Influencer Marketing with Fake Followers
45 Pages Posted: 26 Dec 2018 Last revised: 17 Mar 2022
Date Written: March 16, 2022
Influencer marketing is a practice in which an advertiser pays a popular social media user (influencer) in exchange for brand endorsement. We develop a contract-theoretic model of an advertiser and an influencer. The influencer can inflate her publicly displayed follower count by buying fake followers, and can take a hidden action to legitimately increase her true number of followers. An imperfect audit can detect fraud, which imposes a high cost on the influencer. We show that the optimal contract exhibits high faking for influencers with intermediate follower counts, while faking levels are low for those with very small or very large true follower counts. Audits deter fraud only when accompanied by high penalties, but perversely, restitution paid to the advertiser encourage more fraud.
Keywords: Digital marketing, social media, influencer marketing, fake followers, optimal control, contract theory, moral hazard.
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