Sponsored social media posts have a profound impact on consumer habits, as evidenced by the fact that 74% of consumers now rely on social media when making purchasing decisions. As a result, influencer marketing is one of the most rapidly growing sectors of the advertising industry and is at least a $1 billion market on Instagram alone.
But the effect that social media influencers can have on their audiences comes with a responsibility to properly disclosure sponsored content. In the past year, the Federal Trade Commission (FTC) has been cracking down on influencers and brands who are not following its guidelines for disclosures, which play an important role in protecting consumers from deceptive advertising.
Warner Bros. was one of the first companies examined under FTC scrutiny for proper disclosures on social media, but improper disclosure remains a serious problem. Over 90% of sponsored posts from top celebrities on Instagram violate FTC disclosure guidelines, making transparency on the platform a major problem. The good news is that marketers can learn a number of key lessons from the mistakes of companies like Warner Bros. In this case study, we’ll take a closer look at why Warner Bros. ran into trouble with the FTC and how marketers can avoid ending up in a similar situation.
In 2014, Warner Bros. hired Plaid Social (an influencer marketing agency that has since been acquired by Corbis) to execute a YouTube campaign with top gaming influencers. For the campaign, a select group of YouTubers were given a pre-release version of Middle Earth: Shadow of Mordor and were each paid anywhere from a few hundred to tens of thousands of dollars to promote the game on their channels.
The influencers were instructed to create gameplay videos to “promote positive sentiment about the game” and to post them on YouTube as well as Facebook or Twitter. They were also told to disclose that the video was sponsored in the description box.
The 30 videos that were created for the campaign saw a total of 5.5 million views and generated a lot of buzz surrounding the game prior to its September 2014 launch. A campaign video created by PewDiePie, the top influencer of the campaign and the world’s richest YouTuber, received 3.7 million views alone.
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The campaign sounds like business as usual in the YouTube influencer marketing world. However, Warner Bros. made one critical mistake: it didn’t follow the FTC guidelines for sponsored social media content closely enough. 18 months later, campaign mistakes caught up to Warner Bros. when the FTC issued an official complaint.
The complaint stated that Warner Bros. was in violation of FTC guidelines on two counts:
Count 1: False claim of independent reviews.
Count 2: Deceptive failure to disclose a connection between endorsers and sellers.
Simply put, Warner Bros. didn’t make it clear enough to consumers that the videos were sponsored. While the influencers were instructed to disclose that the video was sponsored in the description box, in the eyes of the FTC this isn’t enough. FTC guidelines clearly state that the disclosure must be near the top of the description box, above the “Show More” button. For videos, FTC guidelines require that influencers also include a verbal disclosure close to the beginning of the video.
In Warner Bros.’s campaign, some influencers neglected to include any type of disclosure, and the influencers that did include one placed it at the bottom of the description box under the “Show More” cut.
Lucky for Warner Bros., there was no financial settlement in this case. The FTC merely ordered that Warner Bros. strictly adhere to its disclosure guidelines in future campaigns and outlined the minimum steps Warner Bros. must take to ensure that future campaigns are compliant. The FTC also stated that Warner Bros. should withhold payment from influencers who fail to include proper disclosures in their sponsored content.
It took the FTC a while to catch up to the rapid growth of influencer marketing, but its July 2016 complaint against Warner Bros. (along with the warning it recently issued to over 90 influencers and brands), makes it clear that the FTC does not take failure to disclose lightly. If the industry doesn’t start taking FTC guidelines more seriously, more brands, agencies, and influencers will almost certainly be held accountable for their mistakes.
To avoid similar FTC pitfalls, brands and marketers should follow these guidelines: