The Federal Trade Commission (FTC) is planning a crackdown on sponsored content on the internet, as brands and advertisers are expected to explicitly disclose if they are paying celebrities for endorsements.
Hashtags, such as #ad, #sp and #sponsored, which are commonly used by celebrities to identify sponsored content on platforms such as Instagram, Facebook, Snapchat and Twitter, are not enough. According to FTC Ad Practices Division deputy Michael Ostheimer, the advertisers will be the ones that should make sure that the sponsored content is clearly shown as paid posts.
The crackdown will make the sponsored posts look less authentic, which will reduce the impact of the advertisements, as opposed to the celebrities seemingly sharing only the products and services that they enjoy. However, what is more important for the FTC is that customers are not being deceived.
"We've been interested in deceptive endorsements for decades and this is a new way in which they are appearing," Ostheimer said, noting the power that such endorsements hold in the consumer market.
The crackdown by the FTC will likely lead to more cases such as the one charged against Warner Bros. over positive reviews on video game Middle Earth: Shadow of Mordor.
The FTC claimed that Warner Bros., which paid thousands of dollars to YouTube personalities to upload positive reviews on the title, told the YouTubers to disclose the sponsorship in the description boxes of the videos. This would lead to the disclosures being hidden as the videos are shared across different platforms.
"Consumers have the right to know if reviewers are providing their own opinions or paid sales pitches," said FTC consumer protection bureau director Jessica Rich.
Social media endorsements have largely grown in importance in the marketing and advertising campaigns of companies and brands due to their reach, with sponsored content being uploaded from celebrities, internet personalities and practically anyone with enough followers within the product or service's target market. As an example, according to Captiv8, brands are already spending over $255 million on influencer marketing just on Instagram per month.
The question, however, is whether advertisers and celebrities will quickly respond to the planned crackdown of the FTC. Many personalities have been upfront in the disclosure of sponsored content, but for those that do not do so, it could be because of the buzzkill effect of disclosures in videos or because they think that hiding disclosures is fine if they genuinely like what they are endorsing.
Nevertheless, brands and celebrities should rethink their strategies for sponsored content as soon as they could, or they could be facing similar charges that Warner Bros. received from the FTC.