Wed, Jun 17, 2020

Risks of Social Media Influencers in a Post-COVID-19 World

 As the world retreated indoors, social media has brought the outside world to us, becoming a critical source of connection, comfort and collaboration. Facebook stated in May 2020 that it experienced more than a 50% increase in total messaging on its app, while voice and video calling have doubled over Messenger and WhatsApp during the past month in countries hit hardest by COVID-19.1 With a captive audience, celebrities and social media influencers have risen in prominence in the brand marketing strategies of companies. As this trend continues, more companies in Southeast Asia will need to be proactive in recognizing and taking steps to mitigate the inherent challenges of influencer marketing. Brands need to protect themselves from potential loss of trust and reputational damage which may occur as a result of inappropriate influencer-generated content and messaging, and fraud. 

The use of influencers is not new in Asia. Kroll’s Global Fraud and Risk Report 2019/20 revealed that more than half of the businesses surveyed in China, Japan and India said they had worked with brand ambassadors or influencers. There is a reason why influencers are increasingly pivotal to marketing campaigns in Southeast Asia. A 2019 report by Google, Temasek and Bain found that consumers in Southeast Asia were the most engaged globally, and responsible for a total of $100 billion(bn) in online travel (including use of ride-hailing services), e-commerce and online media (such as Advertising, Gaming, Subscription Music and Video on Demand) in 2019. At the time of the report, this was expected to triple to $300 bn by 2025.2  

Many influencers have relatively small followings, as they are regarded by marketeers to have better resonance with their followers. They have shown they can be adaptable and nimble - quick to find niches in this new environment. In Singapore, a former radio presenter and travel host branched out from being a brand ambassador for luxury goods to doing live cooking shows which are now sponsored by a local energy company. In Malaysia, a religious preacher and motivational trainer and consultant gained celebrity status with three million followers on Instagram, inspiring his followers through the charitable work he engages in during the pandemic. 

The Indonesia government has also been creative in its use of influencers. In February 2020, in order to boost the country’s tourism industry which faced an estimated loss of $500 million (mn) due to the pandemic,3 the government reportedly allocated $5.2 mn for influencer marketing. The Ministry of Communication and Information Technology subsequently roped in 20 influencers to spread government-endorsed hygiene and COVID-19 awareness campaigns on social media.4 

Trading on Trust

Given this growing trend, it would be prudent for private and public sector organizations who use influencers and personalities to pay close attention to the impact these influencers have on their brands and messaging. Data from Kroll’s Global Fraud and Risk Report 2019/20 showed that 16% of respondents who worked with influencers said they do not conduct due diligence on them, while only 22% conducted due diligence on brand ambassadors or influencers throughout the business relationship based on a determined risk rating.

Such numbers are worrying. Despite the prevailing legal, reputational and fraud risks to brand owners, the vetting of influencers is often significantly less robust than supplier, customer or partner due diligence. Few companies have the ability and sophisticated social media tools to monitor what influencers say and do across an ever-growing range of platforms, while at the same time considering the context and risk appetite of each brand. While influencers may strike the right tone when it comes to giving brands access to a certain target audience, their political and social beliefs, lifestyle and personal interactions with followers may not. 

Vigilance and Caution are Key

There should be no difference in the treatment of more conventional third parties such as vendors, customers and suppliers versus influencers when it comes to risk mitigation. After all, brand owners expect a return on investment. Influencers are assessed based on a set of relatively dynamic metrics such as size of followers, follower engagement and potential conversions. The traditional predictors of a good collaboration – number of successful past partnerships of the influencer, history of disputes and conflicts with third parties, and ethical conduct still apply but must be viewed in a more nuanced fashion. 

A review of an influencer’s track record may be muddied by fraudulent “sponcon” or sponsored content, a tactic used by some emerging influencers to attract actual sponsorships. There is no shortage of viral public disputes between two or more big-name influencers which resulted in the surfacing of sexual harassment allegations and historical racist posts. These red flags are harder to uncover and predict but their potential to escalate is potentially significant. 

Among the influencers assessed by Kroll, a division of Duff & Phelps, approximately 20% have shared publicly available content which their respective brands deemed had the potential to damage customer loyalty. An industry report in 2019 found that 47% of Singapore-based influencers have employed artificial means to boost their following and engagement.6 There are also potential conflicts of interest when social media marketing agencies represent both sides – the influencers and clients – simultaneously.

The reputational risks for clients are undoubtedly higher among younger influencers, who often have more limited track records. Even experienced and PR-savvy personalities can trip up. In April 2020, a prominent Malaysian entrepreneur and fashion influencer with 1.8 mn Instagram followers was criticized for being out of touch with reality as a result of a comment she made online regarding the government’s economic stimulus package. It led to her detractors calling for a boycott of her luxury hijab brand and demanding her removal from the board of directors at a Malaysian university. 

More recently, in early June, Malaysia’s former beauty queen, Samantha Katie James received brickbats locally and abroad after she posted racially charged comments in relation to the Black Lives Matter movement in the United States. The pageant organizer distanced itself from James, the title winner in 2017 and so did a local cosmetic company, which James had modelled for. 

To counter COVID-19 misinformation, the WHO created a brand-safe virtual influencer. Imagine an “avatar”, that appears human. While one appealing factor of these virtual influencers is the control clients have over the messaging, technology cannot replicate the authenticity and charisma of a real person, which is the crux of influencer marketing. The reach and influence of social media marketers is a double-edged sword and all companies need to stay ahead of the curve by conducting social media influencer due diligence and monitoring, to protect their brands and mitigate potential reputational risk. 

Jenn Beh is a vice president in the Forensic Investigations and Intelligence practice, based in the Singapore office.

5 Kroll Global Fraud and Risk Report 2019/20

Forensic Investigations and Intelligence

The Kroll Investigations, Diligence and Compliance team consists of experts in forensic investigations and intelligence, delivering actionable data and insights that help clients worldwide make critical decisions and mitigate risk.