The roaring trade between marketers and social media influencers with a large and engaged fan base has been the hot topic at this year's Festival of Marketing in London.
From internet stars to celebrities marketing a variety of products across the fashion, beauty, fitness, travel and food industries and more, brands are increasingly recognizing influencer marketing as an important tool that brings value and relevance for consumers.
At a time when more brands are questioning the ethics behind programmatic — or automated — advertising, advertisers are looking to tap into the scores of YouTube and Instagram public personalities to market their products and services.
"It has to do with trust," according to Stephanie Lamb, group account director for Europe & Australia at Open Influence, an influencer marketing firm.
"My background is in programmatic … when I was in that industry I noticed there was a problem with trust. There was no guarantee ads were being seen by the right people in the right place," she told delegates during a panel discussion.
Moreover, the advent of ad-blocking, which is in use by 22% of online consumers in the U.K., including 47% of 18- to 24-year-olds, has given brands even more incentive to put their money behind influencers. And the popularity of social media platforms like Instagram undoubtedly drives the use of influencers.
Speaking on the panel, Instagram influencer and YouTube vlogger Laila Swann, explained that the ability to engage young audiences through relevant content is what makes influencers' fan base so appealing for brands.
"I am very relatable … people look at that … and they feel like they have known me their whole lives," she told the audience.
Nielsen estimates that as many as 39% of heavy social users actively use social networks to discover new products and services.
Moreover, a joint study between influencer marketing software business TapInfluence, Nielsen Catalina Solutions and a Fortune 500 food brand found that 1,000 people viewing influencer content generated $285 of incremental sales, compared with just $16 for display ads.
As a result, a growing number of traditional industries, such as financial services, are jumping on the influencer bandwagon and approaching social media with a more open mind, according to Stevie Johnson, an influencer who also works as head of talent at Open Influence.
This has made influencer marketing one of the fastest-growing categories in advertising. The industry is already worth $1 billion and is projected to reach $5 billion to $10 billion by 2020, according to influencer marketing agency Mediakix.
But on the other hand, progress among some of the more traditional businesses and brands remains slow.
"A lot of companies are [still] grappling with the challenge of clearly defining the boundaries of influencer marketing," according to Marco Marranini, COO Europe at Open Influence. He explained that it was therefore necessary to educate brands and agencies about the strengths of collaborating with influencers, as well as educating influencers about what brands need.
In addition to poor understanding among some brands of the nascent industry, influencer marketing is often criticized for blurring the lines between honest endorsement and paid-for-advertising.
The failure to clearly label ads on influencer marketing campaigns has not only led to fears of an erosion in consumer trust, but has also led to crackdowns from the Advertising Standards Authority (ASA) in Britain and the U.S. Federal Trade Commission.
Commenting on U.K. guidelines, Lamb said regulation had been a positive factor for the industry.
"There is research out there which shows that audiences much prefer it when there's disclosure. They don't like feeling like they're being lied to," she said.
Swann stressed the importance of full disclosure and transparency within social media marketing. "As long as you are working with brands you believe in … [if you] love their ethos and everything they stand for … your audience won't have a problem with it," she added.
The panel also tackled brand safety and fraud concerns. For instance, the rampant purchase of fake followers is one way some influencers are taking advantage of market demand to artificially inflate their follower engagement and clout.
And with approximately 60%-80% of a campaign based on the selection of influencers according to Open Influence's estimates, Marranini said it was important to work with the right influencers.
Panelists also urged brands to look beyond the Instagrammers and YouTube vloggers racking up the most followers online and instead seek out the ones with high levels of engagement, and those brand-approved lifestyles and values.
"People that buy fake followers will get blacklisted," Lamb concluded, stressing that "this is a bubble that will burst on them. There is more and more technology that will monitor that."