World Startup Convention Fiasco: The greed of influencers and what everyone is missing!
The World Startup Convention, which failed to deliver on promises like bringing Elon Musk and Sundar Pichai, was promoted by influencers Ankur Warikoo, Prafull Billore, Chetan Bhagat, Raj Shamani and others, who are receiving immense flak. But what about the influencer marketing agencies' role?
Ankur Warikoo, with over 8 million followers across LinkedIn, Facebook, YouTube, Twitter and Instagram, is not just another influencer. He’s a powerful voice, especially for those who are dabbling in entrepreneurship, as Warikoo has been an entrepreneur himself since 2008. He was the founding chief executive officer of Groupon India and co-founded Nearbuy. He is currently working on an education startup too. When he promoted the World Startup Convention, which was to be held in Greater Noida, Uttar Pradesh, it came with a lot of credibility.
The event, which turned out to be "a scam" as per attendees and delegates, was also being promoted by noted and credible influencers such as Prafull Billore, Chetan Bhagat, Raj Shamani, and others who were roped in for the event’s promos. These promos had tall claims. For instance, the videos said the World Startup Convention would host 75,000 startups, 1,500 venture capitalists, and 9,000 angel investors. During the initial promotions, it also promised participation of SoftBank's CEO Masayoshi Son, Google CEO Sundar Pichai, Tesla’s Elon Musk, Gautam Adani, and even India’s top ministers such as Nitin Gadkari and leading global investors who would be attending the event. Organised by "investors" Luke Talwar and Arjun Chaudhary, the event was scheduled to begin on 24 March in Greater Noida. Everything crumbled when participants reached the venue only to realize there were no big names at the event.
The event’s fate has reignited the debate on the accountability of influencers, especially in promoting products and events that involve huge amounts of money from followers. Warikoo and Shamani have admitted that they distanced themselves from the event early on, but the organizers kept using their videos for promotions.
In 2022, a similar incident happened when lakhs of investors lost their money when Singapore-based crypto lending platform Vauld shut operations in India abruptly. The platform was aggressively being promoted by finfluencers. The internet is marred with many such cases, which are often promoted by influencers. It could be small businesses with a lack of quality control or many that don’t even deliver prepaid orders. Often such consumer complaints do not reach the right authorities unless they happen on a mass scale like the Startup Convention.
But influencers end up getting paid for promotions often with almost no liabilities. According to industry estimates, influencers charge anywhere between Rs 3 lakh to Rs 40 lakh for promoting such events or services or products based on their popularity and online reach.
Legal action
The Indian government has taken steps to regulate this burgeoning industry. Product and service endorsements have been a cause of great concern for the government with the advent of social media influencers. The guidelines for the Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022, were set forth by the Government to curb precisely this form of endorsement.
For a violation of the guidelines, the Central Consumer Protection Authority (CCPA) can impose penalties of up to Rs 10 lakh on endorsers. For a subsequent offence, the penalty can be as high as Rs 50 lakh. CCPA can also prohibit an endorser for up to 1 year and for subsequent contraventions up to three years.
The regulations require the influencer to disclose material connections, which include compensation or other benefits they are deriving from any endorsement. What’s more, the endorser is required to diligence what they are endorsing and satisfy themselves that the advertiser is in a position to substantiate claims of the advertiser. On similar lines, the Securities and Exchange Board of India (SEBI) is also exploring options to introduce legislation towards regulating social media influencers creating content on financial and investment advice.
Pritha Jha, partner at Pioneer Legal, noted that an investigation should ensue on whether the guidelines were followed by the influencers who endorsed the World Startup Convention event.
"For a violation of the guidelines, the Central Consumer Protection Authority (CCPA) can impose penalties of up to Rs 10 lakh on endorsers. For a subsequent offence, the penalty can be as high as Rs 50 lakh. CCPA can also prohibit an endorser for up to 1 year and for subsequent contraventions up to three years," she added.
The Indian influencer marketing industry is massive and is estimated to be around Rs 900 crore, according to GroupM INCA’s India Influencer Marketing Report. The market is expected to grow at a compound annual growth rate of 25 percent until 2025 to reach a size of Rs 2,200 crore. This market is backed by strong consumer sentiment that they can trust influencers more than traditional advertising.
Firm action taken by the government on scam events and influencer-led promotions can set an example and "can save the influencer industry from going to the dogs," said a branding expert who wished to remain anonymous.
Make agencies accountable
Ever since the influencer marketing ecosystem has grown, there has been a mushrooming of influencer marketing agencies as well, notes Ashutosh Harbola, founder and CEO of influencer marketing agency Buzzoka.
According to him, such fraudulent events happen, and there must be an agency involved that was working with influencers, but nobody is talking about it. Everyone involved in this event has made money from the agency, organizers to even influencers, and the price is being paid by the customers.
"Agencies (in influencer marketing) don’t come with any liability. They take risky projects, and if things go wrong, they simply change the name and relaunch themselves in the market. That's the bigger problem that regulatory bodies such as ASCI need to address."
"Not all of them are accountable, and they don’t even have a reputation to protect. Hence, agencies (in influencer marketing) don’t come with any liability. They take risky projects, and if things go wrong, they simply change the name and relaunch themselves in the market. That's the bigger problem that regulatory bodies such as ASCI need to address," he asserted.
Harbola claimed that he has written to ASCI multiple times asking them to hold agencies responsible for influencer marketing norms violations as well.
Industry Impact
Jag Chima, co-founder of IPLIX Media, a Delhi-based influencer marketing agency that handles influencers such as Saloni Gaur, Tech Burner (Shlok Srivastava), Mohammed Salim Khan (MSK), and Neha Doodles, says that such events negatively impact the image of the entire industry as well.
"…the confidence of investors and brands goes downhill. It is a clear example of where there's been a lot of noise (about an event), nobody actually checked the credibility of the people behind the actual event," he added.
Chima believes that such events also prompt influencer agencies to become even more cautious when it comes to due diligence.
"When you see things like this happen, as an agency, we will start to put even stronger hygiene checks in place before we suggest any influencers take part in anything like this again. And that means helping the influencers to ensure all of the checks are done before they take the decision to promote anything," he concluded.
Industry stakeholders worry about every violation as it is also another step toward increased scrutiny and possibly stricter government regulations and interventions.
How the authorities respond to the World Startup Convention scandal and the role of influencers involved in its promotion will in part set the precedent for the industry's future and how the ecosystem tackles challenges arising from any violation of norms and laws. Meanwhile, industry stakeholders rue every violation as it is another step toward increased scrutiny and possibly stricter government regulations and interventions.
The World Startup Convention is being billed as India's Fyre Festival, a 2019 fraudulent luxury music festival founded by con man Billy McFarland and rapper Ja Rule and advertised by global influencers and celebrities. Netflix even made a film about it - Fyre: The Greatest Party That Never Happened.
