What Brands Should Know About the FTC’s Influencer Crackdown

This spring, the U.S. Federal Trade Commission sent out more than 90 letters to remind influencers and marketers about the importance of clearly disclosing their relationship to brands when promoting or endorsing products.

In the $1 billion industry of paid posts (on Instagram alone, Mediakix notes), influencers aren’t the only ones who should be working to abide by these rules. Brands should also note the FTC’s guidelines. Failing to make influencer marketing clear could not only damage a brand’s reputation and take a chunk out of the return on investment (ROI), it could open the brand to lawsuits.

Here’s why being transparent about sponsored content can go a long way for protecting the reputation and integrity of a brand:

Transparency builds trust.

Consumers want to shop for brands they can trust. According to a 2016 Transparency ROI study by Label Insight, 73% of consumers are willing to pay more for a product if it promises total transparency. Brands recognize the value of consumer trust, and many work hard to be perceived as authentic. As a result, it only makes sense that transparency around sponsored content would help to build a good rapport with consumers by clearly disclosing any material relationships, such as celebrity endorsers.

Labeling makes it easier to track ROI.

The nature of content marketing and the many metrics that measure success, from likes and retweets to shares of social posts, makes it challenging to track performance, and ultimately, ROI. However, experts agree that one way to evaluate the impact of sponsored content is to measure it against non-sponsored content. This can be a strong indicator of how content is perceived by a brand’s consumer base. Clearly labeling posts as sponsored will make it easier to compare metrics like page views and engagement.

Young consumers prefer authentic brands.

Young consumers gravitate toward social media channels like YouTube, Instagram, Facebook, and Snapchat, and studies suggest that these consumers value brand authenticity. Some 58% of millennials expect brands to publish content online before they make a purchase, and 43% of millennials rank authenticity as more important than the content itself, according to a consumer study by Elite Daily and Millennial Branding.

Social media mishaps can linger.

In the past, major brands have had to settle with the FTC for failing to disclose that posts were sponsored . For example, the FTC penalized Lord & Taylor for publishing magazine articles that weren’t clearly labeled as sponsored content, as well as Instagram posts that didn’t clearly disclose that the individuals featured in the photos received $1,000 to $4,000 in compensation for their influencer marketing. This hurt the company financially, and was a blow to the brand’s reputation.

Companies that play by the rules in all aspects — from content marketing practices to product sourcing — tend to build trust among consumers. Communicating these values with consumers can begin with the way a company conducts—and discloses—sponsored content.

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