Regulating Social Media Influencers

The fact that social media influences consumers’ spending decisions should come as no surprise.  Given this power, the Federal government is now applying its rules to the growing phenomenon of online marketing and influencers.

Federal Trade Commission

The Federal Trade Commission, the FTC, is beginning to crack down where social media influencers fail to disclose that their endorsement is paid and often directed, like an advertisement.

For example, the FTC recently settled with Warner Brothers which had used one of the most popular social media personalities, PewDiePie with over 50 million Youtube followers, to promote its new videogame without any indication that Warner Brothers paid for and directed the endorsement.

The FTC wants more clarity for consumers.  A paid endorsement, for example, might include an indication of this fact by including the hashtag #ad early in the copy.

Bloomberg, the online datasource and magazine, carried an interesting story on the FTC’s crackdown which also highlights the growing influence of online content for consumer marketers (click here).

Excerpt

It’s up to the FTC to be more clear and consistent about their policies and enforcement, she said. A lot of influencers think they are following the rules, but in fact are falling short. More than 300,000 sponsored posts on Instagram in July used hashtags like #ad, #sponsored and #sp, up from about 120,000 a year earlier, according to Captiv8. The FTC thinks #ad is okay if it’s at the beginning of a post, but #sp and #spon aren’t.

“If consumers don’t read the words, then there is no effective disclosure,” Ostheimer said. “If you have seven other hashtags at the end of a tweet and it’s mixed up with all these other things, it’s easy for consumers to skip over that. The real test is, did consumers read it and comprehend it?”

Food and Drug Administration

The FTC is not the only Federal agency focusing on online endorsements.  Not long ago, a drug company using Kim Kardashian for a social media promotional post, ran afoul of the FDA, the Food and Drug Administration (click here).

Securities and Exchange Commission

Online promotion of investments, including the new forms of offerings such as crowdfundings and Reg A+ offerings is regulated by the Securities and Exchange Commission, the SEC.

At this time, there appears to be a great deal of experimentation by social media marketers as to what’s effective yet acceptable by regulators.

Monarch Bay is closely following developments in social media marketing especially as applied to the capital markets and the new offering techniques.  For example, Monarch Bay recently posted “Crowdfunding Communication Do’s and Don’ts” (click here).

Please contact Monarch Bay to discuss how these evolving social media marketing techniques might benefit your company’s capital market goals.