The article authored by our member Konstantina Theodosaki is published at LEXOLOGY.

See more at Influencer Marketing.

Executive Summary:

An accelerating number of companies is moving away from traditional advertising methods in an effort to capture a larger slice of the pie. By recruiting the so-called “influencers” they advertise their products via the accounts of social media stars targeting their followers. Having third parties posting advertisements under the appearance of private posts has generated heated debate due to the underlying risk of consumer deception and violation of competition law. The blurred line between acceptable business practices and illegal deceptive speech is forcing regulators to implement protective measures that ensure transparency and clarity on the sponsored content of the influencers’ published posts.

I. Introduction

1. Companies have shifted focus from traditional advertising with the aim to gain an advantage over competition and fully utilize technological advancement by propelling their brand through social media. They are coordinating efforts and construing a cohesive marketing plan through the recruitment of “influencers” from across the globe. Regulators are lining up to put this hot trend under the microscope.

II. What is Influencer Marketing?

2. What is clearly a misconception is that influencer marketing is something new. The reality is that it has been around for quite some time now, yet its proven effectiveness over time, as an alternative to traditional advertising, has led to it becoming a powerful tool for marketers. Influencer marketing is a hybrid of old and new marketing methods, namely a combination of a celebrity endorsement and a marketing campaign, the difference being that brands are collaborating with influencers (not necessarily celebrities) who encompass three key aspects, i.e. reach, contextual credibility and salesmanship.

3. More analytically, influencer marketing consists in the posting of social media content (picture, video, text, etc.) that is created by influencers, promoting specific brands, thus pushing a company’s advertising message. Usually the sponsored content is mixed with content based on personal experience, giving thus the impression of a private account. The images, in an Instagram account for example, that display a product, are often inserted in a flow of neutral images that demonstrate the daily routine of the account holder of the social media platform. Sometimes however, it is obvious that the photos are the result of a professional photoshoot. Consequently, the visibility of the product depends on how the latter is portrayed by the influencer; either the post contains a hashtag with the brand name, in some cases the product occupies a prominent position in the picture, in other cases the post is accompanied by emphatic comments on the quality of the product.

III. Who is an influencer?

4. Anyone can be an influencer, and, unlike celebrities, influencers can be anywhere. The key characteristic of an influencer is that he or she is someone who has the power to influence public perception to the degree consumer patterns are altered causing followers to deviate from their typical consumer habits.

5. It is not uncommon to confuse influence with popularity. A large social media following is not a prerequisite for one to be an influencer. What is crucial is that an influencer has an impact on consumer behavior. And it is this ability of the influencers to establish a direct and robust relationship with their followers, who essentially become consumers of the products the former advertise, that renders influencer marketing an effective advertisement strategy.

IV. Legal concerns

6. Since social media personalities have the ability to shape people’s views, especially younger generations, it is vital that when people decide to purchase a product or a service are not misled by advertisements on social media that appear to be genuine reviews where they are instead paid opinions. Early on, this marketing tool has been used by companies to promote their products without however clearly indicating the commercial intent of the communication.

7. Regulators are raising the bar for influencer marketing posts not to violate consumer protection and competition law. The sole presence of a disclosure may not suffice. For instance, the hashtag “#ad” or other similar notations is commonly used in Instagram posts. However, since Instagram posts are usually up to three lines long, placing a disclosure after the “more” button does not serve the informative purpose of the disclosure. That is because a large number of consumers do not click through to read the rest of the post’s description. Further, multiple hashtags may divert the attention of the consumer who is less likely to understand when what is depicted is a paid endorsement or not.

8. This has led regulators to push towards transparence in order to ensure that advertising is clearly labelled as such. The FTC has issued guidelines on how to make disclosures so as to ensure that consumers are not manipulated and fully understand that the content they are seeing is sponsored. It has further issued warnings to companies and influencers who fail to comply with the latter. More specifically, the guidelines provide that social media posts should contain information as per the relationship of the influencer and the brand, namely whether he or she has a contractual relationship or whether he or she has received free products or another form of remuneration for publishing the post. Therefore, companies tend to have their influencers contractually obligated to indicate the commercial intent as clearly as possible, e.g. by mentioning the advertising purpose and by including relevant hashtags such as “#ad” and “#sponsored” at the beginning of the comment itself.

9. Disclosures are not the sole concern. Liability issues may emerge if the published content is not the creation of the influencer. And although IP pitfalls may be addressed via written agreements with influencers regarding the content ownership, companies need also to provide for a clear demarcation of trademark rights, which, unlike copyrights, stem from use rather than creation. Further, third-party IP rights need also to be taken into consideration in order to avoid any possible infringement. In addition, when a company maintains business profiles on social media platforms, the contractual relationship of the company with the platform via its terms of service need also to be considered, especially due to the fact that there might be limitations depending on the platform. For instance, a company may be able to retweet influencer content on Twitter, but the same content might not be (re)posted on Instagram.

10. This is not the end of it. The regulatory framework on influencer marketing is not only under continuous adjustment, but also varies across countries, since advertising and consumer law provisions differ. Further, in an EU context, because GDPR makes it harder for companies to target consumers through traditional social advertisements, influencer marketing as a nontraditional channel is becoming a way to reach consumers without the concern of infringing data privacy regulation.

V. Conclusion

11. Influencers are changing the marketing game. They are emerging from every corner of the world and take the advertising scene by a storm. The looming dangers of the phenomenon need not to be neglected. Consumers can be vulnerable when the underlying commercial intent of an influencer’s post is not clearly marked, thus rendering that hidden marketing treacherous since it deprives the former of the available defenses that exist in case of a straightforward advertisement. The provision of suitable indicators that reveal the nature and scope of the message are a first step to ensure that consumers are not blindsided by the façade.