Scroll through your social media feed, and you’re going to notice certain ads pop up with quirky-named stores like Timbuk 2 or West Louis pushing really cool-looking products.
These ads are a weird new part of the global internet economy where the company doesn’t own the product. You’re buying stuff from middlemen who spend their time creating ads for social media.
“If you do click through on any of these companies, you’ll notice a really limited supply of products, usually one thing – like messenger bags or barn coats for men,” said Kelly McBride from the Poynter Institute for Media Studies.
Alexis Madrigal of the Atlantic recently published a deep look at these companies and how they’ve come to be. The story highlights several cyber-entrepreneurs, such as a 17-year-old from Ireland named ‘Rory,’ whose attracted attention for his YouTube shows on how to make a quick buck.
McBride said these companies are not illegal - they are using a practice called dropshipping. Consumers click on the ad to the website and make a purchase. What you don’t realize is that the company is simply buying the product on a site like Amazon or Alibaba and shipping it to you after marking up the price.
The Federal Trade Commission knows there are plenty of companies using social media advertising to do business on the internet, McBride said. But they’re busy fighting more dangerous dubious companies.
“They have no way to get on top of all this,” she said. “They’re more concerned about medical devices and supplements and foods – stuff you put in your body as opposed to the stuff you’re going to put on your body.”
The business model mimics the marketing of some legitimate online companies like Warby Parker, which is disrupting the fashion eyeglass business by shipping directly consumers.
“The only way you know the difference is to know for sure the company’s reputation,” McBride said. “If you’ve never heard of this company, if you don’t know somebody that’s actually bought something from the company, they might not be real. Buyer beware.”