How Influencers Hijacked The Consumer Economy

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Welcome to Profge Markets. I'm Ed Elson. It is June 10th. Let's check in on yesterday's market vitals. The S&P 500 and the Nasdaq fell with tech and semiconductor stocks leading the declines and news that Iran shocked down a US helicopter added to the selling pressure. Oil declined earlier in the day, but rose again as President Trump said the US would respond to the

attack and finally Apple shares slid nearly 4% on day two of its developers conference as investors

remained unimpressed by its AI vision. By the way, that was its worst day since February. Okay, what else is happening? There's a lot happening in the markets this week with the biggest IPO in history coming on Friday. We will be covering all of it throughout the week. But today, we wanted to take a break from the AI news cycle and discuss something a little bit different, and that is the influence to economy. If you walk around New York City long enough,

you'll notice something strange right now. And that is a lot of people standing in a lot of lines. 60% of Gen Z say they have waited for more than 30 minutes in a line for a specific food in the past year after seeing it on social media. For instance, people start lining up at 6 a.m. for a dot cake, which is an $11 cup of cake that just went viral on TikTok. But it's not just food. More than 80% of Gen Z discovered new music through social media and user-generated

content. Marketing companies like K-outed good projects create networks of TikTok accounts engineered to push artists into recommendation at algorithms. They call this the process of trend simulation.

“What they've really mastered, though, is the science of going viral. All of this raises an important”

question, which we will answer in this conversation, and that is, do influences run the consumer economy right now. Joining us to answer that question, we're speaking with Rachel Colton, author of the Lincoln Bio Newsletter, and also Alison Schreger, Sonya Fellow at the Manhattan Institute and Colomest for Bloomberg, who just wrote about the influencer economy. Rachel, Alison, thank you for joining me on Prophogy Markets. Alison, I'm going to start with you because you just wrote

this article, "The influencer economy has crossed the line." I gave a little bit of an intro as to what these lines are, but if you could kind of explain to us what are we seeing right now, what are these lines that everyone's seeing on the blocks in New York City, and in other cities, as well. In the article, I'm actually quite bullish on it. I call it a manifestation of capitalism on display, you know, technological innovation on display. And what we're seeing is, you know,

a lot of people hear about good, or service, usually a good, like frozen yogurt, on Instagram, on TikTok, they want to try it themselves, and then film it for themselves, for their network either to try to grow their audience, or just to impress their friends, that they've tried this

people used to wait in line for nightclubs, now they wait in line for bagels. It's kind of true.

I saw someone speculate recently that because it's a more anti-social generation, this is their sort of new, in-person experience. I, you know, there's problems with it, you know, like any new market. It's a very winter take-all, like a lot of aspects of our economy, like most influencers can earn a living at it. It also sort of sort of shines a lot of economic activity on certain businesses that managed to sort of catch fire for reasons that aren't sort of very

well understood. There's so much in the happening. I mean, one is these random products are going viral, and then suddenly everyone has to get this bagel, or everyone has to get this dot cake. And then there's also the fact that young people are willing to wait in two hour lines for a dot cake. And I think the comparison to waiting in the line for a nightclub versus waiting in the line for a bagel is a genuinely apt comparison. Rachel, I just want to get your views.

Allison sees this as a good thing economically, or maybe a good thing something technologically good about it. How do you see what's happening? And what do you make it the fact that young people are down to do this? Well, I think also to understand why this feels so prevalent right now. It's

“also important to look at like how the algorithms have changed. And so I think when you think of the”

traditional view of an influencer, it was like you grow your following and you grow your views. And that's how you have influence. And with these interest-based algorithms, now somebody with

500 followers can have million views reviewing a product. And maybe they're actually seen as

more trustworthy because they aren't an influencer, quote-unquote. And so I think that we're seeing this explosion at this time also because everyone is an influencer now. It's not because you has spent five years growing your following to have some sort of influence. If you get on TikTok and speak, you are an influencer essentially at this point. And so, you know, I think that to some degree lines, lining up for things. I worked at Bonapetit for four years before I started my

newsletter in 2016, people were lining up for milkshakes, then in cronuts and supreme drops. And so I do think lines and people wanting to sort of thinking, it's worth it to spend 30 minutes, line is not a new thing. But I also think that the way that TikTok has created conversation around it has created urgency around it. And has essentially created a new content stream, which is I tried the viral thing as a way to go viral feels really different right now. I tried the viral

“thing feels really important. I think a lot of people might be thinking like, "Why are we talking”

about this topic on this show?" The reason we're talking about it is because I'm interested in it. But also, I think it matters for businesses. It seems to matter in the actual real world economy, where it seems as though the way you succeed today, if you are selling any consumer product, is you go viral. You randomly hit the lottery, the algorithmic lottery, and suddenly everyone's saying, "Oh, I tried the viral cronuts, bagel, donut, dot cake, whatever it may be." I just wonder,

I thought with you Rachel on this question, "Do you think that that is true? Do you think it's true that you basically have to cater to the algorithm if you want to succeed in consumer business today?"

I will never say you have to be on social media because I'm exhausted by social media myself,

but I think it's a very powerful lever that businesses can pull. And I think that if you look at an example like chilies and they're triple-dipper, like they have credited in earnings calls that the triple-dipper has changed their business, and that's because it's people posting about it all

“line. And then you're seeing, I think, when you look at, you know, dunk in selling a bucket of coffee,”

that has to be in that meeting, thinking about how does that show up online? What type of content are people making about it? You know, we're in a time where views are anyone can get views, and so I think that what holds cultural currency right now is participation, and how do we get people to make posts about our thing? That's where momentum is built, and so I think that I would not be surprised in a lot of brands are behind the scenes, developing products with that in mind.

I was at, this is the part where you might see, I'm not so excited about this because I worry that we're just creating all of these kind of BS products, like a bucket of coffee, because we want to go viral. And in a way, I mean, do consumers really want that? I guess how would you respond to that view? I agree. I think the question is, is this worse than what we had before? You know, in my column, I talk about that there was this wonderful article written in

the late '90s about the sort of PR power girls as they call them. These women in their 20s, who were like the precursor to influencers who were effectively girls from very rich and

And they, they're the ones who instigated lines, usually it like places like Mumbai, like a nightclub

that was cool in the '90s, and they could get Leonardo DiCaprio to go, and then that created the hype. And you know, I'm not sure that was better. In some ways, it was worse because to be an influencer then you had to come from wealth in a very well-connected family. And you only really had to please this elite group of people as opposed to there is something more democratic about this. As Rachel pointed out, anyone can be an influencer. You don't even have to live in New York. You can,

you know, you don't even have to have a lot of money. You just need to have a, you know, a good Wi-Fi connection. And you're good to go. So, I mean, in some ways, you know, there seems something more femoral about these things that like how you build a brand, it's hard to sustain it.

“And that sort of I think is sort of feel scary and there's certainly problems. It's also not clear.”

I mean, most influencer's don't even are living at it. But if you do, I mean, are you building

skills that are going to age with you? Like, can you be a 50 year old influencer? And if you dedicate your human capital to this, you know, where does this go for you? I think these are all like very concerning questions. But I'm not convinced that this is necessarily worse than what we had before either. Yeah, it certainly was true. That was an element of, you know, what we were called, the gatekeepers. If you make it on the list, whether it's, you know, the New York Times

list or those PR machine lists, you had to be on the list, you had to get approved by the taste maker, the gatekeeper, and then you succeed. But I wonder if influences are essentially just another version of the same thing. As just some statistics that we have here. So, for one, 74% of Gen Z say they have ordered a restaurant item after seeing it go viral on social media. So, that alone

“seems striking that, I mean, it seems as though you kind of need to go viral if you want to sort of”

make it today. But then just look at some of this other data here on YouTube, the top 1% most watched videos account for 91% of the total viewing time. And on TikTok, the top 1% of TikTok creators capture 81% of the total viewers. So, it seems as though we still have kind of a lopsided world where a handful of influences, and I don't know if this is actually true, and I want to hear your guys' views on this. But it seems as though influences have a crazy amount of power.

And I'd be interested to hear more Alice in on, on why that's, I guess, better, maybe it's because they were sort of chosen at random by the algorithm. I'm not totally sure. But I wonder if you agree with this notion that these economies, the restaurant business, maybe even the music business is predominantly dominated by a small handful of influences. That's absolutely true. In economics, we call it the winner take all economy. And it is more prevalent than ever. Like before, you might

have a lot of pop stars who are successful. Now, like it's just Taylor Swift and maybe a handful of

“people. So, it's harder to make it in any industry. I think even like public speaking, I'm told,”

like, you know, there's the top who get millions of dollars, and then there's everyone else. Like how host, yeah. Every industry has become winner take all, and that is maybe sort of a sign of our change. But one thing I think that makes me sort of less worried about it than other people is who are those people? And as I said, if in the 90s you had to be born into wealth and privilege to be in that top percent. And now, I mean, I think there's also something I find reassuring

about the fact that, yeah, it's the algorithm. But it is also pleasing the masses. It is that ability to connect with a wider audience, which does also make it more democratic. So, I mean, it's an interesting parable, I think, of technology in general, and where the economy is going, and how you have a new technology in a completely, you know, wipes out these jobs and the sort of these incumbents who maybe were there for variety reason. Sometimes, fairly, sometimes unfairly.

And if you get these new jobs coming in with new people, maybe like who don't have much of a business background. Maybe people who came from very humble sometimes, yes, sometimes know. And so, in a lot of ways, what we're seeing in this influencer economy and what it's replacing, is just sort of bigger than just this. It is for the whole economy. And, you know, there's good things and bad things about it, but it is changed. Rachel, do you think that influencers run it?

Now, is it basically, is the trajectory of businesses, whether it's in New York or otherwise,

are they, I mean, consumer businesses specifically? Is that trajectory mostly determined by how much sunlight they get from a handful of influences? I don't think that that's like a maker-break thing for a business. And I think, you know, I just ran a survey in my newsletter of, like, what are the best brands on social media to you? And some of the top brands are brands like this company called Merri, a beauty company, a fragrance brand called Furn. And people are really

zone and trying to be everywhere and work with every influencer. They're actually very strategic

of how they show up. And there's a lot of intention behind it. And so, I do, you know, it's always

fun to talk about what has momentum right now, which is this moment with influencers and, you know, sort of a volume game and what I'm always interested in is like, what's the reaction that that gonna be in? Is it sort of a pullback of like, maybe a brand says we actually don't work with influencers or we've never paid anyone to talk about our products? And what would that look like

“as sort of a way to gain trust with consumers is a reaction that I foresee maybe coming along?”

This gets to sort of the other question that I have, which is why our people interested in those products that go viral. Like, what is it about, you know, we could use the dot cake as an

example, but any other sort of viral product that suddenly blew up, like what what resonates

would you say for young people specifically, what is that moment where suddenly you're the hot thing? There's small pieces of it. I think like auditory, like when I think about what blows up on TikTok in terms of food, there's a crunchy or there's actually like a hook of like an auditory element. The dot cake videos all start with seeing scraping along the top of it. So there's that piece of it, which is just a good hook on social media. And then I think another piece of it

is truly like almost a self-interest of if I review this thing like Alice and was saying like,

“I will go viral too. I think one thing that might be one of the reasons this sort of explains”

our economy right now is it's accessible. I mean, as you said, I haven't weighed the line for a

dot cake, but you said it's $11. Yes. I mean, like, I mean, only so many people could party with a lit, Leonardo DiCaprio Mumba, like anyone can buy a dot cake. It's a lot for a small cake, I would say. I would say it's a little overpriced, but I agree most of us can can partake if we're down. And the opportunity cost of waiting a line for two hours. I mean, this is time. You could be, I mean, I guess if you're a professional influence or it's worth the time, but for the rest of us, I mean,

this is significant opportunity cost. But, you know, you get to partake in the sort of the excitement of what's hot as opposed to before again. It was less accessible. And now it's, in some ways, interesting too, because being inaccessible was what made it interesting. And now you want to promote goods that are accessible. Stay tuned for more of this panel after the break. And for even more markets insights, you can subscribe to my weekly newsletter simply put at simply put.proftimeedia.com.

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which is young people's interest in reducing their screen time or getting off of these online spaces.

And also, by the way, I don't know if this has anything to do with the trends we're seeing, but getting off of alcohol. We've seen that young people aren't really drinking anymore, with these more sort of sober curious event gatherings. And I wonder if these lines if that's part of it, if it's an opportunity to kind of get together with your peers, be outside, partake in a social event versus it, just going to get the product,

“whatever the product is. Alison, do you think that that's part of it?”

Yeah, I mean, especially as I said, because they're not going to bars and drinking that, you know, it's like I once interviewed the CEO of Synobun. And she was telling me in the Middle East, they had a huge following, they didn't have lines, but just because she said when people drink less sugar becomes sort of their their vice. So if people are turning away from drinking, then yeah, food treats sort of fulfill that. And also, it's the socialization.

It is forcing you to have this in-person experience. You know, it is, your phone is actually kind of part of it and messed up away, but it is sort of a socialization of a kind. Yeah, there's a sort of a phenomenon that I've been noodling on around like offline, but online, where you have these sort of look-alike contests, things that are happening offline, but you're documenting it for online,

or like, you know, analog trend. Well, you're posting about it. So how analog really are you.

“And so I think there is this sort of like, social signifier of like, I'm offline, I'm documenting it.”

But it's this tension, I think, of knowing that they want to be off their phone, but still feeling that urge to tell everyone about it. Something I've also been thinking about here, let's say you go viral. You're running a small business and you come out with a great new product and suddenly everyone's doing it. I tried the viral pronoun out whatever it is. I wonder what the longevity of that actually is for the business.

Because it seems as though you want to try to go viral, you want the line around the block. But I wonder if the line exists two weeks from that, or three weeks from that, or if suddenly it just sort of falls off a cliff. I'll say, I mean, I don't know if you have any insight into this, but do we know if this actually is a good thing, long term, for businesses, or is it more of a thought and therefore kind of a business-red herring maybe? I mean, my guess would be it's like

anyone who gets attention in this sort of attention economy is it can be a great start.

“But do you have a good business? Do you have a good product? Do you have a good marketing plan?”

Are you willing to work hard to do something with that opportunity? And sort of build on it. I mean, if you sort of just have one viral product and you don't really have a good business plant back up, back it up, or you don't have other goods and services that people want, you probably it's not good. But certainly maybe it can sort of spark a business for you. Rachel, as someone who writes about a lot of these topics, I mean, what is your advisor,

or what would you recommend to businesses who see this, here this conversation, they see these trends and they're kind of like, I don't really know what to do with this information. Like is this, are these the kinds of trends that businesses need to actually be acknowledging and thinking about? You know, I wouldn't be like getting the lab and make something that you think will go viral necessarily. But you know, when I'm talking to small businesses who are like, do I need to be on social

media? I say, you know, it's a powerful thing. I have an example. There's a coffee shop in Minnesota

called Little Joy. They've used their own social, so essentially treating their own social, like how do we become the influencer? Let's not hand over the keys or we're happy to hand over the

really amazing customer base by being really consistent and essentially creating like a serialized

show on their own social. So they own that conversation and people are coming in to try the viral things as it comes up, but they've created that consistent show that really instead of building a viral like pop builds loyalty and people are like, my show is on. I'm so happy to be watching this. And so, you know, if you have that momentum, one of your drinks goes viral, I'd be thinking, how do we keep up that momentum through our own social presence? So we're not relying on

somebody coming in and making a video about it necessarily. Yeah, it's a really good point. Do you think that businesses at this point need to think of themselves as creators specifically consume

“a businesses? I think they need to be thinking about how do we find entertaining ways into social”

media that make people want to stick around and watch our content? I love the idea that you sort of can control your own marketing and narrative and maybe that's where this is going is rather than being dependent on an influencer is building your own brand, but then maybe we're circling back to bigger marketing teams because, you know, for a coffee shop to sort of also run a major social media strategy, I mean, that's a different set of skills. It's also a lot of time and effort.

So perhaps ultimately that'll be outsourced in what is oldest new again,

and we go back to sort of hiring a marketing team to do that for you. It seems as though what's nice about it for on the side of the viewer who's seeing these products on their Instagram or the TikTok, is it feels kind of organic and it feels like something's actually happening that's real. Someone just stumbled into this place. They have this interesting product. Everyone's going now and I'm going to meet all these people. But I also wonder the extent to which these

are potentially planned or paid for or set up in some sort of way. And, you know, this becomes especially pertinent in the world of the influencer economy where these influencers go in and they say, "Oh, I just tried out this new hot product and then we don't know that behind the scenes they're getting paid to go in and say that." And it seems as though this is going to become a really big business, really, which is kind of pretending as though you have this organic moment

which in reality has been set out and is paid for. Rachel, I just be curious, is that happening and is that something that I guess influences are thinking about? As social media becomes essentially that slot machine where you can pull the lever, brands are going to be saying, "How do I manufacture this?" Like, okay, we can't pay an influencer to come in or we can't guarantee that they're going to come in. Can we manufacture this? We're seeing this already. There are shadow accounts that are

“are they employees posting this? Are they influencers? Are they just sort of UGC creators?”

And they're just every day pumping out content about that brand. And so we are seeing that. I worry about that and what that does to the state of social media, especially as people are showing up more skeptical of what they're seeing on their timelines. And I don't think that that's necessarily a good thing. And so I do worry about businesses saying, "How do we do this from scratch? There isn't organic sort of momentum that happens and trying to manufacture that. It's a scary

prospect to me." But you wonder, is it inevitable? I mean, this is becoming a big part of the economy, perhaps, and this is largely how marketing happens. So inevitably, it becomes professionalized, it becomes commercialized. I suppose it just has to go this way and maybe what keeps it fresh is this sort of

machine of authenticity. But maybe it was never there. And I suppose eventually people sort of

watching an advertisement on the Super Bowl. You know, this is an authentic, but eventually maybe this just turns into that. Because you can't have this share of marketing be so important to the economy and have it eventually just not become professionalized in some way or commercialized in some way.

“I think what I worry about is that the FTC is about 10 years behind on what's happening right now.”

People aren't disclosing when something is an ad. It's a very big gray area. And so I think that in the meantime, you're going to have consumers that feel dupped by certain marketing. I'm not what we've been talking about. What I think our people are trying to manufacture will confuse a lot of people. Is this marketing? Is this real? I don't know. That's a tough place to be putting people in on social media. And I do worry about the long-term

effects of that and not enforcing proper disclosures. It's really interesting point. Just as we start to wrap up here, kind of a broad question. But Allison, where do you think this is all headed over the next several years? Do you think that this influencer economy is going to grow? Will marketing budgets maybe just completely reshift around this? What do you think's going to happen over the next few years? Well, I think it's just

as I said, become the standard way of how to communicate. Just because how people communicate is

different. Like young people now, like tend not to watch TV as much. They just consume short-form

“video. So if you want to reach that audience, this is where you have to go. Which means, again,”

money is going to follow. And you're just going to sort of, it's probably going to eventually,

people are just going to assume that they're being paid to be told what this isn't. It just becomes

commercialized. You lose that authenticity. You lose. You feel like you're getting a genuine review of a product. But you know, what did we have before? I see this is imperfect, but maybe not any worse than what we had before, maybe in some ways, still better. Rachel, I'll pose the same

“question to you before we end. I think we're going to see right now, like the top top influencers”

are extremely expensive. And I think we're going to see businesses start to realize that

the follower count doesn't necessarily matter anymore. And they can be paying much smaller influencers also to be posting about their product. And so I think we're going to see the split where they're still be paying the really expensive influencers. But a good chunk of that budget is going to go to much smaller influencers who can still get scale, despite not having a high follower count. Really interesting stuff. Rachel Carlton is the author of the Lincoln Bayer Newsletter,

Alison Trigas, senior fellow at the Manhattan Institute and columnist for Blue and Boca who just wrote

“about this topic, you should go check it out, read it on Blue and Boca. Rachel, Alison, thank you so”

much for joining me on the show. This was really interesting. Thank you. Okay, that's it for today. We appreciate you joining us for another Proftry Market's panel. If you are the guest, you think we should speak to on this topic or any other, please drop us a line in the comments or email our producer Claire at [email protected]. We hope to hear from you. This episode was produced by Claire Miller and Alison Weiss, and engineered by Benjamin Spencer.

Our video editor is Brad Williams. Our research team is Dan Chalon. It's been a cancel, Chris Nerdonohue and Mia Salvario, and our social producer is Jake McPherson. Thank you for listening to Proftry Market's from Proftry Media. If you liked what you heard, give us a follow. I'm Alison. I'll see you tomorrow.