In today's hyper-connected world, social media influencers have become the harbingers of what's cool, trendy, and worth splurging on. Yet, the glittering allure of influencers lives casting their verdant shadows over our digital screens masks a burgeoning problem of unethical promotions and rampant fraud, particularly in the crypto space.
The case in point is YouTuber Ben Armstrong, better known to his followers as BitBoy Crypto. With a staggering 1.5 million followers, Armstrong isn't just raking in the views; he's cashing in on substantial promotional deals, upwards of $100,000 a month. His endorsements, however, haven't always been in the best interest of his audience. One such promotion led his followers straight into the jaws of a crypto scam named DistX—a 'rug pull' scam where investors lost big when developers withdrew after the initial coin offering, plummeting its value.
This isn't an isolated incident. High-profile celebrities like Logan Paul and Kim Kardashian have dipped their toes into promoting crypto ventures that haven't always turned out favorably for their fanbase. The lack of transparency in these promotions blurs the lines between genuine endorsement and paid promotion, leading followers to make financial decisions based on misleading information.
As the influencer marketing industry swells—rocketing from $1.6 billion in 2016 to an estimated $21 billion today, the urgent need for regulation becomes ever more apparent. Researcher Emily Hund passionately argues in her article for Harvard Business Review that this surge necessitates new regulatory guardrails to combat exploitation within the industry. Hund clarifies, "Its lack of boundaries opens the door for multidirectional exploitation." Essentially, without proper regulatory oversight, influencers, brands, and platform companies are all in a position to exploit each other in the pursuit of revenue.
From a brand’s perspective, the downside of influencer marketing is glaring. Unethical practices are rife, with fake influencers able to manipulate engagement metrics to inflate their worth. This fraud costs businesses billions, with one report estimating a loss of $1.3 billion in 2019 alone.
Yet the harm isn't limited to businesses. Consumers are also at risk, often falling prey to undisclosed paid promotions that skew their financial decisions. A glaring example is the infamous case of Kim Kardashian, who had to settle with the Securities and Exchange Commission for a whopping $1.25 million due to her failure to disclose a $250,000 payment for promoting EthereumMax tokens.
The FTC has issued guidelines regarding sponsored content disclosures, but enforcement is uneven. Despite the high stakes, it's often only the most prominent influencers who face scrutiny. Many slip through the regulatory cracks, effectively misleading millions of unsuspecting followers.
Influencers of color and marginalized creators face additional hurdles—from significant pay gaps to discriminatory practices. Black and Hispanic influencers earn 35% less than their white counterparts, as reported by NBC News. The tide of fake talent-management firms scamming wannabe influencers adds yet another layer of complexity.
In essence, the influencer marketing world is a double-edged sword. On one side, it offers a unique authenticity that traditional ads can't match. On the other, it opens the floodgates to an array of ethical, financial, and regulatory issues that can lead to distrust, loss, and harm. As David Camp from Metaforce points out, "there's really no filter, there's no barrier—so there's a very small percentage of cream that rises to that top."
Where do we go from here? The path to a more transparent, regulated, and ethical influencer landscape will likely be a rocky one. But one thing is clear: without stringent oversight and a commitment to ethical practices, both brands and consumers stand to lose far more than they gain.
