Being well-connected on the Internet has become a lucrative business. In fact, influencer marketing is one fastest growing industries online, especially on Instagram where 30% of users are more likely to purchase a product or service if they see it being promoted by an influencer.
Companies of all sizes are willing to pay top dollar to social media influencers with large followings – particularly celebrities – because they are seen as providing credibility when promoting products. Kylie Jenner, currently the top-rated social media influencer in the world with 141 million followers, reportedly makes an estimated $1 million per sponsored post on her Instagram.
However, deception and abuse by influencers, as well as declines in engagement rates as the online marketplace becomes overcrowded, have led many companies to pull back or look for more effective marketing alternatives. According to the Wall Street Journal, many influencers have strained ties with advertisers by inflating how many followers they have. One recent report estimated that advertisers are wasting $1.3 billion annually on influencers who use fake followers. Other influencers have hurt their credibility by promoting products they do not actually use.
Another concern for advertisers is the fact that influencer engagement rates – which measure how social media users interact with content – have been declining as Instagram feeds get cluttered with sponsored posts. Analytics firm InfluencerDB reported that the engagement rate for sponsored posts across every industry category was 2.4% in the first quarter of 2019, down from 4% three years earlier.
Not surprisingly, the Federal Trade Commission (FTC) has been increasing its oversite of social media channels. The FTC has maintained a focus on influencer marketing, including providing guidance about whether and how social media influencers should make disclosures in their social media posts. However, recently it has indicated it is prepared to take action against both advertisers and influencers if "material connections" between an influencer and any promoted product or service are not clearly and conspicuously disclosed. The FTC has issued a series of targeted warning letters and cautioned specific influencers that further action is likely if they don't heed these warnings. The brands which maintain relationships with these influencers are also potential targets of FTC enforcement actions.
To minimize exposure arising from the activities of the social media influencers with whom they work, advertisers need to monitor what those influencers are saying and address any questionable or improper practices. Marketers should also familiarize themselves with the FTC’s endorsement guidelines to ensure that they are in compliance.
The search for alternatives has led many companies to explore the use of Computer Generated Imagery, or CGI, influencers. Although they are created by programmers, CGI influencers may seem so lifelike that people cannot tell if they are real or not. Since CGI influencer marketing is still in its infancy, this may change as people become more aware of the technology. However, the popularity of these virtual influencers is growing among consumers and advertisers alike. The advantages to businesses include being easier and less expensive to work with than human influencers.
In a world where social media influencers may not be what they appear, those who rely on them to guide their buying decisions should be cautious. Look closely at engagement rates and the quality of responses. An influencer with a large following and minimal response might not be legitimate. And of course, keep in mind that influencers are being paid to promote specific products.
If you are a business or a consumer who has legal questions, call 973-509-8500 x213 or email us at LFarber@LFarberLaw.com.
The contents of this writing are intended for general information purposes only and should not be construed as legal advice or opinion in any specific facts or circumstances.