2020 Guide To FTC Influencer & Endorsement Guidelines

Facebook – Instagram – YouTube – Snapchat – Twitter

In the old days of advertising, the CEO of Proctor & Gamble could joke that he knew for certain that half of all his company’s advertising worked . . . just not which half.

In the new world of social media and influencer marketing, he would know which half was working. In fact, if he were paying attention, he even would know how much each tweet, post, or product placement contributed to the bottom line.

That “how much” is considerable.

• According to the Harvard Business Review, around 18% of all consumers have purchased a product in the past year because it was promoted by an influencer on social media.
  • That percentage doubles for consumers under the age of 25.
• Influencer marketing campaigns earn on average $5 in free social media exposure for every $1 spent on influencers (from Influencer Marketing Hub).
  • That number triples for prominent influencers.
• As calculated by Forbes, companies are on track to spending at least $3 billion on influencer social media marketing in 2019.
  • That number is expected to double in 2020.

Suffice it to say that these numbers have gotten a lot of companies to pay attention.

It’s also gotten the attention of the Federal Trade Commission, the agency responsible for enforcing federal laws on advertising and promotions. The FTC applies the same rules to influencer marketing that they do to all other types of advertising:  the influencer MUST disclose if they are being compensated in some way by the brands they are promoting.

Since 2017, the FTC has been busy cracking down on influencers – and the companies that use them – if they break advertising laws.

They started easy by mailing warning letters to major influencers and their brands. But they soon graduated to the harsher stuff – enforcement actions with monetary penalties.

Whether you’re an influencer or a brand marketer, the question is: are you ready for tougher scrutiny by the FTC?

The good news: following the FTC’s rules is easier than you might think.

What Does The FTC Require From Influencer Social Media Promotions?

The FTC uses a very simple principle when monitoring paid influencer social media promotions:

Advertising should be truthful and not misleading

If you pay an influencer to pitch your product on social media, but it’s not obvious that person is being paid to pitch the product, that’s misleading. The audience may think the endorsement is voluntary and hence more believable.

The FTC requires any influencer with a material connection to the brand to clearly and obviously disclose that material connection any and every time they promote the product. It’s that simple.

Don’t get hung up in a thicket of rules or best practices. If the material connection is obviously and clearly stated in a social media post, the FTC is happy. No letter, no enforcement action.

What Is Material Connection?

Maybe not that simple. What does the FTC mean by a “material connection”? Being paid to promote a product is a no-brainer. What about a free sample? An invitation to a party?

According to FTC guidelines and enforcement letters, a material connection:

What Is A Material Connection Disclosure?

The FTC simply requires the influencer to “clearly disclose any material connection” with any brand or product they’re promoting on social media.

As you might have guessed, there’s more to it than that.

Again according to FTC enforcement letters and guidelines, the disclosure of a material connection:

Sometimes this might seem confusing, but it really isn’t. The FTC does not regard a disclosure to be “clear” if one of these criteria is not met.

For instance, Facebook, Instagram, and YouTube offer “branded content tools” that mark posts as promotional or advertising content. The FTC warns that these branded content tools do not meet the disclosure requirement. Why? Even though the branded content symbol is a) clear and b) prominent, it is not c) central. It appears in the title or very top of the post, which most readers ignore. What’s central is the content itself: the post, the picture, or the video.

What Brand Promotions Require A Disclosure?

What kind of social media posts require a material connection disclosure? What exactly converts a social media post into an “ad” or “promotion”?

This question is quite complicated. The FTC requires influencers to disclose their material connection to a brand:

Guide To FTC Disclosures On Facebook, Instagram, Twitter, Snapchat And YouTube

We’re clear on material connections, disclosures, and what the FTC considers a “promotion” on social media. What are the actual mechanics? That depends on the medium.

On Facebook, Instagram, Twitter, Snapchat, and YouTube, there are a variety of ways to make a material connection disclosure.

• A disclosure statement in the post, caption, or description.
• A hashtag disclosure in the post, caption, or description.
• A platform’s “branded content tool” which identifies a post as a promotion or advertisement (though, as mentioned, this cannot be the only form of disclosure).
• A written disclosure or tag overlaying an image.
• A written disclosure or tag overlaying a video or live-stream video
• An audio disclosure on a video or live-stream video

Where you make the disclosure will depend on what’s “central” to the post. For instance, an image is not “central” to a Facebook post unless there is no written post, so it may not require a written disclosure on the image. However, images are central to Instagram posts, so they will always require a written overlay even if there’s a written disclosure in the caption.

DISCLOSURE REQUIREMENTS

Don’t Forget The Other Federal Rules

In 2019, several e-cigarette companies ran afoul of the FTC when paid influencers pitched their vaping products on Facebook, Instagram, Twitter, and YouTube.

The companies and their influencers followed all the FTC rules about disclosure. The FTC still went after them.

Why?

They forgot one very important detail: the FTC and FDA require all e-cigarette advertising to contain a warning about the addictiveness of nicotine. That includes influencer promotions and product placement.

Oops.

The takeaway is that you must remember that all the laws and regulations governing advertising apply to influencer marketing. That includes FDA warnings, state-mandated warnings, FTC regulations, and the Lanham Act (which allows companies to sue if rival advertising disparages their brands or products).

Good News About The FTC’s Endorsement Guidelines

In 2018 and 2019, Influencer Marketing Hub estimated that somewhere between 25% and 30% of influencers have been instructed by brand promoters not to disclose their material connection to the product.

It’s a dodgy practice, but it does seem to make sense. After all, consumers are more likely to be influenced by an endorsement they believe is voluntary and unsolicited, right?

Actually, wrong.

We now suspect, thanks to multi-year research done by Alice Audrezet of the Institut Supérieur de Gestion, Paris, that material connection disclosures no longer significantly affect responses to influencer marketing. In fact, in the crucial under-25 consumer demographic, material connection disclosures have no effect on depressing response. They even may actually increase response.

How’s that? Part of the reason, according to Audrezet, is that almost 90% of younger consumers consider any brand placement or promotion by a well-known influencer to be paid for even in the absence of a disclosure. It could be that young consumers trust the influencer and brand more because they’re upfront about the material connection.

More importantly, younger consumers value influencers because they’re influencers. Many aspire to be influencers themselves. As much as follower numbers, paid promotions are a prominent signal of an influencer’s social media status. As a result, younger consumers tend to regard them more seriously than voluntary endorsements.

In fact, brand marketers are now facing the opposite problem. In the crucial under-25 consumer demographic, social media wannabes are pretending to be paid to promote brands. Crunching the market numbers used by Forbes and The Atlantic, up to half of all material connection disclosures on social media are probably faked!

So, as the FTC cracks down on material connection disclosures, the good news is these disclosures are rapidly becoming valuable social media assets. In that sense, the problem, it seems, is quickly solving itself.