U.S. regulator targets ‘influencer’ internet ad campaigns

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The U.S. Federal Trade Commission’s settlement this week with Warner Bros Home Entertainment Inc highlighted the regulator’s increasing focus on internet advertising by so-called influencers or online personalities.

The agreement came after charges by the FTC that Warner Bros failed to adequately disclose thousands of dollars in payments to popular internet stars for posting positive videos and reviews of the company’s game “Middle Earth: Shadow of Mordor.”

As part of the settlement, Warner Bros agreed to disclose payments to influencers in future campaigns or risk penalties or contempt charges.

The case is part of the FTC’s push to ensure internet advertisers follow the same laws as traditional advertisers which call for disclose when someone was “compensated to promote or review a product.”

The FTC action against Warner Brothers followed similar charges in the Spring against retailer Lord & Taylor. According to the regulator, Lord & Taylor paid 50 online fashion influencers to post Instagram pictures of themselves wearing the same paisley dress from the new collection, but failed to disclose they gave each influencer the dress, as well as thousands of dollars, in exchange for their endorsement.

As consumers have shifted from reading periodicals and watching television to surfing the web and perusing social media, companies increasingly rely on so-called influencer marketing campaigns, in which they pay or provide free goods to internet personalities with large followings in exchange for praise of their products online.

The FTC revised its advertisement endorsement guidelines in Oct. 2009 to include advertising through social media and word-of-mouth campaigns, such as influencer marketing.

Sarah McNew, chief product officer for SocialToaster, which assists brands with influencer marketing campaigns, said she was glad to see the recent FTC actions, even though they seemed to be “wrist slaps.”

“It’s really frustrating for us, following the rules, to see so many people not following them,” she said.

IZEA CEO Ted Murphy, whose company links brands with prominent influencers, said he thinks disclosure regulations need to be clearer and tougher.

“If you want the brands to take [the law] seriously and the creators to take it seriously, there have to be real repercussions,” he said. David Vladeck, former FTC Director of Consumer Protection, said it is unlikely punishments will become more severe any time soon, since the agency does not have the power to levy fines on first offenses under the Federal Trade Commission Act.

“That’s not the agency’s fault,” he said. “It’s been asking Congress to give it more authority for decades.”

YouTube video megastar Felix Kjellberg, who goes by the name PewDiePie and was singled out by the FTC in its settlement with Warner Brothers, defended himself and his actions in a video Wednesday, which had been watched by more than four million people by Thursday afternoon.

The FTC’s settlement announcement said that Kjellberg’s video about the “Middle Earth” game failed to disclose prominently enough that it was sponsored by Warner Brothers, something the company should have required.

Kjellberg disputed that in Wednesday’s video, noting that he had disclosed that the original video was sponsored, though in text on the YouTube website as opposed to in the video itself.

Kjellberg was not charged with any wrongdoing by the FTC, and the video he made in his defense lambasted media reports and online commenters who implied he had attempted to deceive viewers.“If I did something wrong I should be paying the consequences; in this case, I don’t think I did anything wrong.”

(Reporting by Meg Garner; Editing by Sue Horton and Andrew Hay)