How Virtual Influencers Are Changing the Marketing Landscape

The rise of virtual influencers is offering brands and retailers a potential cost-saving solution, replacing human influencers with digital personalities. According to a PitchBook report, virtual influencers can be customised to appeal to specific customer bases and are not bound by traditional limitations such as working hours, labour laws, or union regulations. This flexibility may save companies millions but also presents the possibility of job displacement for human influencers, further lowering their wages.

As generative AI (GenAI) continues to evolve, the quality, speed, and cost-effectiveness of creating these digital avatars are expected to improve significantly, making them an even more attractive option for companies.

Limitations of Virtual Influencers

While virtual influencers may seem like the future of marketing, they are not without their constraints. As PitchBook’s report highlights, these digital personas are better suited for promoting simple products, like cosmetics, rather than more complex items such as sporting goods or furniture. Additionally, they face potential risks related to copyright infringement, bias, deepfakes, and consumer manipulation.

Do Consumers Still Trust Human Influencers?

Despite the growing use of virtual influencers, research indicates that consumers still value the authenticity of human influencers. Nearly 60% of Generation Z express a desire to become influencers themselves, and consumer trust in influencers is comparable to the trust they place in friends and family. Furthermore, influencers continue to attract private capital, suggesting they remain a valuable asset for brands.

According to a survey by Sprout Social, about half of respondents make purchases influenced by recommendations from human influencers, whether daily, weekly, or monthly. Opinions were split, however, on whether AI influencers would have the same impact, with 37% of respondents open to the idea and an equal percentage against it.

Brands Sticking with Human Influencers

Some brands remain committed to using human influencers to engage their customers. For example, in January, J.C. Penney teamed up with Dallas-based fashion influencer LaDarius Campbell to create a limited-edition collection, promoted during a live styling event. In a similar vein, Claire’s launched “The Collab,” an influencer platform featuring Generation Z and Generation Alpha brand ambassadors.

Blending Virtual and Human Influencers

Other brands are experimenting with combining virtual and human influencers. Coach, for instance, brought together celebrities like Lil Nas X, Camila Mendes, and virtual influencers such as Imma for their “Find Your Courage” campaign earlier this year. Even Kim Kardashian ventured into the virtual space by partnering with Wieden + Kennedy Portland to create virtual clones of herself, designed to test her products for features like support and stretch.

PitchBook’s report also spotlighted Skims, Kardashian’s brand, which was recently valued at $4 billion. The brand has expanded into physical retail, opening its first permanent store in Washington, D.C., with plans to establish additional locations in Florida, Texas, and Georgia.

The Decline of Venture Capital in Online Retail

Although virtual influencers are proving to be a promising cost-saving and marketing strategy, PitchBook’s findings suggest that venture capital interest in online retailers has dwindled. VC investments in e-commerce companies peaked in 2021, with 72 companies exiting at a combined value of $273 billion. However, by June of this year, that figure dropped dramatically to just 28 companies, with an exit value of only $2.4 billion.

As the balance between virtual and human influencers continues to evolve, the marketing landscape is set to change dramatically, though the allure of human connection remains strong for consumers.