FTC may set new rules for internet influencers

Very early in the development of social media, when someone with lots of followers said they really liked a product, sales of that item enjoyed an instant boost. Marketers took notice, and the internet influencer was born.

Today, billions of dollars that were once spent on traditional advertising are now spent with internet influencers, many of whom hold enormous sway over their followers. Celebrities, such as the Kardashians, have cashed in. In the top echelons of Instagram influencers are Kylie and Kendall Jenner, along with Selena Gomez, Beyonce, and Ariana Grande.

If you are a celebrity, there is big money to be made from influencing other consumers to buy products. According to Influencer Marketing Hub, Kylie Jenner currently earns between $673,528 and $1 million per post.

Lyle Solomon, principal attorney at Oak View Law Group and a consumer finance expert, says influencers are highly effective because they have the ability to entertain, capture, and engage with a very specific audience as they sell a product.

“This applies to various fields, be it a make-up influencer, a gaming influencer, or a political influencer,” Solomon told ConsumerAffairs. “It ends up creating a lot of micro-communities, where each type of influencer has a good hold over the audience in that niche and makes it easy for brands to hire that influencer rather than an online video ad or an ad on a mobile app where the majority of the people may not be interested in the brand’s products.”

Questions for regulators

But for some regulators, this raises troubling questions. There are laws protecting consumers from deceptive advertising. If an influencer is receiving compensation to promote a product, they may or may not really like the products they are promoting. They’re just doing a job.

Celebrities may appear in traditional broadcast commercials on behalf of a product or service, but on that medium, consumers generally assume they are being paid to promote the product. Sam Browne, CEO of digital marketing agency HARO SEO, says nearly everyone on the internet is now aware of influencers’ relationships with the products they are pushing, and they might not care.

“Consumers are…aware of what commercial glamorization is and how it plays a role in their decision-making process,” Browne told us. “Meanwhile, if they idolize the influencer, chances are they would want to have that product. That’s how influencer marketing works.”

FTC considering tighter regulations

The Federal Trade Commission (FTC) is currently seeking public comment on a range of proposals to enhance and strengthen the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising that would affect internet influencers.

For example, influencers who produce a YouTube video that promotes a product are required to reveal any financial incentive in a “clear and conspicuous” manner. The FTC’s revised rules would tighten the definition of “clear and conspicuous” to mean a disclosure that is “difficult to miss … and easily understandable by ordinary consumers.”

The agency is also addressing issues raised by “online technologies, activities, or features, such as sponsored and promoted advertising on social media platforms, advertising content embedded in games, and dark patterns,” which are subtle ways that consumers are sometimes manipulated when they are online.

Solomon says he favors more oversight of influence advertising on the web. He says he has seen the promotion of scams or low-quality goods that are being done by all kinds of influencers, including celebrities. 

“The worst aspect of this was seen during the crypto and NFT boom of last year,” Solomon said. “There were many cryptocurrency pump and dumps and scam NFTs that were being promoted by even established individuals.”

NFTs only exist in the digital world, which means they aren’t things that you can touch or feel. That, critics say, makes it even easier for people to create fake NFT projects to sell digital assets that have no value.

Solomon cites data from analytics firm Annalect and Twitter that suggest consumers are swayed by internet influencers as much as they are by suggestions and recommendations from friends.

Browne isn’t sure whether more regulation is needed since influencers are now part of the fabric of the internet. Advertisers have fully embraced influencers because the results are “instantaneous” and hard to ignore.

“You will only need social media metrics to assess the number of clicked links, purchases, skips, and the like for a specific product, which are determinants to know the feasibility of a product and of an influencer,” he said. “In addition, results are quicker since influencers already have an audience.”