It was another successful year in Chicago at the 40th Annual Association of National Advertisers/Brand Activation Association Marketing Law Conference. During Friday’s general session, I gave a presentation titled “The Pursuit of ‘Truth’ in Advertising,” taking a look at how consumers view the truth in this era of fake news and alternative facts, and how this changing understanding of the truth has affected the advertising ecosystem and the practice of advertising law. In the next series of posts, I will share some highlights from my presentation. Let’s dive into the first one…

Consumers are putting more of their trust in online “influencers” over other sources of reliable facts. In conjunction, social media has quickly evolved to a media not only fueled by business – marketing and advertising – but has grown into a business whose fundamental purpose is to market and advertise. Consumers are beginning to understand that social media is a marketing-fueled media, and in a shift that mirrors the cultural atmosphere of distrust, consumers are realizing that influencers are not their “friends.” What has been a surprise, so far, is that consumers are still continuing to buy into the influencers’ stories anyway, and are choosing to nevertheless “trust” them.

This is translating into brand new risks for marketers who leverage social media.

Here Are Some Things to Consider

Remember PewDiePie?  He used to be one of the highest paid and most popular influencers on YouTube. But after making racist and anti-Semitic comments in some of his videos, things changed: (1) studios dropped him, (2) Google cancelled his YouTube Red series, and (3) he was cut from significant advertising.

PewDiePie got into hot water again this year by falsely claiming that his video was sponsored by Volvo. Volvo responded that it was not a sponsor and had no involvement with the post. PewDiePie then changed the video title to “SPONSORED BY SAAB.” Saab responded that it had no sponsorship relationship and no knowledge of his video.

Also consider the #MeToo movement, which has impacted the worlds of entertainment, news, government, courts, and more. In today’s world, advertisers cannot afford to risk the fallout from a #MeToo controversy. So the proactive legal response is a formal talent contract with a “new and improved” morals clause for talent and influencers.

Morals clauses typically allow the advertiser to terminate an agreement if the talent commits a crime or an act of “moral turpitude” during the term of the relationship. But what if the act of “moral turpitude” happened decades ago? What if there were no charges actually brought? It’s still a disaster for the brand. Contracts must be updated to cover acts that occurred not just during the term, but before the term. The clause must also cover any kind of morally reprehensible or offensive conduct, not just convicted crimes.

Yet another trend has emerged on social media in the form of fake followers. For influencers, having a larger digital footprint reflects both acceptance and a platform to make even more money. But in the rush to gain followers, a wave of fake social media accounts has emerged. These fake accounts, often called “bots,” can follow influencers. They can even like, share, comment and otherwise engage with real consumers online just like a human being. They create false metrics of consumer engagement and brand reach, skewing marketers’ data and resulting in brands paying more money for false results.

What’s the result? Advertisers are now imposing contractual obligations on their influencers, prohibiting them from buying followers, or using bots to increase customer engagement. For example, earlier this summer, Unilever vowed that it would not work with influencers who engage in these unfair and deceptive practices.

The Way I See It

The legal and regulatory risks associated with social media marketing are not going anywhere. Influencers must still disclose when they were paid by an advertiser to share content and any claims made on social media must still be truthful and substantiated.

But as the industry continues to evolve, the business risks will evolve with it.

Influencers offer a direct line to an advertiser’s audience. But they can also be volatile and difficult to control. There is no way to eliminate the PR fallout that can come with a botched influencer campaign, but advertisers can at least mitigate the risk by monitoring their influencers and insisting on the right clauses for their influencer agreements.