The FTC’s Recent Ruling on Influencer Marketing

With almost 50 million subscribers, thousands of uploaded videos, and daily updates, Pewdiepie’s YouTube channel is the prime source of news, reviews, and updates for millions of gamers worldwide. His channel on YouTube is the largest on the platform by a huge margin, the second largest having only 28 million subscribers, and he is arguably the most powerful tastemaker and influencer in the industry. No other mainstream video games and media company comes close to his numbers: for instance, IGN – the most popular gaming site, has only 8 million subscribers on the platform.

Just by looking at these figures, you’ll know that when Pewdiepie plays your game, you are all set. It’s basically like winning the jackpot. The influence and the vast following he has may mean that your game will hit the top spot in charts, will attract a huge fanbase even before being officially released and, what’s more important, will influence other gaming websites and review platforms. There are countless examples of previously unknown, obscure games which were brought into the limelight by Pewdiepie and saw instant success. It’s no surprise that Warner Bros. executives saw him as the perfect influencer for their new titles coming out every year. After all, what could go wrong, right?

So what did Warner Bros. do?

Warner Bros., just like many other video game studios, recognized Pewdiepie as a massive influencer in the industry. What they actually did was simple and straightforward – they used Pewdiepie for a bump to their video games, in this case to Middle Earth: Shadow of Mordor. Almost all video game studios are more than willing to contact YouTubers, bloggers, and other influencers for this type of service. What they did wrong, however, was that they “skipped” the disclosure part. This apparently small issue was the subject of the complaint made by the Federal Trade Commission.

In simpler words, Warner Bros. paid Pewdiepie for a favorable review of their 2014 title Middle Earth: Shadow of Mordor and the video posted on YouTube didn’t feature a visible disclosure about the financial transaction between the two sides.

FTC’s ruling and what it means

According to the Federal Trade Commission (FTC), consumers were deceived by the game’s producer and were misled about the nature of the sponsorship. The ruling is one of the first high-profile signs that FTC is starting to crack down on certain behaviors in influencer marketing. It also means that FTC has a firm grasp on influencer marketing as a whole and is watching closely this marketing strategy. Apparently, influencer marketing is attracting more attention from the FTC than other types of marketing and tradtional publishers.

To better understand how FTC sees the delicate matter of influencer marketing let’s take a look at the 3 main points detailed in the ruling:

  • Warner Bros. instructed influencers to place a disclosure box under the video. Because the disclosure box was too large, the paragraph detailing the financial transaction was not readily visible. This means that the average consumer was unaware of the financial transaction between the two parties.
  • Early copies of the game were given to influencers, but they failed to disclose that Warner Bros. paid them beforehand.
  • Warner Bros. asked influencers for a pre-approval of their videos, and only positive reviews were allowed. Basically, the influencers had to express a positive sentiment in their videos and suggest that the game is good. Similarly, they were not allowed to promote negative sentiment about the company or show errors, glitches and issues related to the game.

The ruling is considered particularly important in the marketing industry because it creates a precedent. The FTC reconsiders influencer marketing as a separate type of advertising. Additionally, the FTC simply wants to shed light on influencer marketing as a new marketing strategy and educate consumers, influencers and companies. This is because, up until now, consumers were somewhat baffled about this new concept: is this a paid recommendation? Is this review real? How is my perception shaped by it? These are all questions that need answers and FTC is starting to deal with these delicate matters.

It’s important to note that this ruling is primarily about the financial exchange that led to these reviews. All advertising is inherently positive and almost always features a financial contract between two or more sides. This ruling suggests that FTC wants to clarify that it sees influencer marketing as advertising, and consequently, it needs to abide to the same strict regulations that are expected with any other marketing endeavour, especially in terms of transparency. The order strictly requires Warner Bros. (and other companies) to strictly follow regulations lest they receive additional punishment. Another interesting detail is that FTC wants the brands and companies (but not the influencers, themselves) to fully comply with these regulations and make their disclosures legible. In other words, influencers don’t risk punishment, but advertisers do.

The conclusion for marketers

The FTC is obviously taking a tougher stance on the online marketing industry, and particularly on the influencer marketing campaigns. Agencies, brands, companies and even influencers should work more transparently and openly. Apparently, these marketing deals are closely monitored by the FTC and high-profile influencers should better understand consumer rights.

While influencer campaigns can prove extremely effective, without a proper legal disclosure they can turn into a PR disaster. As a result, major online companies, like Google and Yahoo have made it clear that they are monitoring deceptive social media campaigns and are willing to block them if there is cause for serious concern. Bottom line, if you want to start an influencer marketing campaign, you must must abide to FTC’s prohibitions against deceptive or misleading advertisement. When you work with influencers, either directly or through influencer marketing platforms, make sure you understand the nature of the activities of your campaign, and make especially sure that audiences have the transparency they need in order to understand this as well.

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