With the speed of the influencer marketing industry’s growth - from a value of $1.7 billion in 2016 to $16.4 billion in 2022 - comes the rising importance of regulation to ensure it evolves in a responsible direction.
This includes ensuring clear and transparent ad labelling for sponsored content. A rule that all creators must follow, no matter how famous - as Kim Kardashian found out this month. On Monday 3 October, she agreed to pay a $1.26 million fine to the Securities and Exchange Commission to settle civil charges after failing to disclose that she had been paid $250,000 to promote crypto asset, EthereumMax, on Instagram.
The importance of industry regulation
In such a fast growing and dynamic industry, it can be difficult to police all the content that’s published on social media platforms. At the birth of the industry, there were grey areas which the industry bodies had to adapt to quickly. However, over time, legislation has been refined. Today, a robust set of measures exist to protect consumers, creators and brands, with punishments to deter behaviour which falls short.
Kim’s fine is a reassuring reminder of the protection offered by the SEC and FTC in the US and the ASA and the CMA in the UK, as well as the consequences for creators and brands who fail to uphold their responsibilities as advertisers in the influencer marketing industry.
This includes creators endorsing products and services they genuinely believe in and being transparent with paid partnerships. Crucially, this builds trust - an essential ingredient for a successful influencer-consumer relationship. Influencers who fall foul of this responsibility such as Kim Kardashian risk damaging relationships with consumers and brands
The growth of ‘finfluencers’
Influencers also have an implied responsibility to protect consumers with sound advice, especially when promoting products or services of a sensitive nature - such as in the medical or financial sector. The consequences of illegitimate or misinformed recommendations in these instances could have significant consequences for consumers, and by extension the brands and influencers involved in any promoted content.
In this instance, Kim’s promotion of a highly speculative asset such as cryptocurrency could lead consumers to invest and accrue financial losses. But Kim’s partnership with Ethereum Max is not an isolated incident. Increasingly, since the start of the pandemic, there has been a significant rise in unregulated financial advice across social media platforms - including from celebrities like Elon Musk whose Twitter posts affected the value of cryptocurrencies.
The rising cost-of-living crisis only increases the demand among consumers for personal finance advice - including on their favourite social media platforms. Whilst we should encourage financial literacy, brands and agencies in the financial sector should approach paid content promotions with caution and seek expert consultation - especially at a time when household budgets are being squeezed.
Ensuring that financial content is ethical and aligned with industry regulation is essential. To reduce risk, brands should only partner with creators who are themselves accredited financial advisors. Marketers, creators and industry regulators must also continue to work closely together to keep consumers protected and to respect the fair and transparent industry that people want.
Above all, Kim Kardashian’s fine serves as an important reminder for brands and creators operating in the financial sector that paid partnerships pose serious risks if mishandled.
Written by Thomas Walters, founder and UK CEO of influencer specialist agency Billion Dollar Boy
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