The $744 M Influencer Marketing Scam

Summary: The amount of cheating in the murky world of influencer marketing is outright staggering. As a seasoned e-commerce retailer, I did some number crunching and found that a lion’s share of so-called influencers boosts their numbers with bots and engagement pods. In a combined study of qualitative and quantitative data, the results show that Instagram’s monthly active user's data may be overrated by as much as 45%. As it turns out, marketing spends equal to $ 744 M is mainly going to Russian Bots and mass-follower accounts, with micro-influencers cheating the system the most.

Read all about how I completely altered our influencer marketing strategy and concrete tips on what you can do to avoid being ripped off.

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cut my teeth in e-commerce a decade ago. The whole industry has a win or die mentality, that I find incredibly rewarding. Since 2007, I have co-founded a couple of e-commerce companies that were sold to venture capital, and I also spent six years as a management consultant working with leading retailers across Europe and the Middle East.

After a bit of a break from the industry, I finally got back into my old gear this year, having just started a new e-commerce business. Upon my return to the industry, I immediately discovered that online marketing has evolved into a fun playground for an entrepreneurial Excel-geek like myself.

My new startup is called A Good Company, and we focus on sustainable everyday products.

Back in the olden days, before big tech got as huge as it is today, online ads had about as much effect as dumb-TV commercials. The flash banners I used before smartphones conquered the world were like standing on a box, screaming a sales pitch at whoever zipped by.

Now, everything had changed. Amazon, Facebook and Google are dominating the landscape.

All brands were doing influencer marketing

The lowest hanging marketing fruit, outside Google and Facebook Ads, seemed to be influencer marketing. Everyone was doing it. It seemed easy enough — you just pay an influencer in money or in free products to act as an ambassador for your brand.

Finding the right influencers was supposed to be another easy step. “Just look at reach and the engagement levels”, the collective industry expertise said.

The number of followers, engagement rates and previous brand collaborations were supposed to indicate whether or not a specific influencer was the right fit for me and my company.

At it’s best, influencer marketing is like striking up a conversation with like-minded people. I love the idea that I can find people in every corner of the world, as engaged as I am in changing the way we mindlessly consume non-sustainable products.

At A Good Company, we strive to change behaviour through transparency and fact-finding — and to get people thinking about the impact of their consumption habits on the environment.

As a sustainable startup, we were immediately attracted to micro-influencers. So, it seemed, were a lot of other brands.

An automated platform to scale was a natural step

I signed up with a platform that promised to help me scale, automate and track the results of this marketing initiative — much like you would with Google Ads or Facebook Ads.

From a marketing perspective, I had found a way to segment and tailor messages in order to reach the right people — all while measuring everything with precision. Or was the latter a figment of my imagination?

Two months in — something isn’t right?

Two months into our ambassador initiative, I looked at the results of our influencer marketing. Something was missing.

What, in my mind, should have been a clear correlation between influencer marketing spend and sales, was nowhere to be found.

  • What was going on?
  • Were we going at it the wrong way?
  • Had we collaborated with the wrong ambassadors and ended up with a bad fit for our brand?

Or were we just bad at execution?

An anonymous study to all of our influencers

A cornerstone of our business is to dig into and affect our suppliers’ production chain to ensure that they do everything sustainably. So with the same scrutiny that I use to evaluate our suppliers, I set out to investigate our influencer marketing efforts.

Slightly distrustful by nature, I began to think that maybe we were in fact not reaching as many like-minded people and potential customers as we initially thought. In addition, I had read about bots allowing influencers to automatically increase their following and so-called engagement pods, where a number of people join a cell of sorts to boost their engagement levels respectively.

The questions asked to our influencers

Were we dealing with inflated numbers from our ambassadors?

To humor my hunch, I shared an anonymous survey with all of the (then) 4012 ambassadors on our platform, asking several innocuous questions about their take on what they do. But I also included some sharp questions about the number of followers they have, engagement and shady services.

A little over 10% responded.

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Most influencers are new into the industry. This reflects the youngness of the marketing channel.
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36% state that they never used any service to increase popularity or engagement.
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When I accumulated the answers, 414 in total, the result was staggering. Most of our ambassadors engaged in one or more shady service to inflate their numbers.

A whopping 60% of influencers had paid for mass-followers, participated in engagement pods and paid for inauthentic comments.

That’s a significant number — 60%. I was in chock. And more than one in five of our ambassadors intended to keep using these number-inflating services.

A jarring quote from one of our ambassadors stuck with me:

“I wanted to try a bot service because now everyone uses bots and I wanted to see with my own eyes how good it was.”

Adding to the survey answers provided under the veil of anonymity, I concluded that either we spotted a serious glossy scam, far bigger than we could imagine, or we were just terrible at execution.

Feeling equal amounts naïve and tricked, I wanted to grasp if the love-affair between startups and micro-influencers was fuelled by Russian bots?

Since the study didn’t answer that particular question, I had to continue to dig deeper into what at first sight appeared to be vital information for other brands — no matter their size and marketing spend.

I was onto something.

1.84 M influencer accounts scanned

I researched the market size again, and according to Statista, it should be worth $1.7 BN in 2019. Growth rates year on year around 35%.

I contacted an analytics tool, HypeAuditor, which has an AI-based fraud-detection system to verify accounts — in order to get a firmer grip of what was going on. I contracted them to do some serious data cracking and they sent us raw data from 1.84 million worldwide distributed accounts.

I was dumbstruck — again.

The results from the global study

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$744 M is at risk on a global level. The new and “true” market cap of Influencer Marketing can be €956 M instead of $1.7 Bn.
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The graph shows the net amount of users in millions per country when bots and MassFollowers have been taken out.
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Engagement Pods are widespread among influencers who have between 1K and 20K followers. They can easily boost the engagement rate due to that each new comment and like will affect the ER-rate from Instagram.
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Auto likes is one popular method of Instagram engagement growth. Loads of services and apps offer a certain amount of likes on every influencer’s post. These likes come from bot accounts.

Distribution of influencers by size for this data

  • 1M+ followers — 0.3%
  • 100К — 1M — 9.5%
  • 20К — 100К — 12.2%
  • 5К — 20К — 41.6%
  • 1К — 5К — 36.4%

Key delights of the global study

  • Instagrams monthly active users data might be overrated by approximately 45%
  • Net market size 2019: $956 M, a 45% drop from the most conservative report
  • Loads of brands pour serious money down the drain hunting engagement and likes
  • The shiniest toy in the store, micro-influencers are the ones cheating the system the most.

What did we do?

First, I considered pulling the plug from our ambassador program. But I was still convinced that influencer marketing is a necessary tool.

As a budding e-commerce startup, interacting with our community of customers and people who share our vision with only the influencer as a middle-man is thrilling.

So I kept our program. But with a hard twist.

I’ve stopped paying influencers without proof of results.

I even stopped believing in any data provided. Likes per post, the number of followers and comments were just not reliable. As influencer platforms and companies develop new ways to expose fraudulent accounts, influencers and bot generators will find novel ways to trick the system. The big companies can never catch up with agile innovators.

Leaving behind the idea of building a brand through influencer marketing, I’ve started focusing on the more measurable number of sales generated by our ambassadors.

No more free products

Adding to that, I don’t give away any free stuff, which is common practice to do within influencer marketing.

It just rhymes poorly with our idea of conscious consumption. We offer our ambassadors a discount when they buy our products, and I figured, if the influencers truly like our brand, that ought to be incentive enough. Perhaps this is the very way to sift out the real endorsers from the bots?

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Sure, it’s more work, and it requires committed influencers. But it’s sustainable.

So, what did I learn from this?

If we want to make it easier for engaged brands to find the qualitative ambassadors in the bot-haystack, we need to cease being impressed by mass-followings and engagement rates.

Maybe, we need to switch away from glossy?

And let’s not forget that freebies are fuelling the fire. We learned from our survey that influencers gladly boost their rates using bots and pods to get their hands on more free products. And why shouldn’t they when it’s working in their favour?

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Our new influencer strategy at a glance

  • Don’t trust any data.
  • Influencers can be great for sales and possibly for brand positioning. But the effect is difficult to measure without direct results generated by the ambassadors. Trust only sales.
  • Finally, don’t be afraid to ask your ambassadors to pay a certain amount for your products. This way, you know that they are actually interested in your brand and what your company stands for. And, not to forget, you are slowing down the mindless consumption train.

Make sure you give this post a clap if you enjoyed it.

The studies were conducted in May 2019. Contact Emilia Cullborg ec@agood.com or Anders Ankarlid aa@agood.com, if you’d like to get the full version of the studies or discuss this topic further.

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Written by

CEO of A Good Company. A serial e-commerce entrepreneur, and a father of three. Have worked in e-commerce for more than a decade. Mindless consumption-activist.

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