Influencer marketing has a fraud problem
The influencer marketing industry is estimated to generate $2 billion a year, with $1.6 billion coming from Instagram influencers alone. That number is only set to increase, with 39 percent of marketers saying they plan to boost their influencer marketing budget this year.
It’s now pretty much impossible to open up Instagram or YouTube without seeing #sponsored posts popping up from your favorite stars, from Kim Kardashian all the way down to food Instagrammers who only have a few thousand followers.
But whenever there’s this much money on the line, you always have people who are trying to game the system. It’s incredibly easy these days to inflate your follower count by purchasing bots or engaging in other kinds of shady activity. If you’re a company that’s thinking of hiring a social media influencer, how can you ensure that their followers are real?
Well, you’ll probably turn to someone like Erick Schwab, the COO of a company called SYLO. SYLO is a tech platform that can scan social media accounts and detect fraudulent activity. I interviewed Schwab about the state of social media influencer fraud and how his platform is able to tell when an Instagram account is propped up by an army of bots.
To listen to the interview, subscribe to The Business of Content on your favorite podcast player, or you can play the YouTube video below. If you scroll down you’ll also find a transcript of the interview.
Simon Owens: Hey Erick, thanks for joining us
Erick Schwab: Thanks for having me.
You run a company that’s involved in influencer marketing. To start with, can you give us a 30,000-foot view of what influencer marketing is?
All of us over the years have seen the billboards from YouTube and YouTube stars that have broke through and garnered tens of millions of followers. That’s now spread to what are called Instagram stars and Facebook stars and Twitter stars. They’re individuals who have gained popularity through producing content for social channels. Some of them have captured tens of millions of followers who watch and engage with them, all the way down to micro influencers, who are people in our local communities who are the local experts on topics.
What their title denotes is that somehow a recommendation or endorsement from them carries more weight than if a brand were to simply run something on their own social media account. That somehow one of these influencers promoting their product carries more heft.
Yes. What we like to say is that they’re content creators. What they do when they work with brands is classified as influencer marketing, or as we describe it, it’s the ad unit. The reason brands come to them is because they have an ability to influence their followers on behalf of the brand. It could be things like generating new awareness for a product that’s come out. Or increase favorability and engagement in their product, and ultimately driving sales.
We’ve seen some great examples of that in the retail and consumer packaged good industry, where particular content creators are partnering up with the likes of Nordstrom and developing their own clothing lines, and these clothing lines are selling out. Anybody who has attended one of the largest conferences in this space, called VidCon, really gets an up close understanding of how connected they are with these fans.
And this isn’t entirely new, right? Celebrity endorsements have existed for years. And Kanye West and Michael Jordan have worked with shoe companies to create their own products. But I guess you could say that the rise of social media has really expanded the marketplace, created a bunch of niche influencing, and this is why this is its own product category.
We look at the data all the time, and the data clearly speaks to the idea that a Kanye West — he became famous because of his music — but his follower base, they’re not there because Kanye creates amazing, engaging online content. He doesn’t engage with them there. That’s not the reason to follow or look at Kanye.
Whereas when you look at a content creator, they started a YouTube channel however many years ago, and they started pouring their time and their energy into developing engaging content, and then spending their time developing and cultivating that relationship with people who follow them or subscribe to their channel.
And that is fundamentally different. That’s why, when we look at the data between a celebrity and an influencer, in terms of the advertising impact, it’s not even close.
I’m guessing there’s a blending that’s happening right now. Cardi B is an example I can think of — someone who started as a digital native, but then transferred to more mainstream success.
Definitely. I think there’s always the appeal of crossing over and doing a television show, a book deal, a movie, etc… Becoming a celebrity in their own right, as we would classify in the traditional sense. So I do think that’s happening, but there’s just still so much opportunity in the current world. I think what marketers are understanding is it’s how you use them. What’s that marketing mix between hiring the Kanyes and Beyonces and Justin Timberlakes of the world, and using their social followings to hit a lot of eyeballs.
How did you get interested in influencer marketing? What’s your background?
I started in online video back in the end of 2005, 2006. I was at a company called ManiaTV, and we were doing live streaming original content 24 hours a day, seven days a week. I thought this looked like the future to me back then of where immersive media and video were going to be a big thing.
I made my bet that this was going to be a big thing. And over the years I’ve had the pleasure of working with people like Lebron James and DJ Tiesto, people like that. And then a few years ago, I started to see the traction these content creators were garnering, and more brands started to pay more attention to what was happening. And I started working with them quite heavily, in terms of understanding their audiences and how they were partnering with brands. And then spending my time working with national brand advertisers, I started to see the pain points that any new industry that’s going from an experimental stage to something more mature goes through.
That’s how I got into it, just being in video for a long time, believing in the power of it, and once you start getting into the weeds with what’s happening on these channels, you see things that within video five, 10 years ago, it just wasn’t there. It’s exciting to see the impact when it is done correctly. That, to me, was ultimately what I was searching for, the best form of advertising.
Can you give me a sense of how big influencer marketing is? Is this an industry that’s in the billions of dollars a year?
It is. Last year, I want to say the projections were somewhere north of a billion. This year, the projections are over $2 billion, closers $3 billion. Over the next five years, influencer marketing has the potential to grow to $8 or $10 billion being spent with influencers.
I think we’ve seen some recent studies come out around content marketing in general, and it’s dramatic in its rise. And this fits with that, because that’s what brands are doing when they work with influencers, they’re developing content together. It’s exciting. It’s growing exponentially.
How are these transactions made? Let’s say you want to be an influencer. You have — I don’t know what the threshold is, I’ve heard somewhere around 10,000 followers, but that the main threshold is 50,000 followers — how do you get to a point where you’re working with brands? Are you going through a talent agency? How is that transaction happening?
A couple different ways. If you’re talking about the folks that are more of the micro influencers, they’re more reliant on third party platforms, matching platforms that marketers will try to come to to narrow in on individuals they should be working with. So that’s definitely one area where deal flow comes in.
As you grow, and become more popular, there are a lot of really great talent management companies. Those are usually reserved for those who have grown a pretty substantial sized following. And then there’s always the traditional route, where very early on there were multi-channel networks for YouTube creators, and that’s still going, with a few heavyweights like Fullscreen. But mostly, the content creator is using various agents, salespeople, managers, people who are contacting the brands.
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With $3 billion and growing, there’s a lot of potential for fraud. And that segues into what your company does. How did you get the idea for your company?
Listening. The art of listening. Listening to content creators’ challenges and frustrations. Listening to marketers’ challenges and frustrations. What it really boiled down to for us at Sylo and my other business partners was listening about this pain point, that we really don’t have a handshake on the same analytics, and the same measurements and rating system. Which is to be expected given that the marketplace is very new and expanding.
But given that we’ve hit those thresholds of billions of dollars, marketers, naturally, are saying ok, we’re spending a lot more money on something. And when you’re spending a lot more money, we all do the same thing, which is pay a little more attention to what’s going on. And certainly when stories come out talking about fraud and fake follower accounts and bots, that erodes the trust that’s being formed with marketers, because now they’re thinking, am I being duped? They had no way to measure the effects of influencer marketing, by and large. So now this comes out and it’s reaffirming some things, when we’re really talking about spot cases. This is not a, by and large, problem within the industry.
What does your company specifically do? Let’s say I’m an influencer agency. What’s your elevator pitch to me about what you can offer me?
We’re a third party verification and measuring for influencer marketing. We like to say think Nielsen ratings for influencer marketing. And the reason for that is that if you’re studying any form of media, every other form of legitimate media, established media, has these entities, these sources. Brands trust them. They know they don’t sell inventory. They don’t have a dog in the show.
And conversely, what we do is we make sure the content creators have a safe and secure way to share data that they need to with their business partners, the brands. We’re coming in and providing that third party and verification measurement system so that the ecosystem of influencer marketing can really start to thrive around transparency, verification and making sure those content creators that really, truly yield influence rise to the top. We want to make it really visible for their brand partners to be doing better and longer term business with them.
So is it that you have a proprietary platform and it’s just a matter of plugging in your Instagram credentials, and then it plugs into it and starts doing analysis of their followers? What’s the mechanism for how it works?
We deliver a product. When they’re signing up, it’s an invite only platform for content creators. Because they sign up, we’re giving them this product that allows them to see all their data and information. They go in and they give us an opportunity to access that data from social platforms in which they produce social content. We then, internally, are able to analyze all that information.
For a content creator, it can be really difficult to read. Why did that post do so well but this one didn’t? And helping them understand their creative strategy. Helping them set benchmarks and say, ok, look you talk about a lot of different subjects with your audience. Here are the top five subjects, and when you talk about food, and family, and travel, and sports, it’s off the charts. That’s what your audience loves. Other stuff you’re doing, they’re not really interested in that. We’re able to help a content creator improve their performance by 20 percent.
You’re an analytics company. But you’re also, based on my reading, helping brands who are wary of getting tricked into hiring an influencer who has a large bot following.
That’s the unfortunate side. The way our technology works allows us to detect what we call suspicious activity on an account. Because we’re observing, and because we link in with the creator and gain all the proper consent, we’re able to quickly tell when any bot fraud suspicious activity is on an account and flag that for our partners. And really what we do there is deliver the report. Here’s what’s going on. Here’s what our system found. And allow that agency person make a decision as to whether this is an acceptable or unacceptable amount of bot traffic. We don’t play the role of making the call. We just want to supply the information.
You don’t establish the number of acceptable bots. I know that, as a Twitter user, I have some bot followers. What’s the industry standard for an acceptable number of bot followers?
I think most marketers have different tolerances. Bots are everywhere. What we’re focused on is not so much how many bots are sitting on there, it’s more of whether the intent of the influencer was to manipulate their follower account, manipulate their engagement. That’s very different. The way chatbots work, you could be doing absolutely nothing wrong, and yet you have chatbots on your account.
Marketers are much more interested in spotting when it’s being manipulated on purpose. And that is fraud.
Are you a SaaS company? Are you charging a monthly fee?
Yes, we’re a SaaS for marketers, agencies, even vendors. Influencer networkers are utilizing us to solve a lot of their own challenges around data collection and analysis, and they want to be better businesses.
And for creators, it’s free. There’s no commitment. We just really wanted to make it a safe and secure way for them to see all their information, and more important, when they need to data share, providing a very clear and transparent way to share that data around branded posts with those external parties, while having the added benefit of understanding how you’re being evaluated.
That’s a pain point we’re going after. When an influencer does a campaign, they don’t actually know how a brand is evaluating them. So one of the things around our product is opening that up.
What are the telltale signs that an influencer has a bot following? How sophisticated are these bots?
It can be pretty sophisticated. The newer ones on Instagram are loops. So a lot of marketers will work with Instagrammers, and part of the campaign is a sweepstakes or some sort of giveaway that the brand is doing. And what the content creators are doing is they go to these loop companies, and they help them promote this loop to new audiences to drive more engagement, but the thing they’re doing is making a person who does engage with it, they have to follow that content creator, which means they’re buying the follower. And that’s not what the marketer wants, that’s fraud. And those followers are coming from areas where they’re not very valuable. If I live in New York City and a bunch of my followers are in China, then they aren’t as valuable.
But are those fake followers, are they signing up and following the account, or are they actually engaging with it?
They’re like shadows. The influencer will go to a loop company, and they’ll partner with that loop company for a certain number of promotions. In essence, it’s a different way to buy followers. And it looks like you’re helping amplify, or put more promotion, behind a sweepstakes. But all it is is a back doorway of padding your followers, which are not real.
They’re not bots in that case.
The bots are more of the chatbots. We’ve seen them go to other companies — and we know this because we can understand the organic nature of a post after you post it — and the way bots work, is you immediately get all your activity within the moment you post it. That’s not organic. Our system sees that, flags it, and says nope, those are bots.
So the bots aren’t just following the account, they’re also creating fake engagement?
Yes, absolutely. They’re liking it. They’re commenting on it. They’re driving up the engagement, because engagement rate in the influencer world is a commonly used metric. To understand, great, this person has 50,000 followers, what is their engagement per post? In that instance, what they’re doing is taking their likes and comments and dividing it by their follower account.
Naturally, if you have a lot of likes and comments on your posts, marketers are going to see that, and that’s going to help you get more brand deals. Just having a higher follower count will help you get more brand deals and have a higher rate, just because you have more reach. So you see these variables are impacting what is happening. Marketers have overvalued reach and overvalued engagement rate, and so what’s happened on the other side is to inflate those two metrics.
Are there signs that they’re going to get more sophisticated so they’re harder to detect?
I think when there’s a will, you’ll have people who try to continue game the system, but through the access we have and the machine learnings we deploy, we’re on top of it. I think that’s one of the reasons we don’t scrape, because you’re now just taking someone’s data that didn’t give you permission. We don’t believe in that. We believe we took the harder path, which is going to the content creator and saying here’s what we offer, here’s why we offer it, but we’re not going to do anything unless you give us consent.
Marketers who have a lot of suspicions are mandating that the creators being pitched to them, before they go to market with anybody, are really wanting to get an accurate readout so they can make a decision on these things we’re talking about before they partner with this person.
Is there a defense to be given for people who buy the bot following? Can it spur a real following? I feel like there’s data out there that people are attracted to accounts that already have a large number of followers. I’ve heard anecdotally from YouTubers that it’s a lot easier to get from 1,000 to 2,000 followers on YouTube than it is to get from 0 to 1,000, because once you have those 1,000 followers, people use that as a signal that you’re worth following. Is there anything to the idea that buying 50,000 bot followers will help me get more legitimate followers?
We have not seen that. We have not seen that that carries over to a more consistent audience. What we’ve seen works much more successfully, is market yourself. If you want to get your message out there more, there are lots of other things you can do that are marketing tactics, can be paid tactics, pay to amplify your content the right way, that has far greater impact. And what we’re starting to see is this pendulum swing from how many followers to you have, to really digging in and realizing that that number is not a number that should be the key performance indicator.
Do the work, don’t take the shortcuts.
Yeah, don’t take the shortcuts. In the end, you want to have as connected, and tight, of a fanbase as you can. That is your value. That is the lifeblood. That is why a brand will come to you and say, you really do have influence, not just that you have followers. Or perceived followers. Where the challenge comes is we have a new industry with primarily younger people who haven’t had some of the experience of working in television or print or radio. Other long standing forms of media. And they don’t have a good understanding of how media is bought and sold. And I think that’s coming full circle of don’t take the shortcut. There are measurements in place. Verifications in place. If you want to play the long game, build this the right way. If you look at the most successful online content creators, some have been on YouTube for a decade now. And doing it the right way.
When you look how the media covers bots, most of it has been around Twitter bots. Russia, the election, a lot less attention to Instagram bots. Do you think Instagram is getting a free pass because all this attention is on Twitter?
No, I think Instagram is more heavily scrutinized. Instagram is, by and large, over 90 percent of primary influencer marketing is going to that channel. Even if I’m going to a YouTuber who has a great channel, I’m still going to purchase that individual’s Instagram account. By per capita by influencer placements, Instagram is above everyone else. It’s the most used and most scrutinized.
Do other platforms have bot problems? Is there a YouTube bot problem? A Snapchat bot problem?
Snapchat we don’t know, because unfortunately there’s no API to get in and access channel analytics. We’re hoping that Snapchat will make those APIs available. YouTube is a different experience. The way you’re incentivized on YouTube, because of the monetization they have, is not around your follower count, it’s around your watch time, how long your followers are watching your content. That’s just something you can’t manipulate with a bot.
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