Virtual influencers gain traction

• Though enterprise capitalists proceed to take a position in brands backed by human influencers, some brands and retailers are turning to virtual influencers to sway consumers, in keeping with a PitchBook report.  
• Brands like Dior, Calvin Klein and BMW have used a virtual influencer, meaning a fictional avatar, named Lil Miquela, who’s approaching 3 million Instagram followers. Brud, the firm that developed Lil Miquela, was last valued at $144.5 million before it was acquired by Dapper Labs in 2021, per PitchBook’s report. 
• Some firms are experimenting with bringing virtual influencers into physical stores. Cindy, one other virtual personality developed by Imaginuity, was introduced at 13 shopping centers within the U.S. to drive traffic across its stores and digital properties, the report noted.

Creating virtual influencers could potentially save brands and retailers tens of millions of dollars otherwise spent on human influencers. Their virtual personalities may be tailored to specific customers, and so they aren’t limited by “working hours, unionization, and other physical and legal constraints that will factor into human influencer partnerships,” posing a risk of job displacement for influencers and further depressing wages for human influencers, PitchBook noted in its report. 

Additionally, the “cost, speed, and quality of those personas are only poised to enhance as GenAI advances,” per the report. 

However, these digital avatars do include some constraints. They’re higher for demonstrating easy products like cosmetics, but no more complex items like sporting goods or furniture, PitchBook said in its report. Furthermore, they’re vulnerable to copyright issues, bias, deepfakes and customer manipulation, the report noted.

Though brands and retailers are turning to virtual influencers to advertise their products, research indicates that customers proceed to value human influencers’ recommendations. Nearly 60% of Generation Z aspires to change into an influencer, and consumer trust in influencer personalities is on par with trust with family and friends, per the report. Additionally, influencers attract private capital. 

An April survey by Sprout Social found that about half of respondents make purchases each day, weekly or monthly based on influencers’ advice. However, they were split on whether or not they could be open to brands using AI influencers, with 37% saying they wouldn’t and the identical share indicating that they might. 

Some brands are continuing to depend on human influencers to garner attention from customers. In January, J.C. Penney partnered with Dallas-based fashion and lifestyle influencer LaDarius Campbell to create a limited-edition collection and advertise during a live styling event at his local J.C. Penney location. The following month, Claire’s announced its influencer platform, dubbed The Collab, which enlists Gen Z and Gen Alpha brand ambassadors. 

Meanwhile, other brands are bringing together human influencers with virtual avatars to advertise their products. Earlier this yr, Coach brought in celebrities and virtual influencers Imma, Lil Nas X, Camila Mendes, Youngji Lee, Kōki and Wu Jinyan, as a part of its “Find Your Courage” campaign. Plus, Kim Kardashian partnered with Wieden + Kennedy Portland to create clones of herself and test out her products based on criteria like support, smoothness and stretch.

In its report, PitchBook highlighted the Skims brand as one in all the more successful influencer-founded brands, which was last valued at $4 billion. In addition to its digital experiments, the brand opened its first everlasting store in June in Washington, D.C., and announced plans to open more locations in Florida, Texas and Georgia.

As retailers and types explore the cost-cutting and marketing potential of virtual influencers, PitchBook’s findings suggest that enterprise capitalists’ interest in online retailers has declined. VC investment in e-commerce firms spiked in 2021, with 72 firms exiting at a combined exit value of $273 billion. But as of June, that figure has fallen to twenty-eight firms exiting with only $2.4 billion, per the report.