Issue 11 - Keeping it Real

A look at the creator economy

Author

The DTC Times
April 21st, 2024

Advertising used to mean a simple radio jingle. Or a newspaper placement. Maybe a 30-second TV spot or a celebrity endorsement. You might remember this if you’re over 50 (or have watched Mad Men). 

Things in the mass media era weren’t easy, but at least they were certainly simpler. 

New forms of media have fractured the landscape and lowered attention spans. It’s more difficult to reach everyone with a single megaphone. Users are not just accessed through a “one-to-many” relationship, wherein the audience is passive. Now, entertainment and content consumption options are legion, engaged dynamically via personal algorithmic filters and handheld devices. 

The audience is also the creator thanks to digital self-publishing. As traditional gatekeepers have fallen, new forms and opportunities have emerged. Enter - the creator economy. 

This week:

  • MKBHD vs Humane

  • How to work with Influencers

  • Desperately seeking authenticity

MKBHD vs Humane

As you may have heard, Marques Brownlee (@MKBHD), a popular YouTuber renowned for his thorough and honest tech product reviews, had a decidedly negative opinion about the Humane AI pin.

The pin is essentially a voice-activated, portable ChatGPT speaker that can access your personal information. 

MKBHD’s main gripe with it? It’s slow as hell to respond.

We watched this demo Humane posted where, every time the speaker prompts the pin, they immediately start speaking to us again to fill the awkwardly long wait for a response. Bit weird at first, then gets funny as the pin interrupts them mid-sentence for the 10th time. 

Anyway, MKBHD called his video review: “The Worst Product I’ve ever Reviewed… For Now”. 

Ouch. Of course, it went viral. 🙃 

Immediate reactions included fun allusions to the fairly serious idea he might be a brand serial killer:

And of course, outrage.

  • Pretty interesting ethical quandary. There is a strong correlation between MKBHD’s opinion and brand success. Whether that’s because of his accuracy or influence is hard to tell. 

  • However, when he uses such a scathing title, the brand is undoubtedly going to suffer (potentially in catastrophic fashion.) 

  • Does the power of being a highly influential creator come with the responsibility to read lightly? Or does that risk polluting the brand of a creator who built his audience around honest reviews?  

In the ensuing discussion on the subject, the ethical line seems to be have drawn between honesty vs clickbait. Or - Sensationalizing the review for clicks and engagement over clarity and accuracy. 

  • Brownlee’s follow-up video to the outcry was titled: “Do Bad Reviews Kill Companies?” In it, he notes the review of the Humane AI pin “was not super positive”. That’s an understatement relative to the title chosen for the review.

  • Additionally, the Tweet promoting the Humane Pin video had a milder title:

Takeaway: The line between clickbait and honesty is ultimately subjective. What is beyond doubt is the impact a major influencer like Brownlee can have on a product or brand when it comes to “review” content.  

How to work with Influencers

More than anything, the MKBHD - Humane story highlights the power creators have today. 

To be taken with a grain of salt of course. The product itself does more to bankrupt the company than the influencer.

Nevertheless, the influencer’s reach must correlate somewhat with the size of their audience, right? If MKBHD’s followers formed a nation, it would rank 66th largest in the world. Not bad, out of 195. 

Thanks to the self-publishing revolution spurred by digital technology and social media, the number of global creators continues to multiply:

  • In a recent study across 9 global markets, Adobe found that nearly 1 in 4 people are content creators. (Content creator defined as a person posting art online or simply being active online with the goal of growing an audience.)

  • Even crazier, 50% of all creators began the activity in the last 2 years. In the US alone, nearly 17M creators earned over $6.8bn in 2017, and experts think this number could reach an insane $480bn by 2027. 

  • As it stands, most (80%) US companies do influencer marketing. 

A swelling army of creators and influencers has meant an entirely new arm of advertising for brands. But is it worth it?

Influencer ROI is notoriously hard to measure:

  1. Attribution Complexity: Can you know how much of an influence the influencer has on each purchase? 

  1. Social Media Metrics: if you know the answer to the following equation, we’d like to speak with you:

likes + comments + shares = X $

Which is why so many in DTC like affiliate marketing. 

  1. Direct Tracking: affiliates share a code to redeem a deal, making tracking easy.

  2. Performance-Based Payment: Payment is usually made based on direct sales, simplifying ROI calculations.

  3. Scalability and Control: Affiliate platforms make execution, monitoring, and scaling simpler. 

Of course, not all advertising is merely about direct response and immediate sales. Awareness, consideration cycles, and brand lift are all considerations as well. How can we determine ROI beyond direct sales garnered with a discount code?

Enter science!

Sweet. 

Actual scientists decided to put their painstakingly earned grant money to work for us. 

For the nerds: 

  • They considered the whole marketing funnel, from followers on social networks, to reached followers, to engagement, to actual revenue, while accounting for the cost of paid endorsements. 

  • Sample size was 1,881,533 purchases with hundreds of paid influencer endorsements.

  • Campaigns were run by some of Europe’s leading DTC firms.

  • The average return on influencer spend? 8.552. 

Influencer marketing definitely pays. 

But here’s the real juice. 

It seems a given that bigger influencers are a better place to put your money since they have more reach. However, according to this thing called “social capital theory”, the more followers you have, the less you connect with them.

So these guys checked. 

Let’s look at the table again:

Nano and micro-influencers outperform the HELL out of macro. 

Desperately Seeking Authenticity

The reason influencer and creator marketing works is that it is perceived as “authentic”. It’s one of the reasons smaller influencers can command such a strong ROI - better connection with the audience can equal more trust. 

Trusted Creators are essentially social proof on steroids, often buttressed by perceived expertise or experience. 

Trust is the currency with which influencers have built an engaged audience. As long as there is trust that they aren’t simply selling out when it comes to brand partnerships and endorsements, the creator channel can be a powerful one. 

Of course, those that sell out too obviously get recognized as shills, undermining the value of a review or testimonial to that of a regular ol’ advertisement.  

One of the paradoxes of marketing is that tactics that work well can eventually be over-leveraged, over-saturated, and worn out. The great enemy of effective advertising is suspicion and skepticism in your audience. 

There are two major risks when it comes to influencer marketing:

  • The acute risk of a mega creator announcing he or she HATES your product

  • The chronic risk of seeding an army of shills who don’t truly like or use your product

The former risk can deal a sudden gut punch to your brand. The latter can slowly and painfully drain your brand of trust and undermine your marketing efforts.

Walking the Tightrope

Influencer marketing works because it is perceived as “authentic”. If users lose trust, “UGC” style creatives regress to the average ad, at best.

Our advice to DTC operators who want to leverage creator marketing: make sure it’s REAL. 

  • That means finding creators who legitimately like your product or brand. It takes longer than going through creator farms, but those are part of the problem. 

  • Give yourself time to seed your product and develop relationships. The result will be better partnerships and quality engagement. 

  • Target micro and nano creators, especially if you are not a National or International brand. You’ll almost certainly get better bang for your buck and it’ll be easier to build a relationship.

  • Similar to putting effort into organic growth vs. paid. Over time, a large collection of legitimately devoted creators, even micro-influencers, can have a compounding effect.

  • If you are working with a very high-impact creator, maybe ask for them to share negative impressions w/ you first before they publish something slamming your product.

One last point calling back to the MKBHD situation. Negative reviews from creators can help too, as long as the brand can respond in a way that answers doubts and improves the product. 

We’ll finish on this recent note from Amanda Goetz re: telling the difference between bogus “Gurus” and actual subject matter experts on social media:

  1. Experience. Have they done what they claim to teach? 

  2. Relatability.  Does the person understand your pain points? Have they been through something similar?

  3. Trust. A.K.A. authenticity. Do they do as they say? Or just preach?

Amanda’s conclusion: 

“As the creator economy continues to grow, be sure to look for a proven track record, a true understanding of their audience and an authentic and aligned approach to their own work and lives. ”

Quick Hits

  • Capital gains tax rate is increasing from a 50% inclusion to 66% in Canada. This increases the net capital gains tax rate from 27% to 36%. For comparison, the US has a 20% capital gains tax rate, plus major incentives. Tough day for entrepreneurship in the great white north. 

  • Alexandra Greifeld shared advice on how to hire. First, categorize the tasks you’re hiring for: are they business critical? Part of your competitive advantage? Then, get these people:

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