Week #2 – MBA 6101 – Influencer Marketing

When Facebook launched its IPO in 2012, it’s trading volume was the largest for a technology company and notched the third largest trading volume for an IPO behind GM and Visa.  While the longevity and profitability of the social media site divided investors’ opinions, pundits, bearish or bullish, could agree that to validate its unprecedented valuation, Facebook would need to tap “bold, new revenue streams” to drive growth. For Facebook and other social media sites, digital ad spending was crucial to profit generation.   

In 2012, the most common social media platforms included Facebook, LinkedIn, Twitter, Pinterest, and Instagram.  According to the Pew Research Center, more than 50% of US adults accessed Facebook. 

The runners up attracted between 9- and 16%.  By 2021, YouTube and Facebook were the most popular social media sites, with 81% of US adults having visited YouTube, while close to 70% of US adults had visited Facebook.  Instagram, Twitter, Pinterest, LinkedIn, Snapchat, WhatsApp, TikTok, Reddit, and Nextdoor were also popular social media sites, attracting visits from between 13- and 40% of US adults. 

As much as social media sites rely on ad generated revenue, businesses rely on social media sites to generate brand exposure.  As social media users have increased over the last 10 years, so has spending on social media sites.  Between 2016 and 2022, ad spending on social network platforms increased from $15.63 billion to $56.85 billion, an increase of more than 250%. 

While “traditional” digital advertising, like sponsored ads, are most familiar, brand sponsorship of influencers is becoming more popular.  Social media personalities, like Gohar Khan, have pivoted their online presence to create mutually successful brand deals.  However, sponsorships with social media stars are not without risk.  Some influencers are known for courting controversy that can negatively impact sponsors. 

Better known as PewDiePie, Felix Kjellberg had partnerships with YouTube and Disney’s Maker Studios, was scrutinized for publishing offensive content.  Likewise, Logan Paul, who has numerous sponsorship deals with brands like Nike, Verizon, and Dunkin’ Donuts, has also drawn criticism for questionable posts. 

Even though brand sponsorship of influencers is likely to become more common, “sponsored advertisements” have been shown to be “more effective in generating post engagements” when compared to “influencer marketing posts.”   According to at least one study, sponsored advertisements can achieve a greater reach and more engagement when compared to influencer marketing posts.  However, influencer marketing posts are more likely to lead to sales.  Despite larger audiences, sponsored advertisements do not carry the same “level of credibility” that influencer marketing can convey.