Hidden in Plain Sight: Regulating Influencer Marketing

Patricia Lu

Anyone on social media has been exposed to some form of influencer marketing. Whether it is in the form of sponsored posts, free gifts or affiliate links (just to name a few), an increasingly problematic aspect is the issue of sponsorship disclosure. The distinction between opinion and advertisement is being muddled, especially given the various ways paid promotions camouflage their way into our feeds. Adding to this is the fact that influencer marketing is a truly thriving resource, almost adolescent in its room for growth. In a survey of 600 professionals working in the fashion, luxury and cosmetics industry, 78% made use of influencer marketing in last year’s campaigns– a 13% increase from 2016. But the regulatory waters are equally murky for everyone involved – whether it is on the policing, consuming or influencer end.

 

How influencer marketing became so powerful

The stage was perfectly set for the rise of influencer marketing. Like with many industries these days, the Internet and social media have also disrupted marketing. With Millennials and Generation Z filling up the consumer space (amounting to 85% of luxury growth in 2017) TV-style ads are no longer effective. Not only are these groups watching TV less and less, these types of ads are seen as disruptive and can no longer engage their multitasking, multi-device-using audience. Companies are therefore coerced into pursuing other ways of engagement, paving the way for the proliferation of influencer marketing. With content creators like vloggers or streamers being consumed in lieu of traditional TV, these influencers also “resonate more than celebrities”, with 63% of Gen Z’ers preferring “real people”. Influencers then become the ideal entry to access this market.

These days it is not unusual to find the more widely followed influencers charging $60,000 for videos or even $20,000 for one Instagram post. Those at the million-follower level like beauty guru Gigi Gorgeous (who currently has 2.7 million subscribers on Youtube) can even earn up to $100,000 for certain videos.

 

The disclosure issue

But despite the abundance of influencer campaigns and the high rates some of them earn, disclosure is noticeably lacking that informs consumers of these sponsorships or partnerships. There is the issue surrounding the different forms influencer marketing can take. There are sponsored posts, sponsored vacations, giveaways, the use of affiliate links – even product mentions can be paid. The landscape is so diverse that consumers cannot be expected to be on the lookout without support, particularly when the methods are becoming more like native advertising, where ads are designed to look like the platform they are found in.

For the influencer, disclosure is important because their relevance and engagement lies on their authenticity and transparency. Without the trust and loyalty of consumers, the influencer industry would never have grown as much as it has. This is not a critique of sponsorships. Its system is necessary for influencers to make a living. Sponsored content accounts for 82% of the main income of influencers, and it is also the most requested service that brands ask of them. But the fact that influencers are so dependent on sponsorships only exacerbates the disclosure issue. Youtuber PrettyPastelPlease recently posted a very insightful 3-part series about “The Secret World of Influencers”. In her videos, she explained that “if [influencers] get kicked off the PR list, they’re not going to be the first person to upload content. They’re going to be irrelevant.” She also highlights the responsibility that companies play in this positive-pay culture: “If brands can accept when negative criticism comes around, it means that influencers will remain honest.” There is pressure to stay on the good graces of companies so reviews may not be as honest as it could be. The incredibly saturated influencer space may also mean an influencer is easily disposable, as there are always other, more authentic influencers available for people to follow instead.

The problem lies with transparency, authenticity, and disclosure of influencer marketing. Influencers resonated with audiences because they were more relatable, accessible and grounded. The influencer rose because of the consumer, and it can die cause of it, too, if this trust is broken. Of course not everyone does this. But the issue is blurred enough to warrant stronger checks. Transparency will only make the system better. As beauty influencer Samantha Ravndahl expressed, “I just think that the more people that are involved in being honest in this industry, the more comfortable it will be for others.”

 

The rules

Regulation has not been blind to the disclosure issues in influencer marketing. The Federal Trade Commission in the United States is responsible for consumer protection and “eliminating and preventing anticompetitive practices.” Even before the disclosure issue became so prominent, the FTC has always held that any material connection between brands and publications (and other similar relationships, influencers included) should be disclosed. Following two notable developments in influencer regulation last year (one was the sending of 90 warning letters to various celebrities, influencers and brands to remind them of their disclosure responsibilities and the other was the settlement of the FTC’s first law enforcement action against social media influencers) and given the increasing industry failures to adhere to this rule, the FTC also responded through an updated Endorsement Guideline that covers frequently asked questions surrounding the requirements for disclosure in order to bring some clarity to the issue.

The Guideline states that at its core is the principle that endorsements must be “honest and not misleading”, reflecting the “honest opinion and can’t be used to make a claim the product’s marketer couldn’t legally make.” The guidelines aren’t law, but it can lead to law enforcement action. And while it is not perfect (in fact, the FTC itself can get confused over what is deemed an ad), nor can it be given the various nuances of this type of marketing, it serves the purpose of giving broad parameters for compliance.

In New Zealand, the Advertising Standards Authority (ASA) also updated its own Guidance Note earlier this year to cover influencer advertisement transparency. Emphasis was placed on compliance with the ASA Code of Ethics, particularly in ensuring that ads are “clearly distinguishable” and “readily recognised”.  It clarifies that when content cannot be clearly identified as an ad, the onus is on all parties involved (agency, influencer, etc.) to ensure that the audience knows it is such. It gives special mention to native advertising and its need to still be clearly recognisable as advertisements. Similar to the FTC Guidelines, the ASA Guide Note does not have the force of law and the advertising industry is largely self-regulated. But complaints of non-compliance could lead to decisions by the Complaints Board, who can request to remove or amend the ad, while serious breaches may potentially be sent to further bodies who can prosecute the case. Additionally, in the rare case of non-adherence by an advertiser to the removal or amending of the ad, the ASA can turn to the media who can remove it for them. But this situation may not be as clearcut for the influencer form of advertising, as these are largely at the hands of platforms and the influencers themselves.

The guidelines are positive developments in creating clarity to sponsorship disclosure. But clearly many questions still remain about its application (how would it apply to endorsements by non-human influencers like Lil Miquela, for example) and there are calls for stricter or stronger consequences to encourage greater accountability. In addition, the actual regulation of content as it gets posted (rather than acting in response to complaints) is incredibly difficult. Perhaps this can be aided by tech developments, such as browser add-ons that can identify disclosures. Developments like Instagram’s “paid partnership” and Youtube’s “Contains Product Placement” option are other examples that can help user disclosure. But there are too many influencer strategies that it is unlikely for a “one-size fits all disclosure mechanism” to be established.

Regardless, transparency and authenticity will be a benefit to all parties involved. Clearer directions could create better compliance, but there is a clear mindset shift that needs to happen to truly tackle the disclosure problem. Consumers should not be misled because of improper disclosure, nor should they be left bearing the burden of identifying which contents are ads. Additionally, they should exercise constant vigilance in the content they consume. Because this is an area so difficult to police and hence establish hard law on, it is advisable for everyone to read the aforementioned guidelines, whether influencer or consumer, because it will provide the tools for better disclosure identification and practice. Similarly, the system should not be incentivising the influencer to be afraid of disclosing in the first place. Companies must also give fairer requirements and not punish influencers for having alternate opinions. Just like how it started, the future of influencer marketing is in authenticity. The influencer, the consumer, the company – each one carries a responsibility in creating a space where disclosure is expected, prioritised and scrutinised. The industry is going through growing pains and we all need to carry our own weight in cleaning up the mess.

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