Influencer marketing—How to regulate this exploding sector

Influencer marketing—How to regulate this exploding sector

Over the past decade influencer marketing has exploded as brands have come to recognise the power of friendly influence. As a result, online celebrities land increasingly lucrative brand deals, earning hundreds of thousands for the privilege of their shrewd eyes and a trusted finger being waggled in the right direction. From its infancy, the medium of “influencing” captured a dedicated and engaged audience, who liberally spent their money in search of what they were sold, paying dutiful, expensive homage to the views (and reviews) of digital gurus.

While there has always been money to be made in this arena, the stakes have increased substantially in recent years. The New York Times discovered that the cost per sponsored post for brands seeking to work with the most premier of influencers has risen from £5,000–£10,000 in 2010, to more than £60,000 in 2018—and this is set to spiral. Perhaps this should be of little surprise given the extreme influence these professionals wield. More personable than any other marketing channel, influencers have intimate access to the lives and shopping impulses of their audiences and have a more trusted relationship as a result. Brands have certainly taken notice of this position—the mobilisation of millions of subscribers over a carefully chosen product has launched a thousand brands. Glossier for instance have perfected the art of influencer marketing, working with a roster of savvy, enviable women to carve a cult brand out of a small, untested concept and e-commerce store. Glossier is now worth an estimated $433bn.  

Reporting on the beauty guru community, the New Yorker depicted a world of “rapacious greed,” as influencers in tell-all videos, shed light on a world often underpinned by extortion and avarice. In the most recent “drama” to rock this community, a premier beauty guru was toppled for promoting an item he did not authentically believe in, or use. Aggravating the trust of his then 16 million subscribers, his fall from grace was monumental as subscribers “unsubbed” in their droves. More importantly however, the fall out asks greater questions of the sectors biggest export—trust.

While their enviable wardrobes, long haul holidays and grandiose houses have the curb appeal to convince their audiences to lay down their hard-earnt cash, fundamentally influencers trade in authenticity…in being a friend. When this authenticity comes into question, empires are wont to crumble, as subscribers no longer trust in the value of what they are being sold. With such intangible qualities on the table, how do government bodies regulate this trade? Can authenticity be monitored?

With so much money flowing through a largely unregulated and rapidly developing market place, legal and regulatory bodies have struggled to keep pace, which has resulted in a largely self-regulating market, as influencers have historically disclosed more or less based on trial and error. While significant steps have been made to ensure that paid relationships are disclosed to audiences there are several questions outstanding. Namely: How can an influencers chief trade—authenticity—be regulated? How can you prevent brand exploitation? How can regulatory technology prevent brands from being mislead?

Often, brand relationships with influencers pivots on the scale of their following, to ensure that they are able to communicate their brand message on scale, and to the right audience. The benefits of an influencer here are manifold, as they act as a vessel for brands to speak directly consumers and provide additional marketing channels for brands. As a result, the number of followers behind an influencer is crucial. In some instances however, brands have been misled by the quantity of followers supporting an influencer, without any knowledge of whether they were acquired legitimately.

In one famous case reported by the New York Times, it was discovered:

“Over a period of years, a company called Devumi ‘sold about 200 million Twitter followers to at least 39,000 customers,’ including famous athletes, chefs, and reality TV stars. In some cases, these customers then turned to brands and touted their inflated following when selling sponsored posts.”

Big brands are prime targets for this sort of follower fraud, as they offer the biggest pay offs for would be influencers.

Now more commonly, brands are encouraged to write a follower “health check” into influencer contracts. These checks allow for specialist software to audit the follower bases of prospective influencers to analyse the legitimacy of followers, ascertain whether any followers have been purchased or whether there has been any bot activity.

Brands are not the only party who occasionally suffer from being misled. Due to the unregulated and enigmatic aspect of the profession, consumers are often left confused about what is sponsored and what is not. In an effort to regulate this grey area, the ASA have published the following guidance:

“If you work with a brand to create some content that you’ll be posting on your own channels, it’ll qualify as an ad if the brand: 1. ‘paid’ you in some way (can be freebies, doesn’t have to be money), and 2. had some form of editorial ‘control’ over the content, including just final approval. It’s not an ‘either/or’—there has to be both ‘payment’ and ‘control’ for this type of post to count as an ad under the CAP Code. However, consumer protection legislation still applies where there has been ‘payment’ (ie any form of monetary payment, a loan of a product/service, any incentive and/or commission or the product/service has been given free) but no ‘control’ and this is enforced by the CMA.”

As a legal professional, how can you help regulate?

When advising clients on how best to employ the services of an influencer, there are several key points to consider:

  • channels of distribution
  • brand obligations
  • maintaining brand IP
  • ownership of content and usage rights
  • contract term and termination
  • warranty and authority to enter into agreement
  • moralities and reputational disputes
  • the type of “influence” are honest opinions wanted?
  • disclosure and regulatory concerns: how will the ad be displayed
  • duration
  • exclusivity

To find out more about what to know when working with influencers, read the full practice note on LexisPSL.

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About the author:
Catherine is one of the Future of Law's digital editors. She graduated from Durham University with a degree in English Literature and worked at a barristers chambers before joining Lexis Nexis.