Social media influencers are everywhere, and they aren’t likely to go away anytime soon, said Sylvia Jablonski, managing director of capital markets at Direxion.
Influencers haven’t just changed how people shop — they’ve completely transformed the advertising industry landscape. "We’ve sort of seen this metamorphosis of advertising and, and that's gone from the classic magazines and ads and billboards and commercials to social media," she told Yahoo Finance’s "On the Move."
"I think influencers are staked to become very, very rich," she said, noting that the spend on influencers is going to go from about $8 billion today to about $15 billion in the next couple of years. This is due in no small part to the return on investment companies are seeing from influencers.
"What companies are finding … [is] that the return on investment on a post by an influencer is 3.5% versus a brand ad that might run in a magazine or might run as a tagline on Google or something [which is at] about 1.2%. So they're actually seeing people click on Instagram, go and buy that product based on what an influencer does."
Jablonski, citing an X-Cart study, that 72% of users report making purchase decisions based on something they saw on Instagram.
"It started with the reality-show world of The Bachelor and the Kardashians and all that stuff. People became obsessed with these people and started following them, and somebody figured out that the average person wants to emulate these people. That trickled down to these other influencers who are just sort of like normal people gathering a following for one reason or another, and they really are leading to things being purchased online," she explained.
Jablonski, however, says she is concerned about the “sincerity” of the trend and how it will be measured and regulated, and it looks like the Federal Trade Commission (FTC) has been thinking along those same lines.
Edgar Alvarez of INPUT recently reported that the FTC is about to crack down on the influencer trend. Alvarez says that new regulations could force brands, celebrities, and social media apps to disclose ads adequately, or risk being financially and legally liable.
In a statement last week, FTC Commissioner Rohit Chopra, said, "When individual influencers are able to post about their interests to earn extra money on the side, this is not a cause for major concern. But when companies launder advertising by paying someone for a seemingly authentic endorsement or review, this is illegal payola. If these companies are also pressuring influencers to post in ways that disguise that their review or endorsement is paid advertising, those advertisers especially need to be held accountable."
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.
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