The Rise of the Creator Economy: New Challenges and Opportunities for Brand Marketing

Earlier this month, the D'Amelio family, known for amassing over 200 million followers on TikTok, announced the launch of D'Amelio Brands, a venture that will leverage the family's consumer-facing marketing experience to build its own brands. The family members—Marc, Heidi, Charli, and Dixie—said they plan to launch two brands by the end of the year and intend to expand further in 2023.

"If I were an operator in any category that the D'Amelio family is targeting with their new brand development fund, I would be concerned," Dylan Conroy, chief revenue officer at The Social Standard, said in an email. "They have a combined 300 million viewers on social media, and each post reaches the equivalent of three Super Bowl audiences. Building a brand takes time, but they have a massive advantage in any category they enter."

The D'Amelio family's ability to build a business—having recruited executives including Eddy Cue, Apple's senior vice president of services—is a far cry from just a few years ago when the family existed only as media figures. The D'Amelio marketing machine began with Charli and Dixie, who both joined TikTok in 2019, posting dance tutorials and lip-sync videos on the ByteDance-owned platform. Over time, they endorsed brands such as Prada, Hollister, Dunkin', and Amazon. Soon, posts that originally earned around $50 each grew to six figures, according to details Marc D'Amelio shared with CNBC.

In 2021, Charli and Dixie earned $17.5 million and $10 million, respectively, through brand and endorsement deals—making them the highest-earning TikTok creators globally. In exchange, brands gained key consumer insights from their follower base.

But as the D'Amelio family lays the groundwork for other influencers to expand their businesses through namesake ventures, marketers face the risk of losing the data points that often make influencer marketing worth the hefty investment—which is projected to total $5 billion this year, up 28% year over year, according to Insider Intelligence.

Authenticity drives sales

The D'Amelio family's success isn't due to a single cause, but their ability to connect with their audience certainly plays a role. As the sisters and other influencers became active on social media during the COVID-19 era—a time that called for universal empathy—influencer marketing shifted from standard marketing scripts to relying on relationship building.

Follower counts and likes became less important as marketers turned their attention to the revenue creators bring in. This shift has made it essential for influencers to focus on the interests and needs of their followers, and for marketers, it means letting go of fixed scripts, said Nicolette Trebing, director of influencer and talent partnerships at agency Movers + Shakers.

"What really resonates with audiences is when you find an influencer and say: 'We know you're a fan of our brand, and we'd love to create some content with you. Here are our ideas—what are your thoughts?'" Trebing added.

The competitive advantage of relatability is clear—according to a study by Whalar, 73% of U.S. consumers aged 18-40 trust product reviews from people who "look like them." Additionally, 70% of consumers like creators and feel loyal to them.

Riding this trend, brands are increasingly building entire collaborations around influencers who successfully capture the attention of their target audiences. In March, e.l.f. Cosmetics teamed up with Dunkin' for a themed makeup collection, featuring creator Mikayla Nogueira—a makeup-obsessed influencer with 13.5 million followers on TikTok and 2.4 million on Instagram at the time of the launch. As a Massachusetts native (Dunkin's home state), Nogueira had previously posted organic content expressing her love for the chain. To date, the campaign has generated over 1 billion impressions.

Similarly, Nature Valley enlisted sustainability-focused influencers Stephen "tWitch" Boss and Allison Holker-Boss to help with its #ReTokForNature challenge, which invited TikTok users to share sustainable actions using the hashtag for a chance to win free back-to-school gear from like-minded brands.

Boosting the creator economy

Despite the vibrancy of the creator economy, the social platforms that support influencer marketing are facing losses. In the second quarter of this year, Meta, the parent company of Facebook and Instagram, reported its first-ever revenue decline. Pinterest also reported its slowest growth in two years in August.

But influencer marketing remains a bright spot: Instagram is expected to maintain its position as the top platform for influencer marketing this year, with marketers projected to spend $2.23 billion on the strategy there, according to estimates from Insider Intelligence shared with Marketing Dive. It's followed by Google's YouTube ($948 million) and TikTok ($774.8 million), the latter of which is expected to surpass Facebook this year and YouTube by 2024.

Among platforms with the highest activation costs for influencer marketing, Instagram ranks at the top, while influencers typically charge less for content made for TikTok, Conroy said.

"Instagram still costs ten times more than TikTok, and there's no good reason for it," Conroy added. "Other than it's been around longer, it shows people's idealized lives rather than more authentic ones—I think TikTok offers the latter."

Although Instagram seems to hold its own, it increasingly borrows from TikTok's playbook. Recently, it has faced scrutiny for mimicking TikTok's more video-driven tools, including algorithm changes that flooded user feeds with videos—a move it rolled back amid criticism. Nevertheless, it has kept Reels, despite backlash, recently extending the time limit from 60 seconds to 90 seconds. This move suggests that brands, in pivoting to the most popular content, may be less responsive to consumer feedback.

"Platforms are changing, even if consumers wish they were different," said Lauren Lyons, senior strategist at research firm PSFK. "We're so deeply rooted in the platform that we'll change with it whether we really want to right now or not."

However, Instagram Reels doesn't seem to match TikTok. A document recently reviewed by The Wall Street Journal shows that Instagram users watch Reels for a total of 17.6 million hours per day, while TikTok users spend 197.8 million hours on the app daily—a massive gap.

Reels and other shoppable content formats have gained favor with marketers, who invite influencers to showcase products through videos and live streams to reach target groups among millennials, Gen Z, and Gen Alpha.

Brands have seen success with influencers promoting collaborations from their own pages, Trebing said, and brands often then use their own pages to host live streams related to the campaign, with shopping links below the stream, providing opportunities for both the brand and the influencer to expand their reach.

Subsequently, platforms have further borrowed from TikTok and its success with short-form video. For example, Facebook will shut down its live shopping feature in October in favor of short-form video, while YouTube added a short-form video product in June. TikTok also added three shopping formats in August.

Everyone can be an influencer

Regardless of the platform, working with major influencers requires advertisers to restructure their budgets. To improve cost-effectiveness, they increasingly rely on micro and nano influencers. Spending on nano influencers (those with fewer than 5,000 followers) is the fastest-growing segment of influencer marketing spending this year, up 220.5%, according to Insider Intelligence data. The research firm has previously noted that micro influencers have between 1,000 and 10,000 followers, though other agencies define them as having between 10,000 and 100,000 followers.

Beyond being more cost-effective than hiring influencers with larger social reach, micro or nano influencers offer the opportunity to reach niche audiences that are more likely to resonate with the influencer's small but loyal following—a group that's more likely to be family, friends, friends of friends, or people who feel connected through shared interests. Marketers may also have more power in such partnerships, Conroy said.

"Micro influencers tend to be more willing to let brands fully own the content created for influencer campaigns, which is an extremely valuable asset these days," Conroy added. "If you run a campaign and take the $100,000 you'd typically pay one influencer and split it among 100 influencers at $1,000 each, you'll get much more engagement and return on investment."

To strengthen relationships with influencers, some brands even create educational resources to help influencers grow their followings and learn how to better market themselves. Of course, funding such efforts also unlocks the potential of influencers who are already familiar with the brand.

In its "Influencer Marketing Landscape" report, PSFK mentions Nivea—a lotion brand that created an influencer marketing academy in India for college students, especially women, to help them enter the profession, Lyons said. The program offers educational courses, resources, and a year-long ambassadorship with the brand.

"It's initiatives like this that bring us closer to true partnerships," she added.

Virtual characters aren't foolproof

As with any real-life partnership, influencers can become a liability for brands if there's a misstep or a bad history. To that end, some brands use virtual influencers to craft an ideal image, including their appearance and the causes they support. 58% of people follow at least one virtual influencer, according to a survey by The Influencer Marketing Factory agency. However, only 35% of respondents said they've purchased a product promoted by a virtual influencer. For example, Pacsun recently partnered with Miquela, a top CGI influencer, to support its back-to-school and holiday campaigns.

Virtual influencers may give brands control over what consumers see, but they face skepticism for lacking authenticity. For instance, Miquela, created by software company Brud, faced criticism for sharing vlogs about surviving sexual assault, with many arguing that real-world issues shouldn't be scripted in a virtual world. Some influencers also support social causes, such as Black Lives Matter, but leave consumers questioning their methods and extent.

"There's definitely some legitimate backlash around 'how is this authentic,'" Lyons said. "They say they support certain things, but there's no real person behind it. In terms of the authenticity or relatability of such influencers, it can be a bit murky."

Nevertheless, gaming and the metaverse offer emerging opportunities for virtual influencers, Trebing said.

"We have a lot of brands interested in opening spaces in the metaverse and having influencers attend events or visit locations," Trebing said. "So, there's an opportunity to place real influencers in virtual worlds. I think that's more on-trend right now than creating fictional characters or bringing existing virtual influencers into spaces."