Payments to Celebrity Influencers Must Be Revealed

Inflluencer Marketing Trend Is Hot
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FTC Cracks Down on Unethical Marketing Tactics

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Anyone who has read about marketing in recent years is aware that both the amount of, and the influence of traditional advertising, both online and offline, have declined steadily over the last decade. In place of traditional ads, marketers are using numerous new tactics and technologies. One technique that’s hot right now is paying “influencers” to promote products on social media platforms. But unethical marketing tactics may eventually erode the power of paid influencers significantly. Outlined here is the basis for that conclusion.

Inflluencer Marketing is one of the hottest marketing tactics.

Influencer marketing is one of the hottest marketing tactics; influencers can make a real difference with social media audiences.

Social media first began to take hold in the late 1990s/early 2000s and quickly brought about a sea change in the methods marketers used to promote their companies and products. Social media has had a huge impact on the way people communicate with each other, including the increased importance of “word of mouth” in influencing opinions. At the same time, traditional print and broadcast media have lost ground, with continually declining subscription numbers leading to ever-shrinking ad revenues, which in turn have led to less robust reporting and content development infrastructure at all but a small number of the most powerful media.

Recent statistics are startlingly clear in demonstrating this. Last year, eMarketer projected that online ad spending would overtake TV ad spending this year. And no wonder, since the number of hours of TV watched per week by Americans under the age of 50 has been rapidly declining. (According to eMarketer, people 24 and under are watching two less hours of TV per week this year than last year, and 25- to 34-year-olds are watching an hour less per week, year-on-year. This isn’t a new trend; the number of hours of TV consumption has fallen precipitously over the last 5-10 years.)

Online advertising has its own problems. Large numbers of consumers have installed adblocker software to avoid constant advertising interruptions of their time online. According to HubSpot, the most popular adblocking software, Adblocker Plus, has been downloaded 300 million times worldwide, which isn’t too surprising, since 87 percent of people say there are more ads online now than two years ago. HubSpot says this cost publishers $22 billion in 2015 alone.

Most marketers are quite aware of the problems associated with advertising. There has been growing interest in harnessing the power of social media to build brand awareness and loyalty, and to promote products using promotion, public relations and some new forms of digital marketing. For example, the use of marketing analytics tools has been growing to draw more site visitors and increase sales leads using “owned content” (content created by marketers), search engine optimization and social media.

Another example: companies employ public relations staff or agencies to reach out to popular bloggers with free product samples as a lure to bloggers to post positive product reviews. The reviews are then shared by site visitors on social media with their peers. This works especially well when bloggers don’t tell site visitors they were given free product, of course, leaving the impression that their reviews represent unbiased opinions. It took a while, but in 2009 the Federal Trade Commission (FTC) flagged unethical marketing tactics such as this one and issued regulations  requiring that bloggers reveal free swag from marketers to their followers or risk being fined up to $11,000. This has had some effect, but because there’s no practical way to enforce the regulations widely, not as big an effect as the FTC might like to have.

Now, let’s get back to influencer targeting mentioned in the beginning of this post, one of the latest trends to influence opinion online.  Over the last few years marketers have become much more sophisticated at using data from sources like Facebook to single out social media participants who have the most influence with their target audiences.

In some cases, these are offline celebrities, such as popular musicians, actors and sports figures. Marketers paid them hefty fees to talk about product on social media. But there are also people without any particular claim to fame who have become experts at building online visibility – online celebrities – and have hundreds of thousands – sometimes millions – of followers and are therefore important influencers. Some of these online celebrities are bloggers who used to review products in exchange for freebees from marketers, but now earn their livings charging substantial fees for blogging about products.

Paying Online Influencers Works Because Consumers Are Unaware

According to FTC regulations, these payments to influencers, both celebrities and online influencers, must be revealed. However, payments are often hidden at the end of the endorsements, soft-pedalled or referred to using terms that are vague and not well-understood by most consumers to mean that monetary payments – paid advertising –were involved.

The FTC is cracking down on this. According to an August 2016 Bloomberg article, “This uptick in celebrities peddling brand messages on their personal accounts, light on explicit disclosure, has not gone unnoticed by the U.S. government. The Federal Trade Commission is planning to get tougher: Users need to be clear when they’re getting paid to promote something, and hashtags like #ad, #sp, #sponsored –common forms of identification– are not always enough.” The article notes that the FTC has said it will make advertisers responsible for following the rules to adequately disclose that these celebrity posts are actually ads, which “could make the posts seem less authentic, reducing their impact.”

Therein lies the key to the future of both paid influencer marketing and the power of online peer influence. When consumers catch on that a lot of celebrity endorsements they see on social media are just paid ads, which will eventually happen if the FTC gets its way, paid endorsements will lose their effectiveness and their usefulness to advertisers. And so will sharing of paid endorsements by peers.

This type of promotion works because it’s deceptive: when consumers are unaware of the payments, they believe that influencers’ comments about products represent genuine enthusiasm. Deceptive marketing may work in the short term, but in the long term it tarnishes the reputation of the marketer and is therefore bad marketing.

By Lucy Siegel, Lucy Siegel LLC

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