The Influencer Bubble - How Money Works - YouTube

this is not sustainable you might have noticed  a trend amongst modern social media influencers  

they are getting incredibly rich just 10 years ago  the very top youtubers on the platform were mostly  

filming out of their modest apartments doing  average skits and living lives pretty similar to  

you or i almost all of them had regular day jobs  and posted to the internet because they found it  

fun or at the very most because it could earn them  a little extra side money contrast that with today  

where some influencers have the same reach  notoriety and income as top athletes singers  

and movie stars as this new breed of celebrity  has grown even wealthier they have been able  

to broadcast even more elaborate content  whether it be showing off their new mansion  

giving away millions of dollars to strangers  or simply spending more money on the production  

of their videos but this whole ecosystem is  predicated on something of a marketing gold rush  

it is a unique and delicate blend of  circumstances that made houses like this  

possible and that easy money situation is coming  to an end faster than these people might expect  

so it's time to learn how money works to find out  how the influence bubble will pop and what it will  

mean once it does in the late 2000s companies had  a problem a key demographic for consumer goods  

people between the ages of 18 and 35 were becoming  harder to place into neat little marketing buckets  

if you can't pin down the specific preferences  of a group they are very hard to market towards  

and to make matters worse younger people  were watching less television and listening  

to less radio which were at that point  the foundation of consumer advertising  

you might think oh well 18 to 35 year olds don't  have any money anyway so what's the problem well  

the problem is that while this group may have  less income and wealth than older generations  

they spend more of what they have and they  spend it more compulsively they do this because  

most of them are not yet burdened with financial  responsibilities of raising a family of their own  

and are making their own money for the first time  in their lives so accessing this demographic was  

hard but potentially very lucrative fortunately  for the marketers around the world a new group of  

pseudo celebrity was being formed on micro blogs  and the early video sharing sites of the internet  

these people were perfect for brands who wanted  to tap into this difficult market of consumers  

the marketeers job was easy their consumer  base was already compartmentalized by interest  

if you wanted to appeal to young mothers work  with young mommy bloggers if you wanted to sell  

tools give a video mechanic a set for free  to use on their new fancy youtube channel  

this all got even easier when companies like  youtube introduced advertising features that  

allowed marketeers to bypass a direct relationship  with the creator entirely and instead choose from  

a wide variety of parameters to show their ads  using adsense and other similar offerings internet  

influencer marketing was also really cheap a large  company could reach out to 100 million viewers for  

less than a hundred thousand dollars the same kind  of exposure on commercial television would likely  

cost millions smaller companies could also get  in on the action too the internet was not limited  

to a few large tv channels or radio stations so a  small business could work with a small influencer  

to promote their product on a modest budget but  all of these other benefits were insignificant  

compared to the greatest selling point of early  influencer marketing people trusted influencers  

if a first-time parent is reading a mommy blog  about how to get their children to stop crying  

they are already looking to that blogger for  their wisdom on the subject of raising a baby  

if the blogger recommends a certain type of  formula or stroller it is going to have a huge  

advantage over the competition because it is being  recommended by someone that the parents trust the  

same trust extends to all influencers in any other  specific niche a 2016 study found that twitter  

users trusted their favorite online influencers  nearly as much as their close personal friends and  

that was twitter one can only reasonably imagine  that the level of trust would be higher on a  

platform that is not a cesspool of people's brain  farts so on the surface influencer marketing is  

a dream to companies it can be tailored to target  specific audiences it is cheap and it is effective  

so why is this a bubble the first problem is that  it's not that cheap anymore as more businesses  

rushed in to capitalize on the promises that  influencer marketing offered the more competition  

there was for influencers at all levels some  youtubers now charge over half a million dollars  

for an ad placement on a single video that is  still slightly cheaper than commercial television  

for a similar number of views but not by much  early on influencer marketing was dominated by  

small agile businesses that were willing to  take the risk on a new form of advertising  

today large companies and businesses backed by  endless amounts of capital dominate the space  

some businesses with enough investment backing  don't even care if they spend more on advertising  

than they gain in revenue because their investors  are primarily concerned with seeing business  

growth think about the brands who sponsor your  favorite online influencer most of them are new  

companies with a lot of investor money backing  them up the reason they spend so much money is  

because this marketing strategy can launch huge  businesses practically overnight but it can  

also be incredibly risky i work as an investment  banker in silicon valley so i am fortunate enough  

to have the direct exposure to market dynamics  in the startup capital of the world let me tell  

you firsthand that the investment appetite for  direct-to-consumer businesses is starting to wane  

the channel modern mba did a great video on these  businesses so i will leave a link to his video  

below for anybody who is interested in learning  more if these businesses fail to raise fundraising  

then they won't exist to pay millions of dollars  every month to influencers across the internet  

for now it's hard to say if or when this will  happen but with increasing interest rates and  

a slew of high profile business failures weighing  on investors minds easy money might not be as easy  

to come by for the businesses which have been  propping up the influencer bubble the cost of  

influencer marketing is insignificant compared to  the bigger problem that these online celebrities  

are now facing people don't trust them anymore it  should have been obvious from the start but a lot  

of influencers do not even care or understand what  they are promoting if businesses can pay their fee  

they will get their recommendation i am now a  youtuber and i can tell you from experience that  

the hardest part about working with sponsors is  simply finding businesses that i feel comfortable  

promoting my good friend richard over at the  plane bagel was once offered 30 thousand dollars  

to do just one video on a cryptocurrency richard  obviously declined that offer because it was an  

obvious pump and dump scheme but many influencers  wouldn't richard's channel has just over 500 000  

subscribers so one can only imagine how  much these shady operations are offering  

people with audiences of millions of younger more  impressionable viewers there have been countless  

scandals surrounding influencers that have been  caught advertising to children promoting failed  

music festivals and pumping and dumping crypto  projects over and over and over and over again  

young people are not dumb and they can see through  influencers who are just saying something to make  

money without believing what they are promoting  influencers that target young children can prey  

on the naivety of their audience for a little bit  longer but audiences this young are going to need  

a parent to do their shopping and they are going  to be harder to fool in a beautifully ironic twist  

the wealth that has been accumulated by top  influencers over their careers is also eroding the  

trust that they once had with their audience ten  years ago when a top influencer was talking about  

a product in their basic apartment it felt like  they were talking to a peer or maybe even a friend  

now as david dobrik dances around his la mansion  talking about sea geek he just comes across as a  

celebrity sponsor people like this struggle to  genuinely recommend products because they are  

so wealthy and famous that they no longer need  them do you think david needs to get his concert  

tickets on the resale market or do you think that  he gets invited to these events before tickets  

even go on sale some of the savvier influencers  will try very hard to convey an image of a normal  

lifestyle and maybe that's because they don't care  for an ostentatious display of material wealth  

or maybe that's because that they know that it  helps them better to connect with their audience  

the clear divide between an online friend and  an online celebrity was only accelerated during  

early lockdowns this [ __ ] show coupled with  the distasteful messaging of being hashtag in  

this together saw a rapid decline in the public's  interest in influencer marketing now not only are  

consumers losing trust in influencers but so  are businesses if a business uses an influencer  

as a spokesperson for their product they become  inextricably linked to that person's reputation  

this can be a good thing if a brand wants to  position itself as a fun loving product for young  

people it would do well by working with fun-loving  young influencers but it can also go very wrong  

as well online influencers are far riskier to  align with a brand than traditional celebrities  

traditional celebrities only really appear in  carefully curated settings where their managers  

get to make sure they don't say anything out  of line and even if they do it is likely to  

get cut out before being released to the public  influencers on the other hand make their living  

by broadcasting their entire lives on the internet  the good the bad and the ugly eventually something  

bad is bound to happen businesses also take on  significant risk with influencers because of other  

businesses if an influencer takes on sponsorship  from one brand that turns out to be fraudulent  

then logical questions will be raised as  the legitimacy of all other businesses  

they promote so what does the future hold for our  multi-millionaire influencer overlords well if the  

gold rush does come to an end they are all likely  going to make a lot less money but that's probably  

a good thing the days of throwing money at online  personalities and hoping for the best may come to  

an end but it doesn't mean that the practice is  going away entirely instead it will hopefully  

mean that online marketing can become something  better than a cheaper alternative to traditional  

celebrity endorsements on traditional media  platforms there is nothing wrong with relatable  

people giving advice that they believe in about  products that they understand and getting paid  

for it and the metrics will soon make companies  realize that this is what made internet marketing  

great in the first place now if you want to see  what a big fat hypocrite i am go and watch my  

video where i reveal how much money i made on this  youtube channel after gaining 100 000 subscribers  

in less than a month thanks again for making  it possible to keep on learning how money works