Influencer marketing is a strategy where brands collaborate with individuals who have a significant online following to promote products or services. This form of marketing has become increasingly popular as consumers tend to trust recommendations from individuals they follow over traditional advertising. By partnering with influencers, businesses can target specific demographics, increase brand awareness, and drive consumer engagement.
Reference [1] examines whether influencer marketing can impact a company’s stock performance. The authors pointed out,
The results show that while the normal activities of mega influencers affect investor attention, volatility and volume, in the busy world of social media, it takes extreme posts by top influencers to grab the attention of investors sufficiently to affect the abnormal returns of “posted companies”. Furthermore, the attention of the investors is limited to the extent that they move on to the “next big thing” in very short order.
In short, the authors find that mega influencers influence investor attention, volatility, and trading volume, but not stock returns. It takes top influencers with extreme sentiment posts to affect returns, and even then, the effect is short-lived.
The authors also discuss the implications of their research findings,
From a company perspective, the impact of influencers, in general, on volatility and volume, and, via top influencers and extreme sentiment, on returns should be a cause for reflection. As noted in the main part of the paper, influencers are not the same as plain advertising because they have their own agency and cannot be fully controlled by a firm. Therefore, while an influencer marketing strategy can bring substantial benefits to a company, the power of influencers to affect investors poses some risks to the company and its share-holders. Not surprisingly and in line with our results, in two relatively recent IPOs, firms listed influencers as a stock market listing risk factor in their offering documents.
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References
[1] Kevin Keasey, Costas Lambrinoudakis, Danilo V. Mascia, Zhengfa Zhang, The impact of social media influencers on the financial market performance of firms, Eur Financ Manag. 2024;1–41
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