By Liav Refael Chen, CEO of of Humanz
If we learned anything from January’s GameStop stock price chaos, it's that we should never underestimate the power of young people on the internet. That historical moment has forever changed the dynamics of investing, and it all began with an online movement that toppled a hedge fund. Today’s young generation wields online tools to influence others’ financial behavior and is proving the GameStop mania was not a one-off instance. Specifically, Gen Z is proving to be an online force to be reckoned with, dominating the social media influencer market, and set to change money management for a whole new generation.
The TikTok generation is asserting more influence over the industry that has already surpassed $13 billion in market size and shows no signs of slowing down. Internet users look to niche influencers they trust as their go-to source for new info and product recommendations, and 74 percent of consumers say they would spend up to $629 on a product recommended by an influencer. With such authority over the way consumers spend their money on commercial goods, Gen Z influencers are bound to sway their followers' interests in other financial investments.
Gen Z’s social media habits are distinctive from other generations. Their most-used social media platforms are Instagram, Snapchat, and TikTok, according to a 2021 Pew Research survey. TikTok’s quick ascension to Gen Z dominance at comparable levels to other well-established online titans has captivated potential investors, e-marketers, and others looking to profit from this bustling and youthful platform.
Given the exponential growth of the influencer industry across Instagram and TikTok, the rapid influx of young retail investors into the stock and crypto markets, and the recent explosion of hype-based trading, the stage is set for Gen Z to follow the footsteps of millennials on /r/wallstreetbets by entering into the world of amateur-advised investing. While there have always been legal concerns regarding investment discussions on online platforms, /r/wallstreetbets trendsetters like Keith Gill have so far been shielded from serious legal repercussions by avoiding directly advocating for investing in certain securities. What’s to stop TikTok influencers from indirectly injecting the same hype-based investing into the minds of impressionable Gen Z-ers using the same defense?
TikTok influencers have already claimed the cryptocurrency investment space in the form of supposedly unbiased research and educational channels. Dennis Liu, known as VirtualBacon on TikTok, regularly posts about the latest movements in the crypto market, often sharing his trades with his audience of over 250,000. Stopping just short of giving direct financial advice, Liu carefully skirts the legal implications of security advocacy while delivering all the required information for his audience to enjoy the same gains as he does.
TikTok user Robert Ross, or @tik.stocks, uses his platform to educate his audience of over 300,000 on the most popular stocks and cryptocurrencies. Ross, a senior equity analyst for an investment research firm, wants to utilize the enthusiasm of young Gen Z-ers to assist them in developing “good habits at a young age,” as he told Business Insider. The leading stock analyst’s huge following demonstrates the potential for TikTok influencers to influence the growing generation of retail investors. Ross has already used his platform to promote a crypto brokerage, an options activity tracking app, and other investment-related tools.
The trend in promoting certain investing tools continues with the nearly 500,000-follower TikTok user Austin Hankwitz, who recently recommended that his audience invest through tastyworks, the same brokerage promoted by Robert Ross. As evidenced by these TikTok champions of finance, the vehicles by which young people engage in the stock and crypto markets may be dramatically shaped by those who they receive indirect financial advice from. And while these sponsored videos require disclosure from the creator, the ability to hide a tiny “#ad” amidst a sea of hashtags leaves open the possibility that many in the audience, particularly young investors, will mistake promotional content for goodwill recommendations.
Those in the financial industry would be wise to promote their tools and platforms through these extensive networks of money-hungry retail investors, but honest and accurate information should always be a priority. Unfortunately, TikTok is rife with influencers who prefer to take a blatant gambling approach to the stock market, no doubt taking many of their retail investor fans down with them. User @biaheza went viral in November of 2020 for his high-risk, high-reward Tesla options trade, which earned him upwards of $5,000 in a single day. Options trading is often forewarned by financial experts as a high-volatility activity that can wipe out retail investors with ease, but to the young TikTok user and emerging retail investor, it can be viewed as a legitimate get-rich-quick scheme backed up by their favorite influencer.
The current state of influencer-driven investing advice is a minefield of scammers and trolls mixed in with genuinely educational content. In this endless storm of analysts and experts, it’s up to Generation Z to navigate to safe harbors. If done properly, this generation may emerge as champions of the trade.
About the author: Liav Chen is the Co-Founder and CEO of Humanz, an AI-powered platform that makes influencer marketing accessible, reliable and trustworthy for marketers and influencers. He has extensive experience in devops, big data and machine-learning. After experiencing the pain points and shortcomings of influencer marketing firsthand, Chen created Humanz by incorporating deep social data analysis with proprietary AI technology on a SaaS platform.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.