Stars who charge a fortune to promote companies online need to reckon with the odds that more negative comments will destroy shareholder value — or that the system doesn’t really work at all.
Snapchat was already a social media platform under pressure when reality TV diva Kylie Jenner called the app “sad” and publicly mused that she doesn’t even use it any more.
That’s a problem when you’re dealing with an incorrigible user of rival networks Twitter and Instagram, where Kylie has 100 million followers so susceptible to her opinions that a whole industry has evolved to monetize them.
For Kylie to dump your platform is one thing. When she actively disrespects it, Wall Street shudders.
The world of social media “centers of influence” has already made a lot of people rich. Now it’s time to weigh the costs when the Tweets go the other direction — and figure out where to assign the blame.
An awkward conversation
Enough people pay Kylie Jenner big money to tell her fans about their products that she reportedly books $18 million a year on social media endorsements.
They evidently think a brief word and a picture from her is influential enough to justify spending $400,000 or more per placement.
But now the pundits are rushing to say that she didn’t budge Snap shares last week when she slammed the app.
I’ll grant that the depth of the damage was exaggerated — the stock is down 10%, evaporating $1.6 billion — but the directionality feels more like causation than correlation.
After all, Snap has already been bid up to giddy levels for a company nobody seriously expects to even turn a profit before 2021. It doesn’t take a big negative catalyst to wreak havoc in that kind of speculative house of cards.
Kylie was a factor when that house sagged last week. She isn’t a market player bound by disclosures and regulatory requirements. She was just speaking her mind.
As far as I know, there’s no commercial relationship with Snap so no non-disparagement clause really applies, either. For all practical purposes, it’s just like a rock with the weight of millions of followers behind it fell on the company — an act of social media if not God.
That said, arguments that she didn’t move the stock don’t do her any favors. If her complaints have no material impact on the brands she talks about, then what does that say about the endorsements? Are they just meaningless chatter too?
Kardashian family consigliere Kris Jenner never wants to have that conversation. The checks stop coming in if promoters lose faith in her clan’s ability to drive sales toward people who pay, which means shouldering the responsibility that negativity has teeth.
Even if the kids aren’t liable, slamming a brand opens them up to nuisance lawsuits that challenge the whole “center of influence” narrative. You can’t have it both ways.
Do no harm
She’s got to get those kids to avoid saying anything if they can’t say something nice, especially about companies that are already on the defensive.
I remember when I first started covering the market and disparaged a company on my watch — no malice, just a little crueler and more dismissive than necessary. They called in a rage.
The company died anyway, but the experience taught me a lot about how the most vulnerable people are the most likely to strike back when they feel persecuted. You want to handle them with tact and maybe even a little mercy.
Snap is in that position. The stock has sunk 40% from its initially heady post-IPO peak and Wall Street thinks shares are still 10% richer than they deserve to be at this stage in the company’s growth cycle.
Users hate the new interface, with more than 1.2 million demanding a rewind to the old, less revenue-friendly design. Audience growth has plateaued. Other social platforms are making great strides.
It’s not hard to imagine a scenario where a company in that position lashes out. Kylie would probably win a war of words, but suddenly her brand would be the one at risk — for no appreciable reason.
Social fixtures like the Kardashians get dragged into public spats all the time. They’re not pretty and while the spectacle can thrill rubbernecking fans, it’s still rolling the dice. Smart people don’t court a backlash.
That means smiling and not mentioning it when you find a social media app boring. Or if you can’t resist criticizing it, cushion the blow with a little kindness. Let the target save face.
I can’t help but notice that Kylie gave Snap an exclusive look at her newborn baby over the weekend. We’ll see if the gesture is enough to repair the damage.
Liability versus “Tweet risk”
Ironically, social media figures are arguably more vulnerable to claims that they’re getting paid to talk a stock up than they are in these more bearish scenarios.
At least a few of the Kardashians have gotten compensation in stock for promoting products. That obviously aligns their interests with the brand by incentivizing them to really give the push their all, but the rules around touting still need to be respected.
Even Jim Cramer has disclosures. When you’re working with market-regulated entities and their securities, you’ve got to be careful if you want to stick around.
Lockups and warrants with strike prices go a long way toward protecting everyone on that front. Of course a little training goes a long way — when you’re charging $400,000 per Tweet, you can afford to have a lawyer screen your feed before anything goes live.
After all, when 18 little words play a role in sinking $1.6 billion, there’s a whole lot of room for revenge. You might not have committed libel. You probably didn’t act with any malice at all. And you’re likely well within the nebulous “terms of service” that support your lucrative social franchise.
But angry shareholders remember you, and if they think your actions have cost them enough money, you’ll become popular for the wrong reasons.
Sooner or later Wall Street will figure out how to calculate social media impacts and ride the wave. After all, traders have largely learned to screen out the presidential feed when it comes to valuing the companies he loves to applaud or talk down.
One day Kylie Jenner’s commentary will be similar discounted as irrelevant to what stocks are worth. When that happens, I think he words may still move the market — but only within normal limits.
Remember, she “only” gets $400,000 for a flattering Tweet just like the negative one she sent out on Snap. When she touts a soda or a jewelry line or shoe designer, she doesn’t create $1.6 billion in value out of thin air.
And she definitely doesn’t destroy $1.6 billion all by herself. Snap was in a precarious place, but if that’s all it takes to crash the stock, all the company needs to do is write her a $400,000 check to reverse the trend.
Maybe that’s in the background here. We may have entered the age of the social shakedown, in which case there are laws that apply. Make sure your clients know the rules. If they have any presence on the networks at all, remind them that it’s better to be safe and silent than sorry.
