Influencer marketing die-hards got a hint of changes to come last September, when the U.S. Federal Trade Commission and multi-channel advertiser Machinima Inc. reached a settlement regarding improper disclosures made by paid YouTube influencers in support of Microsoft’s Xbox One release.
Recently, however, the FTC issued its final consent order on the subject, prohibiting Machinima from misrepresenting paid endorsers as independent reviewers in future paid endorsement campaigns.
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Following closely on the heels of the agency’s slapdown of apparel retailer Lord & Taylor over a similarly-undisclosed Instagram influencer campaign, it seems clear that the FTC has made it a high priority to police native ads and sponsored content pieces that don’t play by its rules.
But what does that mean for marketers who have come to rely on influencer marketing tactics in response to banner blindness and the growing use of ad blockers?
Is influencer marketing really reaching the end of its lifespan?
Let’s explore best practices moving forward by looking at exactly what the FTC objected to in the Machinima case.
The Machinima case
Back in 2013, Machinima contracted with Microsoft’s ad agency – Starcom MediaVest Group – to promote the upcoming launch of its Xbox One console by guaranteeing at least 19 million views on videos created by Machinima’s influential network of publishers.
According to FTC case records, Machinima worked with five YouTube influencers to create product reviews and other sponsored content, with some publishers paid a set dollar amount between $15,000 and $30,000 for the creation of 1-2 videos, and others compensated $1 for every 1,000 views (up to a cap of $25,000) on their campaign contributions.
Publishers were given explicit guidelines on the content of their videos, including recommended talking points and suggested video clips. All videos were reviewed and approved by Microsoft and Starcom prior to publication, while publishers were subject to strict contracts preventing them from disclosing details on the nature of their relationship with Machinima, Starcom and Microsoft, or on their compensation.
In total, more than 300 YouTube videos were uploaded as part of the campaign between November 22, 2013 and December 31, 2013, generating more than 30 million views.
Bloggers started complaining about the misleading nature of the campaign as early as January 2014, prompting the subsequent FTC investigation which, due to the nature of the complaint, couldn’t levy monetary fines against Machinima.
Instead, the FTC’s final order against Machinima requires the company to, “disclose when it has compensated ‘influencers’ to post YouTube videos or other online product endorsements as part of ‘influencer campaigns’.” Failure to comply with the requirement in the future could lead to penalty fees.
The Federal Trade Commission’s stance on the issue of influencer marketing is clear, with Richard McKewen, a senior attorney for the FTC, stating that consumers, “would want to know if what they’re watching is a truly independent review or a paid endorsement.”
In response, the agency has developed a document titled, “Native Advertising: A Guide for Businesses” which provides guidance on how businesses should disclose paid partnerships and why doing so is important for consumer protections – the basis for which is summarized below:
“In the context of native advertising, if the source of the content is clear, consumers can make informed decisions about whether to interact with the ad and the weight to give the information conveyed in the ad. However, an ad is deceptive if it promotes the benefits and attributes of goods and services, but is not readily identifiable to consumers as an ad. Thus, as the Policy Statement explains, the FTC will find an ad’s format deceptive if the ad materially misleads consumers about its commercial nature, including through an express or implied misrepresentation that it comes from a party other than the sponsoring advertiser.”
Greg Sterling, writing for MarketingLand, suggests that, “With these two releases, the FTC is clearly sending a message that more enforcement actions are on the way for any native advertisers or influencer campaigns that are not sufficiently identified as ads or sponsored content.”
And while some marketers may see this – combined with the agency’s actions on Lord & Taylor – as the first nail in the coffin for influencer marketing as we know it, I believe that the only brands and businesses that stand to suffer are those whose success came through promotions that were unethical in the first place.
Influencer marketing will always be around, simply because we – as a people – are highly-swayed by the opinions of those we look up to.
Businesses that capitalize on this by creating great content, partnering with well-known thought leaders in their fields and properly disclosing their arrangements in a way that makes it clear the influencers truly support the campaigns they’re lending their names to will continue to thrive – no matter what changes the FTC makes.