The FTC updated its endorsement guidelines with new rules for disclosing sponsorship in social media content.

The Federal Trade Commission (FTC) recently updated its Endorsement Guidelines with new information that impacts social media marketing campaigns.

These updates give much-needed guidance on how brands, celebrities and individuals should  disclose their relationships and reasons for promoting products online.

The FTC’s goal is to clarify:

When reviews are unsolicited and honest VS. when reviews are influenced by a sponsorship, a relationship with a company or offered in exchange for compensation.

The modern buyers’ journey requires endorsement transparency

This update is important because consumers are going online and using reviews to inform their purchase decisions:

Have you ever watched a how-to video where the presenter is recommending a specific product? It might make you more interested in purchasing that product, but what you might not realize is that the blogger has been solicited for a review from the company, given the products for free to try and compensated for the write-up. When you know the blogger has motivation to give a positive review, you’re more likely to take the endorsement with a grain of salt.

It’s the same way the FTC requires TV ads to disclose whether subjects are paid actors or actual customers, include disclaimers about what results are typical and reveal when celebrity endorsements are contracted.

With these new guidelines, the FTC puts the onus on brands and advertisers to make it abundantly clear that there’s a relationship behind the scenes that could impact the transparency of an endorsement.

social media ad transparency

These same results apply to:

  • Movie and video game reviews

  • Product testimonials

  • Contest entry that requires participants to endorse a brand and its products

  • Social media posts promoting a brand or product by an employee, family member of an employee or a paid sponsor

Video bloggers must disclose relationships & sponsorships

Here are some of the scenarios the FTC outlined that would require video bloggers to disclose information about their endorsements:

  • A company gives free products (movie tickets, cleaning supplies, software, apps, video games, clothing, beauty products, weight loss pills) to a blogger with the understanding that he will provide a review.

  • A company compensates an individual with cash, gift cards, etc. to review a product.

  • A company gives an individual early access to a movie or video game, including a ticket or copy of the game, in exchange for a review.

If the person giving an endorsement receives free products and or payment from a company, she needs to disclose that relationship to viewers directly in the video. A disclosure caption won’t cut it because there’s no guarantee viewers will read it before watching, and if the video is more than a few minutes long, the disclosure may need to be repeated throughout.

The verdict’s in: Purchased Likes are clearly deceptive

The new guidelines show the FTC is taking a hard line on purchased Likes. Considered a spammy social media marketing practice in general, purchasing Likes is a way to make a brand’s presence look bigger and better than it is. There are a lot of companies that offer hundreds or even thousands of Likes to brands for just a few dollars.

In the world of social media, a Page generally ranks higher on a newsfeed if it has more engagement. When a brand or product Page is highly visible, it will reach a wider audience.

Users who see that a brand’s Page is extremely popular and has a huge following are often more likely to engage with it than they would be if it only had a handful of user interactions. They might see that a given product has a lot of endorsements and take this as a sign the item is highly recommended by previous customers, although those Likes actually come from bots or empty accounts.

If “likes” are from non-existent people or people who have no experience using the product or service, they are clearly deceptive, and both the purchaser and the seller of the fake “likes” could face enforcement action.

Spammy social sites

Employee & celebrity endorsements must be transparent

When enthusiastic employees, celebrity investors and the parents of founders distribute social media content promoting products or services, they must include a disclaimer that says “Ad” or “Sponsored.” The FTC’s take is that anyone with a personal or professional stake in the success of a company must make it clear they have a relationship that impacts their review.

Marketing Land’s Martin Beck cited this recent exchange between Kobe Bryant and journalist Samir Mezrahi. In this instance, Kobe Bryant would need to have a disclaimer in his post to let followers know he’s affiliated with the brand.

Keeping the transparency in customer testimonials

Companies must also be careful with their customer testimonials and case studies if the customers featured are offered an incentive for participation.

A client may be more likely to give a positive review if they’ve been offered a free product or a discount on services.

It’s common practice for brands to give customers free products or discounted services for participating in a case study. This seems like good customer service, because it requires the client to spend time either on the phone or in person. And proof-is-in-the-pudding resources are considered some of the most influential assets B2B companies can have in their marketing arsenals.

But companies may be safer providing incentives after participation has wrapped. The FTC explains that a client may be more likely to give a positive review if they’ve been offered a free product or a discount on services. The promise of being featured in a video might be enough to sway an individual’s’ review.

It’s true that people are less likely to give unfavorable reviews when they’ve been incentivized – and unsuspecting viewers need to know the endorsements may not reflect an honest, unbridled review.

    • Here’s a link to the full guidelines if you want to see more examples of when companies need a disclaimer: Find more examples of when companies need a disclaimer in: The FTC’s Endorsement Guides.

The consensus is that these new guidelines are a warning to marketers and advertisers of an upcoming crack down on web content. As consumers reject the traditional sales process and turn to the web for information about products and services, brands need to provide marketing materials that are honest and transparent.

Lauren Kaye is a Marketing Editor at Brafton Inc. She studied creative and technical writing at Virginia Tech before pursuing the digital frontier and finding content marketing was the best place to put her passions to work. Lauren also writes creative short fiction, hikes in New England and appreciates a good book recommendation.