Social Media Stars Feel Pinch Of Regulatory Agency

By Marco Santana
Orlando Sentinel

WWR Article Summary (tl;dr) Regulation of the so-called “sponsored social” advertising industry is being called into question after the FTC’s recent reprimand of Warner Brothers.

Orlando Sentinel

It may appear that YouTube user PewDiePie’s love for playing Warner Brothers’ “Middle Earth: Shadow of Mordor” video game was genuine and innocuous — but the federal government says the YouTube star was paid for his endorsement of the game.

A recent Federal Trade Commission scolding of Warner Brothers has put the spotlight on celebrity endorsers on YouTube, including the popular PewDiePie, who has more than 47 million subscribers. It also opened the door to more-frequent regulation of the so-called “sponsored social” advertising industry.

The Federal Trade Commission said in July that companies that hire Internet celebrities who produce sponsored content must reveal that arrangement clearly. One local entrepreneur in the space says it’s about time.

“I’m happy to see that the Federal Trade Commission is getting more aggressive and more vocal and going after big brands and well-known names,” said Ted Murphy, whose Orlando company Izea serves as a platform for celebrities to get paid for advertising brands on social media. “I don’t think the majority of people have taken that seriously.”

Aside from Winter Park’s Izea, which has been a leader in sponsored social content, the region also plays home to several companies that create social-media content for others.

Chatter Buzz runs social-media accounts for clients. Another firm — Purple, Rock, Scissors — creates videos and other content using platforms such as Facebook 360 for companies to share on their websites and platforms. But Chatter Buzz and Purple Rock have clear agreements with customers about how the content will be used.

Warner Brothers, on the other hand, was more subtle about their advertisements, the FTC said.

Enforcement could be tough for smaller-profile pitchmen and women, but the FTC’s pursuit of agreements with high-profile stars could set an example.

In penalizing Warner Brothers, the agency wanted to send a message, as well, to YouTube celebrities, including PewDiePie, a 26-year-old Swedish gamer whose real name is Felix Kjellberg.

The agency said in a release that Kjellberg and other YouTube broadcasters had failed to sufficiently reveal that they had been paid by Warner Brothers for the game reviews.

On his YouTube channel under the video, Kjellberg posted a note that read “This video was sponsored by Warner Brother[s].”

The FTC said that was not prominent enough.

There was no mention of the sponsorship in the video and the disclaimer only appeared after a user clicked on a button below the video.

Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a news release that the case againstn Warner Brothers was crucial to ensure online viewers are protected.

“Consumers have the right to know if reviewers are providing their own opinions or paid sales pitches,” she said. “Companies like Warner Brothers need to be straight with consumers in their online-ad campaigns.”

The dustup highlighted a dispute over whether internet celebrities must play by the same rules as traditional celebrities, who have a long history of endorsing products, first on radio and then on television.

Some say violations will be tough to track.

“There certainly should be some regulation but it will be very challenging for them to enforce,” said Shalyn Dever, founder of Chatter Buzz in Orlando, which conducts social media campaigns for clients.

Dever pointed at websites such as Fiverr, an online marketplace for people who sell specific services for $5.

She said that if a company wanted to pay $5 to someone who has a social-media following for a positive video about their product, there is little the FTC can do to stop the company from circulating that video repeatedly.

The Federal Trade Commission in 2010 updated its rules about disclosure of paid advertising to govern internet-based celebrities The rules are in place to keep companies from intentionally deceiving consumers, said David Vladeck, a Georgetown University professor who had led the FTC’s consumer-protection division at the time.

“We don’t want to inhibit the growth of social media as a way for consumers to get advice from other consumers,” he said.

“But if people are being paid or compensated to make these claims, that goes to the credibility of the endorser.”

In March, Lord & Taylor was dinged by the FTC for paying for what was passed off as an objective article in an online publication.

Vladeck said updates to the agency’s rules made clear that social media fell under the same rules as television and radio in the past.

“We have, for a long time, said that when you are endorsing a product, unless it’s clear like a television ad, you have to at least acknowledge that you are being compensated,” Vladeck said. “You need to make that clear. We updated our endorsement guide in 2010 to make crystal clear that we are also talking about social media.”

Bloggers also must disclose when they have been paid to write a post.

At Izea, the disclosure is made automatically by the program as it prepares a social-media post, Murphy said. For instance, tweets include a hashtag that says, #ad.

“As a consumer who uses social media constantly, I want to know if there is a relationship there and whether they are sponsored,” Murphy said.

Izea in 2009 created “Sponsored Tweets,” a platform that connects brands to potential celebrity pitch men and women. At the time, Twitter had 6 million active users. It now has more than 300 million.

Any celebrity who joins Izea can broadcast their audience size on social media, letting brands know what kind of reach a Tweet or other social media post could receive.

“I wish (regulation) wasn’t a necessary evil,” he said. “I wish the industry self regulated and I think you have a lot of players in the space that do play by the rules. But you have a ton out there that don’t know the rules or don’t care. That’s the challenge.”

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