While watching your favorite Thursday night sitcom, you see the main character guzzling a can of Diet Coke. You know why that specific brand of soft drink was chosen to be prominently showcased in the show: product placement. And you know that soft drink companies pay a lot of money to have their drink be the one that the actor is holding (maybe not even drinking, but just holding!). So if you were to open up Instagram and see a celebrity partying with a bottle of the newest vodka brand in her hand, is the celebrity simply sharing the joyous occasion with you and her closest 100,000+ followers, or was she paid $25,000 to post the photo with the vodka bottle prominently displayed front and center? Does the celebrity love the vodka? What if she did not even drink it? Does it make a difference? The FTC thinks it does and wants celebrities, and influencers – individuals that amass a large following on a social network – to be crystal clear about paid relationships when socially endorsing products.
Don’t think it is that big of a deal? Your opinion may change when you follow the money. According to the Insta Index, a report created by Dr. Mariann Hardey for Takumi, a company that manages and sells influencer marketing campaigns in the UK, here are some numbers to digest:
| Number of Followers | Rate of Return Per Post | Weekly Earnings (based on 2 posts per week) | Annual Earnings | |
| Smaller Influencer | 1,000+ | $52 | $104 | $5,408 |
| 5,000+ | $97 | $194 | $10,088 | |
| 10,000+ | $195 | $390 | $20,280 | |
| 15,000+ | $292 | $584 | $30,368 | |
| Medium Influencer | 20,000+ | $390 | $780 | $40,560 |
| 50,000+ | $975 | $1,950 | $101,400 | |
| Major Influencer | 100,000+ | $1,950 | $3,900 | $202,800 |
The breakdown above does not even take into account actual celebrities, those who can credit their fame to successful careers (think musician, singer, actor, or model). Selena Gomez, for example, is reportedly the most influential celebrity at the moment, with over 200 million followers on Facebook, Twitter, and Instagram combined. When she is paid to post a photo with a specific product, the industry likes to call it a sponsored image or collaboration, but that’s just fancy talk for advertisement. Oh and when Ms. Gomez posts said photo on all three social media platforms, where it has the best opportunity to reach the majority of her 200 million followers, it can be worth $550,000, according to Us Weekly. $550,000 for posting one photo. Welcome to 2016, America!
Advertising with personal endorsements is nothing new, but the FTC wants consumers to know when they’re being sold to, and sponsored or paid posts on social media platforms are simply today’s delivery vehicle. Consumers aged 18-25 do not react to television marketing as favorably as older generations because they consume less media on TV; instead, they consume media socially on platforms like Facebook, Twitter, Instagram, Snapchat, YouTube, and many more. So that is where advertisers are investing their budgets. According to Captiv8, a company that connects influencers with brands, some brands spend more than $225 million monthly marketing via influencers on Instagram alone.
The FTC is hip on this marketplace evolution and knows that celebrities and influencers can be paid cash or compensated with free products, and wants any and all of the advertisements to be clearly disclosed. Instead of burying “AD” – the simple two letter abbreviation for advertisement (and a time period, but I digress) – in a long body of text below a photo, they want it at the beginning of the post. Other designations, such as “SP” or “Sponsored”, meant to designate a sponsored post, do not clearly inform the consumer it is an advertisement. The FTC wants disclosures at the beginning of posts instead of buried at the end, and when it comes to video platforms like YouTube and SnapChat, disclosure needs to be said out loud or displayed on the screen.
As digital media continues to evolve, so will the rules that follow the money. How will brands know when they need to disclose a post as an advertisement? The FTC offers this basic test: If a consumer knew an endorser was compensated in any way, would that alter the view of the endorsement? In the overwhelming majority of cases, the FTC says yes. To be safe, brands can use the hashtag #ad at the beginning of all social posts where the individual is compensated – cash or otherwise – for sharing a story, photograph, video, or other social media post with the advertised product, regardless of how much the individual promoting it personally loves it or hates it.