FTC Turns Up the Heat on the Social-Influencer Economy
Publishers be warned, the regulators are watching.
Earlier this month the Federal Trade Commission sent a flaming shot across the bow of the new social-marketing economy when it settled charges with two social influencers on allegations they failed to make proper disclosures of the financial connections in their endorsements. The so-called “CSGO Lotto” case involved two gaming world influencers who promoted and paid others to promote the CSGO Lotto online gambling service. While the FTC has issued warnings to scores of influencers in the past about disclosure practices, this is the first time action has been taken directly against influencers. In fact, at the same time it announced this settlement, the FTC also announced it has sent another 21 follow-up warning notices to prominent Instagram figures.
But publishers should take note that the commission also cited the media companies working with partners. The companies failed to instruct the other influencers about proper disclosure practices. This should signal to the larger media community that the FTC will hold publishers accountable for how their network of influencers behaves.
“Publishers don’t like talking about it because no one is 100% compliant,” says Allison Fitzpatrick, partner, advertising, marketing & promotions at the legal firm Davis & Gilbert, which advises media and marketers on the regulatory environment. “I think media companies are going to be brought into these actions for native advertising and influencer campaigns that are going on.”
Last year, in fact, a Nylon magazine Instagram post on behalf of Lord & Taylor got mentioned by the FTC in its complaint settlement with the retailer. While Nylon was not part of the formal complaint, Fitzpatrick warns that, “As the world of native and influencers converge, especially in online videos, we are going to see media companies become more subject to FTC action.”
Unfortunately the FTC guidelines around proper disclosure for sponsored posts is itself a moving target, as even the regulators try to keep up with the ever-changing nature of social media. The FTC has a voluminous series of FAQs it just updated with advice on nomenclature and policies influencers should use. Likewise, it advises any intermediaries working with influencer networks that the FTC regards them as marketers themselves. “Like an advertiser, your company needs to have reasonable programs in place to train and monitor the influencers you pay and direct,” the guidelines state.
And unlike other areas of online advertising that are moving towards programmatic solutions, managing a network of influencer programs is not easily automated. “We work with 9,000 influencers, and they are vetted and curated,” says Samantha Skey, president, CRO, SheKnows Media, which operates some of the most popular women’s lifestyle sites online and owns the long-running BlogHer conferences for influencers. “We had to build a process that is much more thorough, as we learned the cover of someone’s channel is not revelatory of what lies beneath.”
SheKnows takes an active role in educating both influencers and advertisers on the language and formatting needed for transparent sponsored posts. “It’s a lot more work for us if they don’t understand the expected formatting for content—like leaving space for indicators of paid content,” Skey says. Entire tracks of the BlogHer conference are often devoted to the issue, and SheKnows hosts roundtables with advertisers on the formats for sponsored posts.
Monitoring a network of influencers is a challenge, especially as a media company’s reach expands. “I don’t have a perfect technology in place that’ll show me an aggregate of all references,” says Skey. “But I do have a platform where I review all of the content produced for a different brand.”
SheKnows distributes an extensive slide deck on policies and advice for its social-media partners. Like the FTC, for instance, it advises influencers that site-level disclosures are good to have, but not replacements for disclosures on specifically sponsored posts. “If you ask yourself, should I disclose this post?” the deck advises, “The answer is yes. There is no such thing as too much disclosure.” Disclosures are best placed at the beginning of content, and must be included in visual or audio form in a sponsored video post, they advise. Overall, SheKnows is quite direct with its network of influencers. “Don’t waste time trying to come up with ways to avoid disclosing sponsored content. Spend your time creating amazing content that customers will love, sponsored or not.”
In fact, Skey argues that the problem of effectiveness for sponsored posts is not in disclosure but in authenticity. The company is focused on “mapping influencers to the products they have told us already they like and use.” In fact, influencer followers are among the best BS detectors in the ecosystem and respond best when an influencer’s endorsement makes sense within the context of their persona and interests.
The FTC’s increased scrutiny of the social influencer marketing economy should give publishers pause on a number of grounds. It’s part of the commission’s overall concern with native advertising. As advertising budgets are moving away from traditional media buying, the FTC is following the money with greater speed than one expects from a regulatory body. This is driven in part because disclosures, even in this murky area of native and social sponsorship, are right in the FTC’s wheelhouse—deceptive advertising. The formats may seem novel and appear to reflect a new organic closeness between publisher and advertiser. But so far as the FTC is concerned, the standards of transparency are unchanged. Unless the consumer clearly understands the financial incentives behind a post, he or she is being deceived.