Influencer Incentives: The Future of Brand Marketing

As the U.S. Federal Trade Commission (FTC) considers changes to its endorsement guidelines for advertising on social media platforms, members of INTA’s Internet Committee gathered brand owner views on influencers and how to regulate their activities, including compensation to promote a product or service.

With billions of users worldwide, popular social media platforms are important vehicles for marketers and social media influencers.

In June, the FTC closed its public comments window on its current Endorsement Guidelines for advertising on social media platforms. Members of the Internet Committee, Subcommittee on Public Policy reviewed the Guidelines and gathered views and perspectives from Internet Committee members. The feedback and statements collected from INTA members were summarized into four key viewpoints:

I. Brand owners need more clarity on how to comply with the current Guidelines, particularly when it comes to social media.

INTA members believe that U.S. advertisers are generally aware of, and attempt to comply with, the current Endorsement Guidelines, particularly where the Guidelines provide specific examples that take into account and reflect on advertisers’ current-day activities. However, the Guidelines lack necessary clarity when attempting to apply them to new technologies, modern advertising techniques, and the evolving practices in social media.

For example, in the modern advertising environment, the line between a sponsored social media endorsement and an unsponsored post can be unclear when an influencer is compensated for a certain number of posts and then, after fulfilling his or her obligation, makes a post for the same product without payment by or authorization from the advertiser. Under those circumstances, it is not clear whether that latter post requires advertising disclosure.

If the FTC believes that it does, doing so would require the advertiser to constantly monitor its influencers’ activity, even when there is no active relationship between the advertiser and the influencer. Such a requirement is not practical, particularly where advertisers employ the services of ordinary social media users with small followings, known as micro- influencers. An advertiser that does attempt to follow the Guidelines is likely, in the interest of avoiding enforcement by the FTC, to over-monitor and incur significant additional costs (or abandon such a program to avoid such costs). In particular, the Guidelines are most useful when multiple examples are offered to clearly illustrate the dividing line between acceptable and unacceptable activity.

Such unintended consequences could be avoided by revising the Guidelines to reflect modern advertising practices. It would be extremely helpful if the Guidelines were published as a living, evolving website that could be regularly and frequently updated. It would be particularly helpful to permit advertisers to submit anonymous questions that could be answered on an ongoing basis by the FTC, thereby providing quick feedback on advertising practices and assisting similarly situated companies in adjusting their practices.

II. Monitoring has become all but impossible given changes in the nature of social media advertising, including: (1) the emergence of new social media platforms; (2) the change from relying on a small number of influencers to the use of numerous, less-sophisticated micro-influencers; and (3) the blurring of the lines between sponsored posts and unsponsored posts by those influencers.

The Guidelines do not sufficiently address the evolving nuances in the marketplace given the significant increase of micro-influencers and social media advertising in general. The burden to police posts related to their goods and services currently falls on brand owners, but the unsophisticated nature of many micro-influencers, as well as the ease with which social media posts and comments can be widely and virally shared, makes providing continuous guidance to influencers and policing influencers virtually impossible.

Additionally, some brand owners give products away to micro-influencers without any expectation of the products being returned. This creates an incentive for micro-influencers to shine a positive light on these products, due to the tacit promise of receiving future products. This practice creates a gray area when it comes to disclosure, and while some micro-influencers do disclose the fact that these products were sent free of charge, many others do not.

Most consumers understand that many of the posts they see on social media are paid or sponsored ads, but disclosure is inconsistent. While the current Guidelines are helpful for seasoned influencers and brand owners, it is significantly less likely that micro-influencers will read or internalize the generalized nature of the requirements. It would therefore be helpful to provide concise, specific language and placement requirements for disclosing an affiliation on social media.

Further, many influencers use hashtags, such as #ad, as the sole means of communicating an affiliation, but FTC guidance on hashtags is spotty. The FTC might get more regular compliance if it were to put forward suggestions like #companycontest or #companyinfluencer. Many influencers would prefer to use nothing or other alternatives to #ad. Also, encouraging clear-but-more-business-friendly hashtags would likely result in broader use of disclosures. Likewise, in audiovisual posts, the FTC could clarify whether thanking an advertiser for free products is sufficient to disclose the relationship between the advertiser and the influencer.

III. Today’s online consumers are more sophisticated than they were years ago and now expect or assume that influencers are compensated by brands.

In general, most consumers know when they are looking at an advertisement, including advertisements presented by influencers. This understanding is probably even clearer to millennial and Gen Z digital natives, who grew up in the online environment and who are the primary targets of social media advertising. Given that they expect posts to be sponsored, it is less likely that under-disclosed posts will cause concern for the FTC. Moreover, brands are incentivized to provide clear disclosures because doing so is more likely to create a relationship of trust with consumers.

Although this state of consumer sophistication may be an argument for not adding regulations, it does not mean there shouldn’t be guidelines incorporating the best practices of those influencers, advertisers, brands, and social media sites that are already making sufficient disclosures. Without sufficient guidance, companies will comply to different degrees with the FTC, thereby harming competition in the marketplace while creating inconsistent compliance.

Consumers benefit from disclosure, and while truth is an important value, they also benefit from the existence and variety of influencers. In the current landscape, there are many forms of influencers: celebrity, macro, big, small, and micro. Over-regulation with a lack of guidance will probably affect this environment in a negative way and it will render less of a variety of influencers for consumers who search for guidance online.

IV. Penalties for noncompliance should remain the same or perhaps be lessened due to changes in consumer expectations and awareness of influencer marketing.

Penalties for noncompliance should be proportionate with the violation, particularly until the Guidelines provide clarity around disclosure requirements and the harm to consumers is better understood. Without better understanding of the harm to consumers, increasing the current penalties (including imposing monetary penalties) may not address the perceived or actual harm to consumers.

Moreover, consumer understanding of disclosures has changed over the last decade. With this in mind, the FTC should better understand the harm of advertiser noncompliance to consumers before imposing additional or stricter penalties. The FTC could undertake a study to assess the harm of disclosure noncompliance, or to assess the effectiveness of specific disclosure requirements in communicating endorsements to consumers. With that information, the FTC would be better situated to determine the adequacy of penalties. Without that information, increasing penalties unfairly shifts the burden to businesses and still may not address the issue of consumer harm.

INTA has consistently supported polices and best practices that give brand owners and consumers the maximum amount of information to make informed buying choices. As a result, INTA continues to support FTC Guidelines and advertiser best practices encouraged by the Association of National Advertisers and the Interactive Advertising Bureau. To be useful, however, the Guidelines must match current advertising guidelines with bright line rules that are easy to follow by sophisticated brands and major influencers, as well as unsophisticated micro-influencers.

Although every effort has been made to verify the accuracy of this article, readers are urged to check independently on matters of specific concern or interest.

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