Influencers have long been an effective tool for marketers hoping to build more authentic connections with their consumers, new research from Princeton University has cast some doubts on the transparency many had taken for granted. According to the study, the vast majority of influencers on YouTube and Pinterest who use affiliate ads may be violating American trade laws.
Affiliate ads, or affiliate links, are personalized URLs that brands, usually ecommerce sites, give to individual influencers, who earn kickbacks for clicks and converted sales from that link.
The paper, by Princeton researchers Arunesh Mathur, Arvind Narayanan and Marshini Chetty which analyzed 500,000 YouTube videos and 2.1 million pins on Pinterest, found that 90 percent of posts containing affiliate links do not disclose the fact that they are sponsored. Of those that do mention payment, less than 30 percent actually meet the Federal Trade Commission’s guidelines for brand endorsements.
According to FTC guidelines, influencers must tell their audience about any partnerships that may affect their content.
“Knowing about the connection is important information for anyone evaluating the endorsement,” the FTC states on its site. “Disclosures need to be easily noticed and understood.”
Since, as Princeton’s research found, user engagement on posts that contained affiliate ads tended to be higher than those without, YouTube’s and Pinterest’s recommendation algorithms tend to display them more frequently. This may well lead to a decreased trust in and effectiveness of influencer partnerships in the future, as consumers grow wary of undisclosing product endorsements.
Despite having sent letters to prominent influencers about the requirements to clearly state the existence of any partnerships with marketers, the FTC can do little to combat this issue. According to its Endorsement Guides, the FTC itself has no authority to prosecute influencers that violate its regulations.
“The Guides themselves don’t have the force of law,” the FTC website reads. “The Guides themselves don’t have the force of law. However, practices inconsistent with the Guides may result in law enforcement actions alleging violations of the FTC Act. [emphasis added]”
Even if legal action is brought against influencers that violate the FTC Act, punishment is nonexistent: “Law enforcement actions can result in orders requiring the defendants in the case to give up money they received from their violations…there are no ‘fines’ for violations of the FTC Act.”
With the risk of being caught so low, and the penalties for being caught being essentially nonexistent, there are few reasons for influencers to take affiliate ad disclosures into their own hands, and thus many simply don’t.
Both YouTube and Instagram have recently incorporated disclosure tools into their platforms, which will automatically display “paid partnership” messages on promoted content, but this does not apply to partnerships made outside platform channels.
“Such disclosure tools are a step in the right direction, however, it is unlikely that such blanket disclosures will cover all marketing strategies,” the Princeton researchers write. “Future work could investigate what kind of affordances should be designed into social media platforms to enable affiliates to disclose clearly.”