DIY (Do-It-Yourself) Marketing

Influencer Endorsements and the Regulation of Social Marketplaces

Dr Catalina Goanta
Universiteit Maastricht
SMALL GROUP PROJECT: MARCH 2018 – FEBRUARY 2019

Abstract

This research project aims to shed light on the regulatory challenges of a current social media trend that has received little attention from the academic literature: ‘influencer marketing’. Digital influencers are typically social media users who start out as anonymous citizens but who reach stardom with self-made visual content. These ‘prosumers’ attract thousands of digital followers while sharing day-to-day behaviour and their lifestyle advice on fitness, nutrition or parenting. Marketing literature has suggested that their followers internalise this non-expert advice as they perceive social media influencers as authentic. Recently, influencers have also started earning their livelihood through endorsement contracts and brand advertisement that are not often explicitly disclosed on social media. Given their large audiences, influencers are very effective not only at creating online engagement for the companies that contract their services, but also at manipulating their followers’ opinions and transactional behaviour who do not always distinguish between genuine and sponsored marketing advice. Although advertisement regulations include endorsements made on Instagram or Youtube by ‘prosumers, influencers appear to disregard these regulatory limits. This is highly problematic as average social media users are at an ever greater risk of falling prey to inconspicuous advertising practices.

Drawing on insights from different strands of the legal, media studies, and marketing literature (e.g. regulation of digital platforms, consumer law, freedom of speech, branding), this project inquires into the limitations of the current regulatory framework applicable to influencer marketing, and explores how this framework can be adapted to take into account both consumer and commercial interests. This project combines doctrinal legal research with empirical methods (semi-structured interviews with influencers, advertisement agencies and public bodies). Understanding and regulating the digital transformation requires knowledge from multiple disciplines and cultural contexts. This project addresses influencer marketing from an interdisciplinary perspective and draws on different research methods.

The Research Idea

This project inquires into the need to regulate endorsements performed by social media influencers. Influencers are social media users with millions of followers who produce visual content and are either celebrities or anonymous users. This project focuses on the second type of influencers. Drawing on empirical evidence, it seeks to understand when social media users identify themselves as influencers, how and to what extent they develop transactional connections with the companies they endorse, and the role of social media platforms (e.g. Instagram) in preventing the abuse of disclosure rules and protecting consumers. This interdisciplinary and empirical project combines insights from public law (regulation, constitutional law in particular freedom of expression), private law (consumer law, advertisement law, unfair commercial practices, torts), behavioural law and economics with media studies and marketing. It offers an innovative perspective on how social media is transforming traditional pillars of advertisement regulation (e.g., truth in disclosure) as well as their regulated actors (before, mainly celebrities; now anonymous citizens turned into overnight influencers).

This project is guided by the following questions:

(i) Who is an influencer? When does an anonymous citizen become an influencer? How does influencers’ content impact consumers?

(ii) What rules are applicable to influencers? Do general rules on advertisement, branding and consumer law apply to their endorsements?

(iii) How should the public be protected against non-expert/non-truthful advice? What is the role of social media platforms?

(iv) Should additional duties be imposed on social media platforms in order to promote compliance with advertisement and endorsement rules?

Background

Nikkie de Jager was an unknown teenager from the small town of Uden in the Netherlands until she went viral with her ‘Nikkie Tutorials’ make-up channel on Youtube. Nowadays, her videos amass a total of 588,634,786 views and she is known worldwide. Nikkie, similarly to other social media “influencers”, often endorses consumer goods and trends without properly disclosing the nature of the relationship with the companies behind these goods. Marketing literature has suggested that although influencers are not experts in most areas they operate in, their followers place a high level of trust on them. The internalisation of their endorsements are explained by their attractiveness, perceived similarity and likeability. Although their endorsement might seemingly reveal ‘authentic interest’ in a certain brand, influencers often do it in exchange for payment. Thus far, it is unclear how these influencers should be regulated in Europe. Earlier this year in the United States, the Federal Trade Commission reminded 90 influencers that they should disclose any ‘material connection’ with advertised consumer goods, underlining that “truth in advertising also applies to social media”. However, how can truth in advertisement law be enforced in a world where almost any anonymous citizen can rapidly become an influencer or a ‘brand ambassador’? Moreover, are traditional endorsement rules in line with the functioning of social media? And what are the dangers of unregulated endorsements? Such endorsements also raise other concerns such as unfair commercial practices; and the provision of potentially irresponsible advice on health or fitness to vulnerable social groups.

The Focus

This project focuses on the legal implications of unregulated influencer marketing. Word-of-mouth advertising is a well-known marketing technique. However, with the emergence of digital platforms, this technique has been digitalised due to increasing reliance on online peer-to-peer feedback in the form of influencers’ endorsements or consumer reviews. Several companies have been adapting their business models and engaging with social media influencers in the past five years. The legal literature has nonetheless overlooked the growing importance of influencers as prosumers. Traditional European consumer law studies on advertising focus on two main Directives (Directive 2006/114/EC on misleading and comparative advertising and Directive 2005/29/EC on Unfair Commercial Practices), both of which are addressed to businesses. It is unclear whether influencers fall into this category and although they operate through platforms, they are separate entities and regular consumers. This raises a question already discussed in the sharing economy: should a user sharing content/services through a digital platform bear responsibility for her actions as a professional or an individual? And should platforms be involved in this equation?

This project innovates in three ways. First, it addresses the general inability of law to respond to prosumerism. Peer-to-peer transactions have not received sufficient attention despite the complex and polarizing issues they raise (e.g. peers issuing potentially harmful medical opinions). Second, it combines an interdisciplinary study, doctrinal and empirical methodologies. Third, this study innovates by considering the perspectives of different stakeholders and their different interests as well as the need to regulate innovative practices without endangering public values.

Theoretical Novelty

In the United States, academic literature on influencer advertising is scarce, while in Europe, it is almost inexistent. We draw on existing literature on peer-to-peer transactions particularly in the fields of the sharing economy, citizen participation (e.g., citizen journalism), liability of digital platforms, and consumer protection. Our project makes three central contributions.

First, from a conceptual perspective, this research aims to fill a grey area in existing literature on both private and public law by understanding whether the effects of the ‘influencer marketing hype’ can be adequately addressed by the current regulatory framework, and if not, what changes need to be made to this framework. Second, it rethinks traditional concepts and paradigms of advertisement and consumer law such as ‘business’, disclosure of sponsorships, and truthful advice. It does so by combining legal concepts with marketing, communication and behavioural law and economics insights. Third, it generates interdisciplinary insight for a social issue currently under the radar of regulators worldwide. Relevant public bodies (the US Federal Trade Commission, the Dutch Media Commission or the Italian Competition Authority) have showed awareness but find themselves ill-equipped to handle the negative effects of social media. At the same time, platforms like Youtube or Instagram offer steady incomes to creative prosumers. Our research proposes solutions that consider the different stakeholder perspectives, as many top-down regulations (e.g. the new EU Commission proposal on digital content) increase obligations on digital platforms to the detriment of free speech, open innovation and mutually bargained solutions such as adapting user interfaces.

Methodology

This project will rely upon both doctrinal and empirical research. In law, doctrinal research (study of literature, legislation and case law) is a common research method that allows us to understand what legal interpretations are commonly accepted. After an interdisciplinary study of the literature on marketing, communication and media studies, social media and public interest and values, endorsement practices in European consumer law, we will conduct an empirical study involving first the analysis of the content of the social media of a selected number of influencers (see below) for the period of three months in order to identify how often they endorse consumer products, what type of products they advertise, and whether they disclose material connections. We will then conduct semi-structured interviews with selected influencers (from different industries and countries, anonymous citizens that became influencers and television celebrities, and with different impact on engagement), advertisement agencies and public media bodies. We have selected five key influencers as this number of actors is feasible in terms of content analysis, they can be easily contacted by both researchers due to geographic and linguistic proximity. Although the popularity of influencers fluctuates, we have selected five European influencers with a different but fairly stable audience. The interviews contribute to the theoretical framework as they allow us to understand the particularities of this industry and the dimension of the social and legal problem. All interviews will be conducted according to high ethical standards and the data will be safely stored in academic research databases.

Work Plan

January 2018 – Literature Review; Analysis Social Media Content & Coding Practices

March 2018 – Stakeholder interviews

June 2018 – First draft

September 2018 – Academic workshop with stakeholders (presenting results); Op-ed & international media outreach

December 2018 – Final draft/ Submission for publication

Outcome

This project will result in one article to be published in an international peer-reviewed legal journal and one short op-ed for a major international media outlet: the paper will delve into the regulatory aspects of influencer marketing including the dangers to the public of unregulated advice and sponsored endorsements that might be misleadingly perceived as genuine. In both articles we will discuss the role of social media platforms and use the findings of the planned empirical research. The academic paper will also be presented in a conference in 2018 in a law & technology panel of the International Conference of Comparative Public Law (Fukuoka, July 2018)

The findings of this study will be disseminated at a workshop we plan to organize by engaging the European Law & Tech Network, a multidisciplinary research network founded by the applicants which bring together researchers from over 20 different European countries, as well as additional relevant research institutes (e.g. Maastricht European Private Law Institute, STeP Groningen).

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