On March 18, 2015, we ran our first story on FTC Guidelines for influencer marketing. At the time, influencer marketing was just picking up steam. Instagram was the five-year old rival-turned-wunderkind that Facebook shelled out a billion dollars to buy in 2012.
By 2015, brands were really just starting to test ads on the platform to see if the FTC was really paying attention. It was.
So, this week, we’re publishing our follow-up to that first article. This is sort of our “State of Influencer Marketing Law” post that will help you:
Really understand the FTC guidelines for influencer marketing campaigns,
Present a handful of case studies of how brands are complying (or not complying) with the laws,
And give you a playbook for how to effectively market within those guidelines.
An Old School Tale of Influencer Marketing At Its Finest
In February of 1952, Citizens National Trust and Savings Bank reluctantly agreed to foot the bill for a televised variety show starring a local, fancy-pants pianist by the name of Liberace.
Liberace was a local celebrity. He was a prodigious pianist, but more, he was a showman who had been selling out clubs in the Los Angeles area. He was a rare kind of musician, one who could bypass radio and go straight from the stage to television appearances (think Josh Groban).
The Liberace Show was a 15-minute variety show that attempted to bring Liberace’s flamboyant, highly-engaging club performance into the living rooms of Los Angeleans (that’s a thing, right?). But that kind of thing costs. So, the show’s producer, Don Fedderson, set out to find a sponsor who could underwrite the show. Citizens National agreed.
These were the early days of television. Very few American households even had a TV, let alone a color one, and Fedderson had just convinced a local bank to buy ad time on a local TV show at a time when most people didn’t have a television.
Legend has it, the morning after Liberace announced on his show that everyone who opened a new account at Citizens with a $10 deposit would receive free recording, Citizens National employees arrived to find a line of new customers outside the bank.
In 2 weeks, the bank had 2,350 new depositors.
In 3 months, $600,000 in new deposits had been made.
In 2 years, Liberace’s influence with his audience generated $1.4 million in new deposits for Citizens National alone. That didn’t include the show’s other sponsors.
That is the power of influencer marketing, my friend. Today, the impact of influencer marketing remains; only the platforms have changed.
Why the Government Cares About Your Instagram Shout Outs
Fast forward 65 years and here we are again. Today, more and more brands are choosing to leverage the power of social media to market their products and services. Adweek cites this important stat - the average influencer marketing campaign received $6.85 in earned media value for every dollar spent. Nothing to sneeze at.
As companies start coming up with creative ways to get access to the 2+ billion people using social media for their personal and professional lives, there arises a serious need to ensure there are rules in place to level the playing field between brands, influencers, and consumers.
What the FTC actually does
The Federal Trade Commission (FTC) is the branch of the US government that looks out for your rights as a consumer. The agency keeps companies from price gouging you, ripping you off with shoddy products, chaining you up in unfair financing arrangements, and hooking you into signed agreements without telling you the whole truth.
The FTC exists for no other reason than to protect the American consumer. Awesome stuff.
That protection extends to making sure brands engage in fair and transparent marketing practices. The FTC makes sure you’re not making promises about your product that can’t be backed up by facts and science. It also makes sure that the general public knows when they’re being “advertised to,” so to speak. The FTC forces publishers to make the distinction clear between editorial content and paid content.
That’s where you come in.
There’s a Need for Transparency in Online Marketing
Influencers, by their very nature, have the attention of their audience. Influencers can have a very real impact on their audience members’ decisions. Essentially, every social influencer is the leader of his or her own tribe, and brands pay not just to get access to that tribe, but also to get the endorsement of the tribe leader.
The FTC makes sure brands compete fairly in the online market and keeps unscrupulous companies from engaging in unfair and unethical advertising practices. That means anytime there is a material connection between brands and influencers, the connection must be disclosed to consumers.
So, Here’s What HAS Changed Since Our Last Post
Influencer marketing is exploding and TV viewership is dropping
Big brands are seeing the light and redirecting TV ad spend to influencer marketing. Bloomberg reports that brands are already spending more than $250 million a month on Instagram influencer marketing.
Of the 200 marketing professionals surveyed for the 2016 Influencer Marketing Report, 66% say they plan to use social influencers as part of their marketing strategies. This is according to a recent article on Social Media Examiner. Eighty percent of these marketers will use social to reach a new audience, 70% are trying to “niche-down” their audience, and 40% will be using social influencers for the first time.
It seems marketers finally accept the fact that Gen X and younger aren’t big TV watchers. And the amount of time they spend watching live television (“live” meaning watching a show when it originally airs) drops every year.
Case in point: I grew up on Thursday night NBC shows and Friday night family shows on ABC (“Did I doooo that?”). I never missed either night of TV-watching because I didn’t want to have to wait for the summertime reruns to see the episode I missed.
But these days, my favorite TV shows are DailyVee, broadcast daily on YouTube from Gary Vaynerchuk’s channel, and New Girl, which I watch exclusively on Netflix before bed. I’m up to Season 4 now. I took a year off because I wanted to always be looking forward to a new-to-me episode.
My TV habits are the norm now. In fact, Gen X and Millennials are more likely to watch television on their own time, and 68% of us binge-watch three or more episodes when we do finally watch / stream a television show.
That’s the state of live television: A 10-minute YouTube show I watch during my workday, and a major network TV show that I’m 2 years behind on.
More people are turning to social media for news and entertainment
What are people watching when they’re not in front of their televisions? They’re watching their social media feeds.
The number of active users on Instagram has doubled from 300 million at the end of 2014 to 600 million at the end of 2016. I’ll be honest with you - I’m one of the additional 300 million, and I engage daily on Instagram.
According to Statista, there are currently more than 2 billion active social media users around the world. These are people who sign in to their social media accounts, from any device, at least once a month. By the year 2020, that number is expected to creep up to about 3 billion people.
Of course, Facebook leads the pack with more than a billion users, followed by Instagram, then Twitter, Pinterest, LinkedIn, and Snapchat. What’s also interesting is that people who use one of the other social platforms is likely to also use Facebook and/or Instagram.
Here’s the Challenge Your Brand Faces
The FTC puts the onus on brands to ensure any and all of their marketing efforts are in compliance with FTC guidelines. This includes the people you get to endorse your brand.
So, irrespective of the method by which you advertise, or even the amount of creative control your company chooses to exercise over the creation of the ad itself, you are still responsible for how your ads appear to the general public.
The main goal of the FTC in monitoring influencer marketing is to make sure consumers know when a brand is marketing to them. It wants you and the influencer to be honest about the nature of your working relationship. It doesn’t matter if you’re paying the influencer in money, gift cards or freebies. You must clearly disclose that relationship in some way, shape, or form.
FTC issues a stern warning to 45 celebrity influencers
In May, AOL.com released a list of 45 celebrities whose Instagram posts were targeted by the FTC for possible compliance issues. The letter, which targeted specific posts from the accounts of celebrities like Zendaya, Naomi Campell, Sean Combs, the Kardashian women, Bella Thorne, and Sofia Vergara warned celebrities, their agents, and the brands they advertise to more clearly identify any “material connection” - whether financial, familial, social, or otherwise - to consumers so they know when they’re seeing brand-sponsored posts on celebrity profiles, or when celebrities are mentioning (read, promoting) brands based on an existing relationship.
According to WWD.com, the celebrities whose accounts were reviewed by the FTC were included as a result of petitions filed by Public Citizen and affiliated organizations regarding Instagram influencers. The petition, which seeks to reign in the influencer marketing community so it’s a little less like the “Wild West” (their words, mine) and more like a social community.
You can probably see the problem in the screenshots I included below. The line between candid shots (though none of these look candid) and product placement is considerably blurred. For instance...
Check out the post from Khloe and Kourtney below. Are they taking this picture on their private jet so we can say, “Wow, they’re eating Popeye’s on their private jet?” (which actually would shock me), or am I seeing a Popeye’s ad?
The FTC makes the template for their standard influencer letter available to the general public (you can read the FTC’s form letter here). But the gist of the letter is this:
I’m writing you because you have a post that’s live on Instagram right now that we believe may be an ad, but we can’t tell… because you’re not saying whether it’s an ad.
Look, we’re okay with you advertising products. That’s cool. But it’s not cool to advertise products low-key without telling your followers you’re being paid for a post, or that you have a relationship with the brand that makes it hard for you to be objective.
Within the context of this form letter, influencers are referred to the FTC’s Endorsement Guidelines (link at the bottom of this post) and provided very specific instructions on how to make sure consumers can tell when one of their posts is a paid ad.
Silence gets Warner Bros. a slap on the wrist
In 2016, the FTC ruled that Warner Bros. was in direct violation of disclosure laws when it paid influencers tens of thousands of dollars to promote the game Middle Earth: Shadow of Mordor.
Not only did Warner Bros. tell the influencers not to disclose the fact that they were hired guns, the company also told them how to promote the game, and advised them to keep quiet about any issues or glitches they found while playing the game. Promoters received the game for free, posted Youtube videos about the game (getting a more than 5.5 million views altogether), and made off with anywhere from $15,000 to $30,000 each.
Deceptive advertising gets Pure Green Coffee in deep… stuff
In a separate case, also decided last year, the FTC issued a $30 million judgment against the folks behind Pure Green Coffee for using deceptive marketing practices to sell a weight-loss product.
The company got in on the green coffee weight loss craze and made money after green coffee rose to popularity following an episode of Dr. Oz.
In order to make that money, Nicholas Scott Congleton used his company, NPB Advertising, Inc. to create fake news outlets that he and his cohorts used to post bogus testimonials about his product, Pure Green Coffee. Congleton also used the logos of actual news media in his marketing scheme, news outlets that had never actually endorsed his weight loss product. And no, the coffee didn’t actually help people lose weight either.
At the end of it all, Congleton got hit with a $30 million judgment and another man, Dylan Loher was named as a relief defendant, someone who wasn’t involved in the deceptive practices directly, but who profited indirectly from it. Loher was ordered to turn over more than a half million dollars in partial satisfaction of the judgment.
“As this case shows, the FTC is willing to go the distance to make sure that defendants like these are held accountable,” said Bureau of Consumer Protection Director Jessica Rich.
The moral of the story is this: Even if you think you may lose a little face by disclosing that a post is sponsored or that the seemingly spontaneous lifestyle photo is actually a well-crafted product placement pic, it’s important that you understand, and that you make sure your influencer partners understand - you’re both better off staying within FTC guidelines.
The Basics of Being FTC-Compliant in Your Influencer Marketing Efforts
So, here’s where the rubber meets the road.
In the beginning, the easiest way to get onboard with this type of advertising is to get your head in the game. Get past the initial resistance of using hashtags and language that specifically identifies your post as a paid advertisement. Once you do that, you can focus your attention and your energy on creating a really cool-looking post. But first, you need to learn the rules of engagement.
There are those who say it is sufficient to use a short hashtag like #sp or #spon to indicate a post is sponsored. The consensus across the web is that there are two primary hashtags consumers are accustomed to seeing and they are: #ad #sponsored
Don’t be a hero. These are the two hashtags you want to use. Yes, you can probably come up with something way cooler, but the FTC wants you to make it crystal clear to the audience that what they are seeing is an ad. If you make up a new hashtag, it may sound cooler, but your audience may miss the significance of it and you could still end up in trouble with the FTC.
Another practice influencers use is creating a hashtag or at-mention of your brand. So at any given time, there are at least two hashtags in your paid advertising - one that lets people know they’re looking at an ad and a second hashtag to help them figure out who is sponsoring the ad.
Check out the above screenshot of a post from @gretamenchi. As of this writing, @gretamenchi has 1.7 million Instagram followers and over 1100 posts. This particular post got 74,476 likes.
At the very top of the post, you will find the only thing @gretamenchi even wrote about this pic is: #Zenfone3 #AD
From that language, we know this picture is actually an ad for the Zenfone she’s holding in her left hand. Simple. It doesn’t take away from the picture itself. She didn’t write a super-long description or lay out all the phone’s features. I’m not sure how well this ad converted to sales, but it’s clearly a paid post and @gretamenchi used “classic” influencer marketing tactics to make this ad FTC-compliant.
The disclosure is at the very top of the post
She’s holding the product in her hand
She names the company sponsoring the post
Nothing is hidden; it is what it is
So, I did a quick search of the tag #sponsored and came up with this little gem from @levistocke.
This is also a sponsored post. Here’s what @levistocke got right:
There are just three hashtags below this post, so there’s no clutter.
The #sponsored disclaimer is the last thing he wrote in the comments section, but you can see the hashtag without clicking “more” or scrolling down. THAT’S IMPORTANT!
You can also see exactly who paid for the post (Jameson) because that brand’s name is both hashtagged and at-mentioned at the bottom of the post. Simple.
What these influencers know is that not only does the brand’s name need to be prominent and easy to find, so does the disclosure. The FTC specifically calls for disclosures to be a “clear and conspicuous” text description.
The next category is video disclosures.
The FTC requires brands to prominently disclose that videos are paid advertisements. Well, the most prominent place to add a disclosure to a video is within the first few seconds of the video itself.
You may be tempted to put the disclosure in the description below the videos, or some other place that you think is a good video-adjacent location. But, to be safe, just put the disclosure in the video.
In the first five seconds of this video from Seattle Seahawks cornerback Richard Sherman, you see a disclosure from Yahoo! Sports that stretches across the bottom of the actual video itself.
That’s a win.
We don’t have to wonder what the video is about. In this instance, you don’t even have to read the comments to see it’s an ad. And the disclosure stays on the screen long enough for viewers to see AND READ it.
Still, the text in the Comments section also includes the #ad disclosure, just in case you don’t actually watch the video, you still know you’re looking at an advertisement paid for by @YahooSports.
The FTC-compliant rule of thumb is to ensure the disclosure “travels with” the content you are promoting. Blogs can be a little trickier because you may mention a product within the text of a 2,000-word blog post. Do you really need to stop the flow of your text to say “this is an ad”?
Not really. Most bloggers will include a disclosure at the bottom of their post. You may also want to include one at the top of your post and provide details about the product and sponsor somewhere within the post or in the footer.
How does disclosure language look?
It’s up to you what you say and how you say it. You just have to make sure you write the disclosure in such a way that your audience has no question that X brand paid for you to review its product. So, something like, “If you’ve read my blog, you know I’ve always been a little curious about how I would look with the winged eye. Luckily, the fine folks at Winged-Eye Beauty reached out to me a few days ago and sent me their stencil set. I have to admit, it’s easier than I thought it would be.”
You get the point.
And the point is this: Always point out that a relationship exists between the brand and the influencer and make it clear what that relationship is.
If your blog happens to be audio, make sure the podcasters speaks clearly and at a tempo that doesn’t make it hard for listeners to hear and understand the disclosure. No auctioneer talking.
A few more things
This may seem a little odd to have to say, but it’s worth saying: Make sure the disclosure is visible. Don’t stick yellow text on an orange background and put the disclosure there. Make sure the text is against a background that presents enough of a contrast for readers to actually be able to read the disclosure.
Also, the influencer has to be able to tell the truth if they don’t like your product. You can’t pay them “hush money” and require them to give the product a favorable review. And it’s illegal for an influencer to talk-up a product they have no experience using.
How to Keep Your Team in the Loop
What we know for sure is that things will change.
As more brands direct resources to influencer marketing, and more Internet celebrities start trading attention for compensation, you’d better believe the FTC will continue to clamp down on this form of advertising to make sure the general public doesn’t end up being misled.
(Thank goodness, right? Because some of those magic teas don’t really work.)
If you don’t have a legal department, and you’re not in the habit of frequenting websites (like this one) that talk about best practices for influencer marketing, you do have a couple of good options here.
First option: Subscribe to the three FTC newsletters that deal with influencer marketing: Press Release Updates, Tech@FTC Blog Updates, and Business Center Blog Updates. You can sign up for any or all of those newsletters by clicking here.
Second option: Subscribe to the FTC’s YouTube channel. Those boring videos can save you thousands of dollars and loads of public embarrassment.
Fourth option: Subscribe to industry sites like The Shelf, eMarketer, Marketing Land, and Social Media Examiner. These are authority sites that produce super-useful information about all-things social.
Here is the piece de resistance: The Federal Trade Commission produces guides on this stuff. As a matter of fact, I referred to their guides in penning this post. Download and read:
.com Disclosures: How to Make Effective Disclosures in Digital Advertising - This 53-page handbook will detail for you what, when, where, why, and how to provide conspicuous disclosures in your ads and sponsored posts. Remember, it’s the brand’s responsibility to make sure this gets done, even when you’re leaving your influencer partner in charge of the creative.
Guides Concerning the Use of Endorsements and Testimonials in Advertising - A shorter manual, this one outlines how and when you can use endorsement and testimonials in your ads.
FTC Content Tag: Online Advertising and Marketing - Use this page to go directly to all the latest content on the FTC site related to online advertising and marketing. There is a goldmine of information that turns up on this particular search results page.
So, those are the basic of staying FTC-compliant. A few things have changed over since we first talked about the FTC rules. But the foundational principles remain the same: Be fair and be honest, and you will win. you have the basics.
*Liberace story from Liberace: An American Boy by Darden Asbury Pyron