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

Duncan 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 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 that in a

lot of brands are behind the scenes

developing products with that in mind.

Welcome to Profy Markets. I'm Eden. 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 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 a.m. for a dot cake, which is

an $11 cup of cake that just went viral

on Tik Tok. But it's not just food. 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

Tik Tok 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 Carton,

author of the Lincoln Bio newsletter,

and also Allison Shrager, senior fellow

at the Manhattan Institute and columnist

for Bloomberg, who just wrote about the

influencer economy. Rachel, Allison,

thank you for joining me on ProfG

Markets. Allison, I'm going to start

with you because you just wrote this

article. The article is titled, quote,

"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

blocks uh in New York City and in other

cities as well?

>> Well, 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 um you

know you a lot of people hear about a

good or service usually a good like

frozen yogurt on uh on Instagram on Tik

Tok. They want to try it themselves and

then film it for themselves for their

network either to try to grow their

audience or um just to impress their

friends that they 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. now they wait in line

for bagels. Um

it's kind of true. I I saw someone

speculate recently that um because it's

a more antisocial generation, this is

their sort of new uh inerson experience.

Um I I you know, there's problems with

it. You know, like any new market, um

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 uh that

manage to sort of catch fire for reasons

that aren't sort of very well

understood.

>> 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 2hour 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?

>> Well, I think also to understand why

this feels so prevalent right now. 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 5 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 Bone Appetite for

four years before I started my

newsletter in 2016. People were lining

up for milkshakes then and cronuts and

supreme drops. And so I do think lines

and people wanting to uh sort of

thinking it's worth it to you know spend

30 minutes online is not a new thing.

But I also think that the way that Tik

Tok has created conversation around it

has created urgency around it and has

essentially created a uh new content

stream which is I tried the viral thing

as a way to go viral feels really

different right now.

>> Yeah. 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?

Uh 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

have a random, you randomly hit the

lottery, the algorithmic lottery, and

suddenly everyone's saying, "Oh, I tried

the viral cronut bagel donut dot cake,

whatever it may be." Um, I I just

wonder, and I'll start 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 mean, 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

Duncan 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 that

and a lot of brands are behind the

scenes developing products with that in

mind.

>> Right, 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? Well, I I don't, you know, I

agree. I think the question is, is this

worse than what we had before? Um, you

know, in my column, I talk about that

there was this wonderful article written

in the late 90s about uh 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 like

places like Mumba, like a nightclub that

was cool in the '9s and they could get

Leonardo DiCaprio to go and then that

created the hype. And you know, I'm not

sure that was better. Um, 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, 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 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 earn a 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. 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 taste maker,

the gatekeeper, and then you succeed.

But I wonder if influencers

are essentially just another version of

the same thing. And 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

if you want to sort of make it today. Uh

but then just looking at some of this

other data here on YouTube the top 1%

mostwatched videos account for 91% of

the total viewing time and on Tik Tok

the top 1% of Tik Tok 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's

views on this, but it seems as though

influencers have a a crazy amount of

power. And I'd be interested to hear

more, Allison, on on why that's I guess

better. Maybe it's because they 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 you that these economies, the

restaurant business, maybe even the

music business is predominantly

dominated by a small handful of

influencers.

>> 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.

um pretty much any industry

>> every industry has become winner take

all and that is maybe sort of a 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 '9s you

had to be wor 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 sort of

these incumbents who maybe were there

for 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 business sometimes

yes sometimes no and so in a lot of ways

what we're seeing with this influencer

economy and what 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.

>> Yeah. Rachel, do you think that

influencers run it now? Is it basically

is 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? I don't

think that that's like a makeorb breakak

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. Um, 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

interesting 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 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 uh a reaction that I I

foresee maybe coming along.

>> We'll be right back. And if you're

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This gets to sort of the other question

that I have which is why are people

interested

uh in those products that go viral? Um

like what is it about 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? I mean, I think I

think a 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 the spoon 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 Allison was

saying like I will go viral too. Um

that's sort of the themes that I've

seen. I'm curious what you would think

Allison.

>> I think of it like Rachel does is like

um you know going viral can be

sufficient but not necessary to becoming

successful. Um, it is. 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.

>> Yes.

>> I mean, like I mean, only so many people

could party with a Leonardo DiCaprio

Mumba, but like anyone can uh buy a dot

cake.

>> 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. and the

opportunity cost of waiting in line for

two hours. I mean, this is time you

could be I mean, I guess in if you're a

professional influencer, it's worth the

time, but for the rest of us, I mean,

this is significant uh 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.

>> Yeah. 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, and I can't 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.

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 a 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.

>> Maybe you'll fall in love online,

>> right?

>> That'd be that'd be a great story.

That'd be a great vow column. We fell in

love waiting for dot cake.

>> I'm waiting for it to happen. I feel

like it's going to happen at some point.

That would be their wedding cake.

>> That's beautiful.

>> A giant multi-layered dot cake. Do you

think that might have something to do

with it though?

>> Um yeah. I mean, especially as you said

because they're not going to bars and

drinking that, you know, it's it's like

I once um interviewed the CEO of um

Cinnaban and she was telling me in the

Middle East they had a huge following.

No, they didn't have lines, but just

because she said when people drink less,

sugar becomes sort of their their vice.

So um if people are turning away from

drinking then yeah food treats sort of

fulfill that and also it's the

socialization um it is forcing you to

have this in inerson experience um 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.

>> Yeah would you agree Rachel? Yeah,

there's sort of a phenomenon that I've

been noodling on around like offline but

online where you have these sort of uh

lookalike contests uh things that are

happening offline but you're documenting

it for online or like you know uh 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 um but it's this tension

I think of 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

you're running a small business and you

come out with uh a great new product and

suddenly everyone's doing it. I tried

the viral cronut, whatever it is. I

wonder what the longevity of that

actually is for the business. It seems

as though you want to try to go viral.

um you want the line around the block,

but I wonder if the line exists 2 weeks

from then or 3 weeks from then or if

suddenly it just sort of falls off a

cliff. Um Allison, 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 fad and therefore kind of a 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?

>> Yeah.

>> 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.

>> Yeah. Rachel, as someone who writes

about a lot of these topics, I mean,

what is your advice or 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 the are these

the kinds of trends that businesses need

to actually be acknowledging and

thinking about? 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, uh, 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 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?

>> Right. 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?

>> 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.

Allison, any thoughts on that?

>> You know, it's a tall order. I mean, I 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,

>> right? So perhaps ultimately that'll be

outsourced and what is old is new again.

Um and we go back to sort of hiring a

marketing team to do that for you.

>> Yeah. I mean 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 Tik Tok 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

gonna meet all these people. But I also

wonder the extent to which these are

potentially planned or uh 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. And it seems as

though this is going to become a really

big business really um 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 I just

be curious is that happening and is that

something that I guess influencers are

are thinking about? I think that, you

know, 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 uh 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 there is

an organic sort of momentum that happens

and trying to manufacture that it's a a

scary prospect to me

>> 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 I

suppose it's sort of it just has to go

this way. And maybe the um what keeps it

fresh is this sort of sheen of

authenticity. But maybe it was never

there. And I 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.

>> 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. Uh

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.

>> Yeah, it's a 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? Uh what do you think is going to

happen over the next few years? 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 um you're just going to sort

of it's 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. Um you know you you lose

that authenticity. You you lose you feel

like you're getting a genuine review of

a product,

>> right?

>> Um but you know what did we have before?

>> I mean well I I never been great.

>> I see this is imperfect but maybe not

any worse than what we had before. Maybe

in some ways still better.

>> Yeah. Rachel, I'll I'll pose the same

question to you before we end.

>> What I 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 um despite not having a high

follower count.

>> Really interesting stuff. Rachel Carlton

is the author of the Lincoln Bio

newsletter. Allison Shreger 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

Allison, thank you so much for joining

me on the show. This was really

interesting.

>> Thank you.

>> Okay, that's it for today. We appreciate

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