Influencer Marketing's Trust Crisis: The Impact of Fake Followers, Paid Reviews and Non-Disclosure of Sponsorship on Brand Reputation Damage

Abstract

Disclosure practices and authenticity have increasingly become important concerns in influencer marketing of digital advertising. This study influences fake followers, paid reviews, incentivized endorsements, and non-disclosure of sponsorships on perceived influencer credibility and the resultant effect on brand reputation. The data were gathered through a self-administered online questionnaire with a 5-point Likert scale and n=549 active social media consumers were approached to complete the questionnaire and analyze the responses with the help of a Partial Least Squares Structural Equation Modeling (PLS-SEM) with the purpose of investigating how the deceptive practices of influencers impact the perceived influencer credibility decrease (which we term ‘trust crisis’). Findings show that trust crisis is a complete mediator between deceptive practices and brand reputation (β =.502, p <.001), and the non-disclosure of sponsorship has the most immense direct effect on trust crisis. The trust crisis is a significant mediator of brand-level reputational damage by fake followers (β =.243, p <.001). The direct effect of paid reviews is calculated to be marginal (β =.094, p =.055). Including trust crisis, 24.7% of the variance in brand reputation is explained (R² = .247), and 16.7% is explained with no mediation (R² =.167). These findings point to the critical role of authenticity and disclosure compliance in ensuring brand reputational results. The study expands the conceptions of trust transfer and source credibility to the context digital influencers. Also, the results demonstrate that disclosure compliance is a key governance system to reduce the effects of trust erosion and safeguard brand reputation in influencer-based marketing.