Virtual influencers (VIs) artificial intelligence (AI)-generated personas that mimic human influencers have emerged as a transformative force in digital marketing. This study conducts a systematic literature review (n = 51 articles) to explore the impact of virtual influencers on consumer trust, engagement, and ethical considerations across different cultural and regulatory environments. Key themes examined include the perceived authenticity of virtual influencers and its influence on trust, the ethical dilemmas surrounding transparency and consumer deception, and the effects of disclosure on engagement across various social media platforms. The findings of the study indicate that while virtual influencers have the capacity to enhance brand engagement, concerns regarding authenticity, transparency, and the uncanny valley effect influence consumer perceptions. Ethical considerations, including regulatory compliance and cultural sensitivities, further complicate their integration into marketing strategies. The Virtual Influencer Trust and Engagement Model (VITEM) is a novel framework that elucidates the relationships between authenticity, disclosure transparency, and cultural context. It shows trust to be a key mediating factor, emphasizing cultural differences in consumer responses to virtual influencers. The present study offers insights to a range of professionals, including marketers, researchers, policymakers, psychologists, and consumer wellbeing stakeholders, on the responsible leveraging of virtual influencers in an evolving digital landscape.

Virtual influencers (VIs) are increasingly integrated into brand communication strategies, offering novel opportunities for audience engagement, message control, and digital differentiation. This study examines brand-virtual influencer collaborations through a multiple-case study approach, analyzing five diverse cases: Lil Miquela, Imma, Noonoouri, Lu do Magalu, and Knox Frost. The analysis focuses on brand motivations for engaging with virtual influencers, strategic design and implementation choices in VI collaborations, and their effects on consumer trust, brand perception, and engagement. Findings indicate that brands are primarily motivated by novelty, differentiation, and the ability to achieve risk-controllable visibility, while effective collaboration strategies depend on aligning virtual influencer characteristics such as form realism, ownership structure, and endorsement format with product category and communication objectives. Cross-case synthesis reveals what we conceptualize as the Credibility-Engagement Paradox: an analytical framework whereby novelty, originality, and visual distinctiveness enhance engagement and opinion leadership, while simultaneously constraining perceived credibility and trust relative to human influencers. This study advances influencer marketing theory by conceptualizing the Credibility-Engagement Paradox as an analytical framework derived from cross-case evidence, demonstrating how novelty-driven engagement and credibility formation operate as partially independent mechanisms shaped by anthropomorphism, ownership structure, and contextual accountability, while also offering actionable guidance for brands deploying virtual influencers in digital marketing ecosystems.