Seven years ago, Chiara Ferragni was a fledgling 23-year-old fashion blogger, studying law at university in Milan. She never finished her degree, but now lives in a $3.5m Los Angeles mansion packed with antiques, and spends her days travelling the world in midriff-revealing tops, Gucci sweatshirts, cut-off jeans and a collection of Louis Vuitton. How do we know this?

Every day, the “Blonde Salad” shares images of her gilded lifestyle with her 9.6 million followers on Instagram, making her one of the cult celebrities of the social media world. Unlike Taylor Swift, Beyoncé et al, who have all made their names elsewhere and maintain fanbases on the photo-sharing platform, Ferragni has found fame and fortune solely by publishing photographs of herself wearing a variety of designer ensembles in a range of glamorous locations. Now worth a reputed $12m, with a line of branded shoes selling at up to $500 a pair, and a contract with Pantene as a global ambassador, Ferragni is a role model to a generation of digital natives who have established a viable career as social media “influencers”.

Chiara Ferragni – how a ‘crazy blogger’ turned her life into a shop window Read more

On her 30th birthday earlier this month, her boyfriend, Italian rapper Fedez, proposed on stage in Verona, singing a song dedicated to her at a concert broadcast live to their home nation. Almost one million fans “liked” the Instagram video of the moment. That same day, almost half a million clicked the heart symbol below an image of her in a black mini dress, featuring the hashtag #ysl, while 700,000 followers “liked” another image Ferragni shared, showing her next to a vast 30th birthday cake emblazoned with the Leading Hotels of the World logo, with the hashtags #leadinghotelsoftheworld, #LHWtraveler and #kempinskivenice.

To those unfamiliar with the machinations of social media, it is highly likely Ferragni had a commercial arrangement with these luxury brands, keen to tap into an audience that wants to emulate her lifestyle. She is not alone in utilising her position as a social media star with a loyal and highly engaged following.

Earlier this month, 17-year-old Amanda Steele shared images of herself on the red carpet at the Cannes film festival, hanging out with Hollywood A-listers Jake Gyllenhaal and Tilda Swinton. The YouTube beauty vlogger, who shares make-up tips under the “MakeupbyMandy24” handle, was flown out to the French Riviera, dressed and made up, and given tickets to the premiere of Okja courtesy of Christian Dior – all in return for a caption shared with her 2.8 million followers that read: “Thank you sooooo much @diormakeup for treating me like a princess!!”

In just a few years, the power of blogs and platforms such as Instagram has created a new marketing genre that has seen brands investing heavily in collaborations with the big names in the online space. Beca Alexander, founder and president of the social media casting and management agency Socialyte Collective, represents about 100 influencers, each with between 30,000 and 2 million followers.

“One of our top influencers did about $1m last year and the average for those on our books is around $200,000 a year,” says the digital entrepreneur from her New York office.

Facebook Twitter Pinterest Chiara Ferragni on Instagram. Photograph: Chiara Ferragni/Instagram

“There are a variety of ways they earn that revenue and we work on strategies that best suit the individual style and audience of each one. Some might focus on promoting as many brands and products as possible – but always being aware of the natural synergy with their own ‘brand’, so it feels authentic – while others have contracts with a curated range of brands to work on exclusive long-term campaigns.”

Alexander, a former fashion news blogger who takes 10% commission from her portfolio of clients, founded her business seven years ago and has seen double-digit annual growth and a predicted 2.5 times rise in turnover this year. While women dominate the influencer space, she has also established a reputation for nurturing a number of male stars, such as her most successful client, Adam Gallagher, whose elegant, well-travelled lifestyle has won him a lucrative long-term contract with Armani fragrance.

When you get to the top tier of influencers, they go to great lengths to portray the perfect image online, often recruiting a retinue of still-life and style photographers, make-up artists, stylists, assistants and editors to support the burgeoning business of being a brand in their own right. Many have a signature style to their posts, using specific filters or a trademark pose, but the key, says Alexander, is to remember who your audience is and retain an authenticity that means they remain engaged with your output.

We have no issue with social influencers working with brands, as long as consumers aren’t misled Guy Parker, ASA

And you don’t have to have a mega-following to earn money from social media: companies are spending up to $1.5bn on Instagram marketing, says Thomas Rankin of Dash Hudson, who matches influencers with brands. Even users with 5,000 followers can attract $250 for a product post or endorsement if they have the right audience.

Alexander developed a programme two years ago known as “product bombing”, whereby a co-ordinated campaign saw numerous, carefully selected micro-influencers paid to talk about a new product at a specified time, thus saturating the social media space within the target demographic. “That worked really well, and created huge awareness and demand, seeing stock sellout rapidly,” she says.

However, the speed of change within the tech world and the evolution of algorithms to change the user experience means this approach isn’t as effective today. Instagram has recently changed the way consumers see posts, from a simple chronological feed, guaranteeing a user would see all posts in the order they appear, to a more nebulous feed based on the user’s individual engagement with those they follow.

Currently worth around $1.5m, Julia Engel’s pastel-tinted “Gal meets glam” feed is brimming with high fashion and has 1.1 million subscribers. She generates revenue using the popular app LIKEtoKNOW.it, which sends followers direct to websites selling the clothes: if they buy, she gets a commission. She has also collaborated with #AmExPlatinum in highly stylised posts that convey the perceived luxury lifestyle promoted by the financial services brand. Each one carries a carefully worded caption and the #ad tag, defining the post as a piece of paid-for advertising. This boundary between independent editorial posts and those that have been paid for in some way is one that is blurred in this new era of social media marketing.

“We have no issue with social influencers working with brands, as long as consumers aren’t misled,” says Guy Parker, chief executive of the Advertising Standards Authority, which is working with the Federal Trade Commission in the US and the newly formed International Council of Advertising Self-Regulation to develop some kind of oversight of influencer marketing. “We define advertising as a tweet, vlog, blog or Instagram post where the influencer has been paid and there has been some control over the content. We therefore expect the post to have #ad on it in a prominent position, not buried in 30 other hashtags, but in the first three lines of the caption, so it isn’t hidden to followers. It’s not fair to consumers to expect them to play detective and deduce whether something is an ad or not.

“Many millennials believe this isn’t necessary as they claim to be able to see whether content is ‘sponsored’, but we believe it is imperative to protect consumers who aren’t that savvy, and ensure they know.”

Callum McCahon, strategy director at the social media agency Born Social, says the industry needs to be self-regulating, and that Instagram must take some responsibility for protecting consumers using their platform. “Users scroll through feeds fast and are trained to skip past hashtags. I believe Instagram needs to have its own mandatory labelling system for a ‘paid-for’ post, which Facebook – which owns Instagram - has launched recently as branded content.”

There is no doubt that a generation of style-conscious entrepreneurs are making a good living – in some cases a fortune – by building their own personal brands online with fan bases to rival many established global businesses. The challenge will be for newcomers to join a crowded market, and for those with a substantial following to keep them loyal.

“The reason a brand is using an influencer is the trusting relationship they have with their followers,” says McCahon. “When it’s done properly it is a very effective method of building a brand and selling product.”