Ipsy, an online cosmetic brand, was a pioneer in paying social-media stars hefty fees to promote its eye shadow and lip gloss in Instagram posts and YouTube videos.
Now, the brand is leading the way again, this time by pulling back.
Companies will funnel billions of dollars this year to the online personalities, known as influencers, who pitch their products on social media. Yet with no way to measure sales or verify how many people even see the ads, the companies that paved the way for the influencer economy—mostly early adopters like Ipsy—are questioning if it’s worth it.
What began as friends and family sharing their favorite products has become a lucrative advertising industry of celebrity endorsers, influencers and meme creators. Such paid endorsements, known as sponsored content, are the online equivalent of a 30-second TV spot. Big-name stars can command $100,000 or more for a single YouTube video or Instagram photo.