United States: Transformation Sweeping Advertising And Marketing: Influencer Marketing

Last Updated: November 20 2017
Article by Ronald R. Urbach

It was an incredible three days in Chicago at the 39th Association of National Advertisers/Brand Activation Association Marketing Law Conference, "Breakthrough: Legal Strategies for Dynamic Businesses." During yesterday morning's general session, I gave a presentation titled "Transformation Sweeping Advertising and Marketing: Key Trends and Legal Developments," exploring not only the trends and changes in the advertising and marketing ecosystem, but how lawyers can and are responding to keep pace with the industry and their business clients' demands. In the next series of posts, I will share some highlights from my presentation. Let's dive into the first one...

Influencer marketing isn’t just the fastest channel for consumer acquisition – it’s also one of the most cost-effective. Studies have shown that working with influencers on a multi-channel campaign can drive up to 16 times more engagement than paid or owned media. That’s because today’s social media users follow influencers with whom they feel a real connection. And as brands continue to invest more in influencers, they expect more in return. This is changing the process of contracting influencer talent. What’s more, we are seeing new regulatory and legal standards emerge for content development, campaign measurement, adequate disclosures, and monitoring and compliance.

To be successful, influencers’ contracts must reflect a balance in the rights and needs of all parties, not just the brand. But they must also reflect the reality – they are now A-List celebrity deals. Many influencers have now signed up with big name talent agencies like CAA.

We’re also seeing new ways of working with “micro” and lesser known influencers. Instead of signing hundreds of individual deals, brands are working with influencer and multi-channel networks, turning influencers into virtual content studios.

However, don't get so caught up in the new media whirlwind that you forget about the Federal Trade Commission (FTC). The FTC has long emphasized the need for disclosure of material connections to brands, and the FTC's focus is only getting stronger.

Here are some things to consider

First, in April of this year, the FTC sent more than 90 letters to celebrities, influencers, and brands, warning all players in the influencer industry that material connections must be disclosed. Then, in September, the FTC sent follow-up letters to 21 individual influencers – including celebrities like Vanessa Hudgens and Sofia Vergara – requiring that they inform the FTC of the status of their material connections to the brands mentioned in their social media.

As if that wasn't enough, the FTC brought its first direct action against individual influencers for failing to disclose their material connections in social media. At the same time, the FTC updated its staff FAQs to the Endorsement Guides to clarify the adequacy and appropriateness of various forms of disclosure.

It’s clear that the FTC is scrutinizing individual influencers as well as brands – and is willing to go after them directly.

Second, the FTC is actually paying attention to consumer rights advocacy groups, like Public Citizen and Truth in Advertising.org. These groups have flagged certain "suspicious" celebrity Instagram posts, and criticized the adequacy of "built-in" social media disclosure tools, like Instagram's "paid partnership" feature.

Third, the FTC is keenly focused on the form and adequacy of hashtag and other short form disclosures. According to the most recent batch of letters and updated FAQs, certain hashtags, such as "#partner," "#collab," "#ambassador," and "#thanksbrand," are not sufficient. Disclosures on Instagram must be included in the first three lines of the post, above the "click more" button. The FTC has even provided updated guidance regarding brand tagging, Snapchat and Instagram stories, obligations of foreign influencers, and other evolving media.

How I See It

More actions are yet to come. And, if any of the recently named 21 influencers fail to disclose material connections to brands – another FTC action will result.

So what's the takeaway? As with much in life, preparation is key.

Develop robust influencer guidelines that explain how disclosures should be made – so it is not left up to the individuals to decide what to do or how to do it. Revise and tighten your contracts, and implement real compliance and regular monitoring — all are crucial.

The FTC's actions show that the regulators are watching the entire ecosystem – from brands, agencies, and content labs, to publishers and individual influencers. You are on notice, and you must act accordingly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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