Unpacked   //   December 7, 2023

Unpacked: How the FTC’s new guidelines could impact influencer marketing

For the longest time, the majority of influencers have gotten away with burying a “#ad” in the caption of sponsored posts. 

But earlier this year, in May, the Federal Trade Commission issued a set of guidelines for social media influencers to make sure they properly disclose brand-sponsored content. Then, just a few weeks ago, the FTC issued a warning to a dozen influencers and two trade associations for endorsing the safety of aspartame or consumption of artificial sweeteners. TikTok dietitians like Steph Grasso and Mary Ellen Phipps — who have over 2 million followers and 200,000 followers, respectively — were some of the influencers included in the warning after failing to clearly disclose to their followers that they were being paid by lobbying group American Beverage, which represents brands like Coca Cola and PepsiCo. 

The influencer marketing industry has been booming, especially over the last couple of years. Thanks to their influence over social media users, brands of all sizes have been leveraging content creators to reach customers. With new guidelines in place, it could change the way paid influencer content is being put out. 

“This summer was the first update officially since 2009. The industry has evolved so much so rapidly since then,” said Permele Doyle, founder and president of influencer marketing agency Billion Dollar Boy. “The original guidelines were quite vague, and I think it made the playing field a bit uneven with brands and influencers.”

With these new rules in place — and the FTC upping its enforcement — it could impact influencers as well as the brands that work with them. It could also affect the effectiveness of influencer-led content. Here’s a look into what this latest development means.

Stricter rules

As part of the new guidelines, influencers are required to disclose any relationship they have with a brand, including financial and personal. Financial relationships also include gifts, discounts or any perk. When endorsing a product in a video, influencers have to disclose it in the video and not just in the description. Influencers were always required to disclose sponsorships, but the new guidelines detail exactly how they should do it.

Doyle said that the guardrails around influencer marketing have been long overdue. But these set of changes as well as the FTC’s crackdown could impact the content and the engagement around influencer posts.  

The influencer marketing industry has now grown into a $21.1 billion industry, according to a report from the Influencer Marketing Hub. The industry grew 29% compared to last year — and for good reason. Retailers ranging from apparel brands like Abercrombie & Fitch to younger skincare brands like Peace Out have built a large network of influencers to show off new products and vouch for the brands’ quality.

“Users’ attention spans are so short that it’s a really big focus of ours and brands to capture that attention in the first few seconds. Keep the audience and engage to watch the whole video,” Doyle said. “I do worry and I think my team worries that there’ll be a little bit of a drop of [engagement].”

In addition, the FTC also released standards around how to disclose endorsements properly when influencers use Instagram Stories, Snapchat or hold livestreams to show off sponsored products. Influencers have to superimpose the disclosure over the photo when posting on their Instagram Stories or Snapchat. On livestreams, influencers have to repeat the disclosure periodically. 

A focus on enforcement

Richard Hanna, professor of practice in the marketing division at Babson College, said that while influencers were always meant to disclose sponsorships clearly, these policies were not always enforced. But the industry, he said, has grown too big not to be enforced. 

“People’s consumption of media has changed so much over the last 10 years,” he said. “There’s a greater chance of misinformation. People are peddling products because they’re being paid, not because they’re actually a good product.”

The 12 influencers involved in the FTC’s warning as well as the two trade organizations could face possible civil penalties of up to $50,120 for every violation. Every recipient of the warning has 15 working days to explain what they did or plan to do to address the issue. The American Beverage Association and the Canadian Sugar Institute were the two trade associations that received a warning from the FTC. 

Oftentimes, larger celebrities were the ones getting warnings from regulators and not smaller influencers. Now that influencers are in the FTC’s crosshairs over their inadequate disclosures as well, it could hurt their reputation among followers, Hanna said. 

“A lot of people want to give the impression that they’re authentic,” Hanna said. “Now they have to actually admit that they’ve been paid, that’s sort of a knock on their identity.”