Unless you’ve been off the internet or ignored the newscycle for the last week, you’ve likely heard about the unlikely story of retail investors organizing on Reddit to prove hedge funds wrong about their position on GameStop stock. Here’s a brief explainer, but when GameStop stock saw a 1600% surge at its peak, it recalled a classic story of David versus Goliath. Hedge funds represent the Goliath, or institutions we’ve historically put our trust in, and David represents the retail investors (i.e. a lot of Redditors from /r/wallstreetbets) and the growing influence of the crowd to go up against the giants.
So what can brands learn from this still-unfolding story? Its lessons from what’s really at the heart of this situation — trust and social proof.
The last several years have put trust into the spotlight — or more often, the eroding trust in institutions displayed by the increasing distrust in media due to the rise of fake news and misinformation, the attempt by social networks to stop (or in some cases, ignore) misinformation on their platforms, and the growing desire for transparency from consumers. In fact, according to Edelman’s 2021 Trust Barometer, trust in all information sources is at a record low. It makes sense too — the last year presented many challenges from the global pandemic, to the US’s reckoning with racial injustice, as well as the 2020 presidential election. However, 2021 provides an opportunity to start to solve systemic issues in society exacerbated by the turbulence of 2020: a severe lack of trust.
While trust in institutions is waning, trust in peers and experts remain high and in a society that is desperate for connection, social media is using this opportunity to press reset and rely on what is a term getting used more and more in business and marketing: social proof.
What is social proof? In a marketing and business context, social proof is simply the idea that what consumers say online is more trustworthy than what brands or institutions say to consumers. It is the evolved interpretation of influencer marketing — content created by people we trust.
The economy around social proof is becoming even more important, especially for rising generations of wealth and power. A recent study shows that 50% of millennials and 52% of Gen Z trust content from influencers, with 1 in 4 Gen Z females citing influencers as the most common medium for learning about new products to buy. Contrast this with only 26% of both generations trusting ads in their social feeds. Social proof is a core strategy that is also used widely in ecommerce, one example being the growing use of star ratings and product reviews. In fact, with 95% of shoppers reading online reviews before making a purchase, a study by Northwestern University’s Spiegel Research Center found that displaying online product reviews can increase conversions by as much as 270%.
Why is this so important for brands? Like Rachel Botsman said in her popular TED Talk, reputation is our most valuable asset. Influencers have created businesses around their reputation, whether it be for creating enviable homes, educational tutorials, fashion tips and tricks, or otherwise. Their businesses are built on personal relationships, even if you’re one of thousands or millions of followers. Influencers open their world to their fans and in turn, they become part of social circles as well. We know them by name, we ask them for help when we need it, and we rely on them to share new brands, products, and services with us. So if trust is our currency, then social media is our marketplace, and brands must use these trusted messengers to distribute their message.
This brings us back to GameStop. As our trust in institutions like Wall Street and hedge funds (that have gotten us into trouble before) continues to decline, the power of the people has taken over on social media, or in this case on a specific subreddit. One person perhaps didn’t have the power to change the market, but when thousands and even millions came together to purchase GameStop stock, they influenced the masses and that trust and influence moved markets. Consumers saw retail investors making meaningful returns on their investments, so they joined the throngs. While the underdog story may not hold (GameStop stock has dropped considerably since its peak, leaving some with significant losses), the power in this narrative persists – resulting in four movie options from big players and even a TV show.
It’s a reflection of what smart brands have already seen through influencer marketing — real people can influence purchase decisions that drive real business results. And it’s accelerating quickly. People are spending more time online, and they are also engaged at a higher rate, even on sponsored posts — engagement rates on sponsored posts from influencers activated through the Mavrck platform in 2020 have risen nearly 70% since March. It’s expected that up to $15 billion will be invested in influencer marketing by 2022, according to Mediakix data. So what’s the lesson? Accelerating macro trends and recent current events validate that brands need to start thinking about developing a social proof strategy to stay relevant in today’s world.