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    What Kim Kardashian’s $1.26M fine says about influencer marketing

    The following is a guest piece by Kearney’s Jim Singer, partner in the consumer practice of global strategy and a board of directors member, Brooks Levering, partner, and Piyush Gupta, principal in the firm’s strategic operations practice. Opinions are the authors own. 

    When it comes to almost anything, from her siblings, stepparent, and husband to her politics, wardrobe, and children, there’s no question that Kim Kardashian, the reality-show celebrity most famous for being famous, knows how to make an outsized statement.  That’s what made her one of the earliest, most powerful and durable celebrity social media influencers. But given the news that she is to pay a fine for touting crypto without disclosing she was paid for the promotion, she is now the poster person for why the role of influencers and influencer marketing needs immediate and serious reexamination. 

    From roughly $1.7 billion in 2016, influencer marketing has soared to a $10 to $14 billion dollar industry today, making it the fastest growing media category, expanding almost three times faster than traditional media. Today, some companies are allocating upward of 50 percent of their marketing budget to influencers.

    In one example, over the last three years the influencer spend of a $10 billion dollar beauty company we studied, as a percentage of working media, grew from around 5% in 2018 to 15% in 2020. This is not completely surprising, given marketers’ eagerness to extract promised superior return-on-investments (ROIs) of “up to 2 times” when compared to other forms of advertising.

    On the other hand, two influencer disasters in April 2017 tell a different story. First, the Kendall Jenner and Pepsi collab that trivialized Black Lives Matter protests considerably set back the soft drink company’s reputation as it was labeled “tone deaf” to a major social movement. Then at the end of that month, the Fyre Festival, a so called influencer hub and event billed as a luxury musical festival in the Bahamas, wound up feeding its patrons cheese sandwiches and housing them in FEMA tents, and was canceled after its inaugural weekend.

    The future of influencer marketing isn’t looking entirely rosy, which brings us back to Kim Kardashian, incidentally Kendall Jenner’s half-sister, and the social media scandal caused by her June 2021 endorsement of an unproven, speculative digital token called Ethereum Max, not to be mistaken with Ethereum, the cryptocurrency that made its debut in 2015.

    Ethereum Max hired Kardashian along with fellow influencers Paul Pierce, a former Boston Celtics journeyman, and boxer Floyd Mayweather to pitch their tokens on social media. When Kardashian’s (identified) ad for the tokens appeared on Instagram in June, regulators and social media watchers jumped all over it, and her, for not telling her 250 million followers that the tokens had only been around for a month and weren’t a traditional digital currency.

    Partly as a result of the controversy, Ethereum Max lost more than 70 percent of its value after Kardashian’s Instagram post — obviously not quite the outcome the token’s marketers had in mind. As of January 2022, she was being sued for her role in the scheme. Not quite the outcome she had bet on, either.

    Then there’s the moment of an influencer losing their cool — also disastrous. In 2018, Will Smith worked hard building his social media reputation, rendering himself into “the King of Instagram” in three months. A beloved influencer and entertainer, Smith lost it all on that fateful Academy Awards stage by slapping fellow entertainer Chris Rock over a comment about his wife. Can that kind of downfall be foreseen?

    How can companies operate in this complex and challenging digital space without falling prey to false promises or falling short on planned commitments? At Kearney, we have identified five best practices for making your influencer marketing effective: 

    Select the right influencer 

    With mega-celebrities at one end of the spectrum and common folks vlogging at the other, it’s important to shortlist the type of influencer best suited to the needs of the brand. Budget aside, this choice is a function of the product category and its value proposition. For a successful long-term partnership, the key is to align a brand’s value proposition with those of the chosen influencer. 

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