comment on content, just to do all that underlying stuff that an account has to do sometimes to grow and do it in a turbo-charged way. In this way, all of a sudden you follow 500 people, 200 follow you back, you unfollow them, you’ve got 200 followers and it looks like you are important because your follower number is bigger than the number of people you follow.”
Another issue is that a social media user might post something that looks to be a sponsored post on behalf of a brand they aren’t working with. This behavior, according to the researchers, could cause brands to believe that they have a track record as an influencer.
Digital analyst Brian Solis tells the researchers about the issue of inactive audiences: “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,” he says.
In an audit of 10,000 influencers, SocialChain found that 25% of their followers were engaged in fraudulent activity.
But the harm of fraudulent influencer marketing is further complicated by the fact that being famous isn’t a requirement of being a social media influencer. The report points out that brand use of nano-influencers—people who are paid approximately $10-35 to advertise products on social media but have fewer than 1,000 followers—adds further complication to revenue from influencer marketing because sector increases diminish opportunities for accountability.