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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
Please play the YouTube video first