Meet the industry's $1.3 billion problem: Fake influencer marketing

15% of all influencer ad dollars are spent on fake followers, study finds.

It’s no secret that brands have been investing more in influencer marketing; in fact, the spend was $500 million in 2015 and is expected to be at least $8.5 billion this year and $10 billion in 2020.

But what about all the money lost in this practice? According to new research, fake influencer marketing will cost advertisers $1.3 billion in 2019 and $1.5 billion by next year.

The "Economic Cost of Bad Actors on the Internet" study, conducted by AI-based cybersecurity company CHEQ and economist Roberto Cavazos, examines the impact that fake influencer marketing will have on trust and brand health.

While digital marketing has been victim to ad fraud, which costs marketers at least $23 billion a year, fake influencer marketing can cause more indirect damage – namely, the erosion of consumer trust, the study states.

The report also found that influencer tech platforms are on the rise, leaving more room for fraudulent activity.  These tech platforms have garnered more than $118 million in funding in the last year.

Additionally, the number of paid influencers, including micro and nano-influencers, has been increasing across channels, such as YouTube and Instagram.

"We're seeing an almost institutionalized fraud industry within influencer marketing, with standard market rates for purchasing fake followers on leading platforms like Youtube, Instagram and Twitter ranging from $15-$50 per 1,000 followers," said Daniel Avital, CHEQ's chief strategy officer.

He added: "Another thing we're seeing more of is 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."

Nearly three in four marketers (71 percent) consider influencer marketing to be highly strategic, with 55 percent saying they plan to spend more in this space next year. This is why the fraudulent activity and fake influencer marketing efforts have to be yielded, especially as the space becomes more complicated.

Professor Cavazos of the University of Baltimore said: "Complexity is a well known cause of any fraud in any industry. In this market, we are seeing many more players and more money flowing and potentially less control."

"In particular, opportunities for accountability and monitoring diminish, the bigger and more complex a market gets as we have seen with more micro-influencers and nano-influencers," he added. "Fraud follows money and complexity, and this market is seeing more of both."

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