How Influencers Hijacked The Consumer Economy

Ed Elson is joined by Rachel Karten and Allison Schrager to explore how influencers became the dominant force in the consumer economy. They discuss why young people are so interested in viral products, how social media is accelerating “winner-take-all" dynamics, and whether going viral is a sustainable growth strategy for businesses. Rachel Karten is the author of the Link in Bio newsletter. Allison Schrager is a senior fellow at the Manhattan Institute and columnist for Bloomberg. Subscribe to the Prof G Markets Youtube Channel Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 1:43Ed Elson?

  Welcome to Prof G 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. News that Iran shot 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

• 2:28Ed Elson?

  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 influencer 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 6:00 AM for a dot cake, which is an $11 cup of cake that just went viral on TikTok. But it's not just food.

• 3:10Ed Elson?

  More than 80% of Gen Z discover new music through social media and user-generated content. Marketing companies like Chaotic Good Projects create networks of TikTok accounts engineered to push artists into recommendation 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 influencers run the consumer economy right now? Joining us to answer that question, we're speaking with Rachel Carleton, author of the Lincoln Bio Newsletter, and also Alison Schreger, senior fellow at the Manhattan Institute and columnist for Bloomberg, who just wrote about the influencer economy.

• 3:55Ed Elson?

  Rachel, Alison, thank you for joining me on Prof G Markets. Alison, I'm going to start with you because you just wrote this article. The article is titled, "The Influencer Economy Has Crossed the Line." I gave a little bit of an intro as to like 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 blogs in New York City and in other cities as well?

• 4:19Speaker 09

  In the article, I'm actually quite bullish on it. I call it, you know, 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 a 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 good. And you create a lot of hype. I mean, I think the cliche in New York is now becoming, people used to wait in line for nightclubs,

• 4:57Speaker 09

  now they wait in line for bagels. It's kind of true. I saw someone speculate recently that because it's a more antisocial generation, this is their sort of new in-person experience. You know, there's problems with it, you know, like any new market. It's very winner-take-all, like a lot of aspects of our economy, like most influencers can't earn a living at it. It also sort of shines a lot of economic activity on certain businesses that manage to sort of catch fire for reasons that aren't sort of very well-understood.

• 5:31Ed Elson?

  There's so much in there 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 of the fact that young people are down to do this?

• 6:12Speaker 10

  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 a 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 have 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.

• 6:57Speaker 10

  And so, you know, I think that to some degree, lines lining up for things. I worked at Bon Appetit for four years before I started my newsletter in 2016. People were lining up for milkshakes then and crow nuts and supreme drops. And so I do think lines and people wanting to sort of thinking it's worth it to, you know, 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.

• 7:32Ed Elson?

  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 crow nut, bagel, donut, dot cake, whatever it may be. I just wonder, and I'll start with you, Rachel, on this question. Do you think that that is true?

• 8:14Ed Elson?

  Do you think it's true that you basically have to cater to the algorithm if you want to succeed in consumer business today?

• 8:22Speaker 10

  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 Chili's and their 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 online. And then you're seeing, I think, when you look at, you know, Dunkin', 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.

• 9:06Speaker 10

  And so I think that I would not be surprised that in a lot of brands are behind the seeds, developing products with that in mind.

• 9:14Ed Elson?

  Alison, 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?

• 9:34Speaker 09

  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, influential New York families, who ran the city through their own self-started PR companies. And they, they're the ones who instigated lines, usually at like places like Mumba, 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 and a very well-connected family.

• 10:18Speaker 09

  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, you know, a good wifi connection and you're good to go. So, I mean, in some ways, you know, there seems something more ephemeral 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 feels scary and there's certainly problems. It's also not clear. I mean, most influencers don't end up 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?

• 11:02Speaker 09

  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.

• 11:09Ed Elson?

  Yeah, it certainly was true. There was an element of, you know, what we would call 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 tastemaker, the gatekeeper, and then you succeed. But I wonder if influencers are essentially just another version of the same thing. There's 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 you, I mean, it seems as though you kind of need to go viral

• 11:54Ed Elson?

  if you want to sort of make it today. But then just looking 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 views. So it seems as though we still have kind of a lopsided world where a handful of influencers, 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 influencers have a crazy amount of power. And I'd be interested to hear more, Alison, on, on why that's, I guess, better. Maybe it's because they were sort of chosen at random by the algorithm.

• 12:39Ed Elson?

  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 influencers.

• 12:53Speaker 09

  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 like 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.

• 13:13Ed Elson?

  My co-host, yeah.

• 13:15Speaker 09

  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 and it completely, you know, wipes out these jobs and the sort of these incumbents who maybe were there for

• 13:57Speaker 09

  a variety of reasons, sometimes fairly, sometimes unfairly. And 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 no. And so, in a lot of ways, what we're seeing with 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 change.

• 14:23Ed Elson?

  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 their trajectory mostly determined by how much sunlight they get from a handful of influencers?

• 14:40Speaker 10

  I don't think that that's like a make or 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 Merit, a beauty company, a fragrance brand called Fern. And people are really reacting to actually their restraint on social media. They don't feel like they're flooding the 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 to that going to be? And is it sort of a pullback of like, maybe a brand says, we actually

• 15:25Speaker 10

  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.

• 15:37Ed Elson?

  This gets to sort of the other question that I have, which is why are 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 resonates, would you say, for young people specifically? What is that moment where suddenly you're the hot thing?

• 16:06Speaker 10

  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 a skewer and 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 Alison was saying, like, I will go viral too.

• 16:34Speaker 09

  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 waited in line for a dot cake, but you said it's $11?

• 16:44Ed Elson?

  Yes.

• 16:45Speaker 09

  I mean, like, I mean, only so many people could party with Leonardo DiCaprio at Mumba. But like, anyone can buy a dot cake.

• 16:53Ed Elson?

  It's a lot, 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.

• 17:01Speaker 09

  And the opportunity cost of waiting in line for two hours. I mean, this is time you could be, I mean, I guess if you're a professional influencer, 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 that was in some ways interesting too, because being inaccessible was what made it interesting. And now you want to promote goods that are accessible.

• 17:28Ed Elson?

  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 simplyput.profgmedia.com.

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• 19:21Ed Elson?

  We're back with Prof G Markets. This also gets to something we've been talking about on the show recently, 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. I mean, we've seen that young people aren't really drinking anymore, where there are 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, you know, going to get the product, whatever the product is. Alison, do you think that that's part of it?

• 20:06Speaker 09

  Yeah, I mean, especially as you said, because they're not going to bars and drinking that, you know, it's like I once interviewed the CEO of Cinnabon 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 vice. So if people are turning away from drinking, then yeah, food treats sort of fulfill that. And also 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 in a messed up way, but it is sort of a socialization of a kind.

• 20:44Speaker 10

  Yeah, there's sort of a phenomenon that I've been noodling on around like offline, but online where you have these sort of lookalike 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.

• 21:18Ed Elson?

  Something I've also been thinking about here, let's say you go viral, you're, 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 cronout, 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 then or three weeks from then, or if suddenly it just sort of falls off a cliff. Alison, I mean, I don't know if you have any insight into this, but do we know if this actually

• 22:00Ed Elson?

  is a good thing long-term for businesses? Or is it more of a fad and therefore kind of a, a business red herring, maybe?

• 22:09Speaker 09

  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, you know, viral product and you don't really have a good business plan to 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.

• 22:40Ed Elson?

  Rachel, as somebody writes about a lot of these topics, I mean, what is your advice or what would you recommend to businesses? Who see this, hear 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?

• 23:02Speaker 10

  You know, I wouldn't be like get in the lab and make something that you think will go viral necessarily. But I, 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 keys, but let's make our social page the hub of where people want to watch. And I think they've built a 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,

• 23:47Speaker 10

  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.

• 24:02Ed Elson?

  Yeah, it's a really good point. Do you think that businesses at this point need to think of themselves as creators, specifically consumer businesses?

• 24:11Speaker 10

  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?

• 24:19Speaker 09

  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 A major social media strategy, I mean, that's a different set of skills. It's also a lot of time and effort.

• 24:41Ed Elson?

  Right.

• 24:41Speaker 09

  So perhaps ultimately they'll be outsourced and what is old is new again.

• 24:47Speaker 09

  And we go back to sort of hiring a marketing team to do that for you.

• 24:50Ed Elson?

  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 their 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, 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.

• 25:35Ed Elson?

  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 up and is paid for. Rachel, I'd just be curious, is that happening? And is that something that, I guess, influencers are thinking about?

• 25:58Speaker 10

  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, and so I do worry about businesses saying, how do we, you know, do this from scratch?

• 26:40Speaker 10

  There is an organic sort of momentum that happens and trying to manufacture that. It's a scary prospect to me.

• 26:48Speaker 09

  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. Like, so, I mean, I suppose it's sort of, it just has to go this way. And maybe the, what keeps it fresh is this sort of sheen of authenticity. But maybe it was never there. And I suppose eventually, people sort of cut, it's like watching an advertisement on the Super Bowl. You know, this isn't 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.

• 27:33Speaker 10

  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.

• 27:42Speaker 10

  It's a very big gray area. And so I think that in the meantime, you're going to have consumers that feel duped by certain marketing. And that's not what we've been talking about. What I think 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 like the long term effects of that and not enforcing proper disclosures.

• 28:08Ed Elson?

  It's a really interesting point. Just as we start to wrap up here, kind of a broad question. But Alison, 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 is going to happen over the next few years?

• 28:29Speaker 09

  Well, I think it's just going to become more mainstreamed in our culture and more institutionalized. And probably, 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 is. And it just becomes commercialized. You know, 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.

• 29:14Ed Elson?

  Rachel, I'll pose the same question to you before we end.

• 29:18Speaker 10

  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'll 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.

• 29:46Ed Elson?

  Really interesting stuff. Rachel Carlton is the author of the Lincoln Bio Newsletter. Alison Schreger is Senior Fellow at the Manhattan Institute and columnist for Bloomberg, who just wrote about this topic. You should go check it out, read it on Bloomberg. Rachel, Alison, thank you so much for joining me on the show. This was really interesting.

• 30:04Speaker 10

  Thank you.

• 30:05Ed Elson?

  Okay, that's it for today. We appreciate you joining us for another Prof G Markets panel. If you have a 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.

• 30:27Ed Elson?

  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 Shalan, Isabella Kinsel, Chris Newdonahue, and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow. I'm Ed Elson. I'll see you tomorrow.

• 31:25Speaker 13

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• 32:03Speaker 01

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