LTK Case Study | The Gamification of Hyper Consumption
Part I: An unfiltered look into LTK & other digital MLM structures within the creator economy that manipulate consumer and influencer behavior through incentivized consumption
Did SoftBank invest $300 million dollars in a digital dud that will eventually face the same fate as Lula Roe *OR* is it the ‘performance marketing’ platform of the future?
Before we dive in, I must share some caveats. In the following case study you will see hard, verifiable data, educated assumptions, and context derived from my personal experience. But at no point, am I making a black and white judgement. The creator economy is the wild, wild, West and it’s only pertinent to recognize that I do not have *all* of the information, BUT, I do have a lot. My education in business, professional experience and social media presence have uniquely positioned me to not only deeply understand the ramifications and outcomes pertaining to this topic, but disseminate it into layman’s terms. So the public, as well as the overwhelming majority of young adults that wish to have a career in the creator economy, are able to make an informed decision regarding what type of brands and business models they are willing to support. In other words, this is my very well informed opinion.
With that being said, let class begin…
Are affiliate networks that partner with fast retail (also known as ‘performance marketing platforms’) the modern, digitalized version of the MLM?
While these networks don’t exactly fit the MLM mold, there are striking similarities, especially when coupled with the image their top influencers cultivate online as a way to attract potential new influencers (+ users from their audience) to the platform. *more on this strategy in Part II dropping Wednesday, March 22nd.
As a former LTK user, I am acutely aware of the massive amounts of consumption, waste, and time this type of business model requires. I also know to what lengths influencer brands will go to convince you they are authentic and have your best interests at heart while actively working behind the scenes to preserve a business model that *only* benefits a select few. For context, this is one of the many messages I have received over the years (this specific DM is from 2022) illustrating a complete disregard for how fast retailing is harming us all.
While I was a fan of Zara, Revolve, H&M and other fast fashion brands/retailers in my teens and the entirety of my 20’s it wasn’t until I began influencing in 2016 that my consumption began creeping up at an alarming rate. This was after working for almost 4 years at Nordstrom and writing blog posts like this circa 2013 (see below).
Especially as I began to realize that availability, trending items and impulse friendly pricing had the most impact on driving sales. And while my initial motivation for launching my platform was to help my audience discover emerging, independent brands my attention was constantly being pulled towards fast retailers. I was purchasing rapidly to attempt to keep up with the trend cycle and even though every once in a while I thought “this is too much” I was too busy with my full-time career in tech sales to pay much attention to my nagging conscience. *putting a pin in this experience to be featured in a future post, this is going to be a journey friends.
For those of you who aren’t familiar, LTK was founded in 2012 and retro-fitted affiliate software to serve the burgeoning opportunity for retail sales via aff links on social media. I applied and was accepted into the platform in 2017.
As a part of my on-boarding I was prompted to sign up friends and peers also looking to monetize on social media. LTK (aka RewardStyle) incentivized this behavior by offering a small percentage of their first year sales in exchange for recommending them to the platform.
This practice has since been abandoned, but they may have agreed to honor the pyramid scheme(esque) commission structure in perpetuity to early adopters; we simply don’t know. One does wonder why influencer brands such as Dani Austin are not actively pivoting away from fast retailing considering how much has come to light regarding wage theft, the fashion waste crisis, child labor violations and the fashion industry’s large hand in driving climate change.
As of 2022, LTK claims to have driven $10 billion in revenue and created 130 millionaires over the last decade [out of the 150,000 creators signed up to their platform] since launching in 2011 (Source: Inc Magazine). Based on publicly available information + this AARP report from January 2023 that states 25% of participants within an MLM turn a profit, with 27% breaking even and 48% reporting net losses I was able to produce *assumed income tiers based on an average commission of 10%.
*LTK does not publicly share how the $10 billion dollars equates to influencer earnings, but this would be an opportunity for them to share this information so creators know where to spend their time and energy (and then I can stop doing math as well as looking up AARP reports).
It’s important to note that not only are influencers prompting purchases, they are modeling hyper consumption behaviors like daily Amazon buys and weekly Sephore/Ulta hauls behind the guise of living an aspirational lifestyle. The $10 billion is the tip of the iceberg and LTK is a plug and play directly into the fast fashion ecosystem. One of my audience members commented recently that when you look at the behavior objectively it tends to look like a sickness or an addiction and the medicine is more things.
The normalization and glamorization of a fast lifestyle is a strategy.
Now this conversation is nuanced, complex and tends to elicit shame, guilt, confusion, and misdirected anger, but mainly in groups that are benefitting from the system the least. When the responsibility to acknowledge harm and shift practices lies with those who have benefited from these systems the most. We should strive to understand the ways in which digital marketing is shifting to protect and perpetuate fast retailing while fiercely advocating for those who are not properly represented and create space + opportunity for the brand’s that deserve our attention.
One of the ways in which these systems are perpetuated happen via ‘influencer growth programs’. This occurs when a network [in this case LTK] executes campaigns on behalf of advertisers [i.e. Walmart or Express or Free People] via coordinated content calendars, best seller tips and ‘growth’ strategies that conveniently create multiple marketing touch points for said advertisers. They look and feel authentic because they don’t require the #ad or #paidpartnership disclosure as the influencers are one level removed from the advertiser themselves nor do they necessarily realize they are acting in unison.
Reminder that only ONE influencer will be credited at POS (point of sale), even though multiple influencers participated in leading consumers down the sales and marketing funnel. *more to come on the conundrum of attribution, the importance of paying out ‘the assist’ + more examples in future posts.
Another, more blatant path, is for influencer brands to co-opt, or in this specific case outright steal, language to greenwash their image. Even going so far as to attempt to trademark a term that they knowingly do not embody, all for the sake of preserving their image & profit. *will be posting a full break down, including what happens with the trademark, once the situation wraps up
We are witnessing the attempted greenwashing of fast fashion influencers, but times have changed; consumers are smart, information is readily available at our fingertips and regulation/policy is already here thanks to consumer protection agencies cracking down on misleading and outright deceitful marketing practices by fast retailing models. Sustainability and ethics in the fashion and beauty industries has been building momentum for years and we are getting results. Have you noticed H&M no longer markets their ‘conscious collection’? There is a reason for that.
This is only the beginning and I hope you come along for the ride.
Read Part II —> HERE