Brands are investing more in influencer marketing with marketers predicted to spend a whopping $8.5 billion on influencers this year, reaching a further $10 billion in 2020, according to Mediakix. However, what about all of the budget lost to fake influencer marketing? According to a new report by Cheq, brands could be losing as much as $1.3 billion a year to fraudulent activity. If left unchecked, it could increase to $1.5 billion by 2020. The Economic Cost of Bad Actors on the Internet study was conducted by AI-based cybersecurity company Cheq and economist Roberto Cavazos. They used a combination of economic analysis, statistical and data analysis to measure the global economic price paid by brands and society due to fraudulent activity. This could be buying followers or buying “click farms” to like or comment on the posts. Despite the likes of Twitter and Instagram trying to cull fakes followers on the platforms and regulators trying to tackle the issues of trust, the problem has grown as the industry has evolved. Standard market rates for purchasing fake followers on leading platforms like YouTube, Instagram and Twitter range from $15-$50 per 1,000 followers. “In defining fraud, we consider the inflating of follower counts as blatant in estimating economic losses,” stated the report.In a survey analysed by Cavazos, it found that 25% of followers of 10,000 influencers were fake. Another survey found that two-thirds of the 800 marketing agencies and brands questioned had worked with influencers with fake followers. Looking at stats like this, Cavazos believes 50% of engagement levels on sponsored content is fake.

The report also found that influencer tech platforms are on the rise. These platforms have received $118 million in funding in the last year. “We’re seeing more automation as more and more sophisticated tools are put forth to help fraudulently grow audiences. There’s no doubt that without a clear strategy and suitable technological solutions to combat it, fake influencer marketing will continue to flourish, further eroding the public’s trust in social media,” said Daniel Avital, Cheq’s chief strategy officer.

Indirect costs

There are further indirect costs such as the erosion of trust, which threatens greater enforcement and regulation. The long-term impact effect of genuinely inauthentic communications and its effect on consumer trust remains challenging to quantify. However, the report outlines that marketers lose receptive consumers and business marketing ROI diminishes. Brands and advertisers are still falling victim to influencers with fake followers. For example, o

ne study conducted by influencer marketing measurement firm Points North Group last year found that 78% of the followers of influencers hired by Ritz Carlton were fake, while 39% of followers of influencers working with L’Occitane were fake.

“Though there is no precise way of measuring the loss of consumer trust in influencer content, we suspect it’s significant,” Cavazos said.As the report notes, influencer fraud will most likely continue to increase as the market becomes more complicated and the sector increases.  “The industry is moving towards greater depth and complexity through other means, with so-called micro-influencers and nano-influencers joining the payroll of brands,” concluded Cavazos.
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