Digital Celebrities Rely on New Trade Group to Set Ad Disclosure Rules

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Andrew Fitzpatrick, online-famous for his humorous beat-boxing videos under the pseudonym 80Fitz, makes money from work for brands as an influencer, incorporating their products into his videos. The problem? There aren't clear rules for how to say he's been paid.

"I've done 25 to 30 campaigns for Fortune 500 companies and I think over the years the disclosure practices have literally never been consistent," he said. "Sometimes they want a hashtag, sometimes they don't require any disclosure at all." The hashtags vary, too, from the clear #ad label to the more vague #partner.

The Federal Trade Commission requires these sponsored influencer posts on social media such as Instagram and Twitter to disclose that they're ads. The agency sent several dozen warning letters to brands and online celebrities earlier this year to remind them to do so. Still, the practice isn't consistent. Now Fitzpatrick is pinning his hopes on a new trade group to clear things up.

An Influencer Marketing Council, comprised of brands, talent agencies and other influencer representatives, went into operation this week. Members are tasked with outlining a set of best practices for paid posts that are, in effect, ads.

Influencer marketing has become more widespread, with more than 200,000 such posts a month just on Facebook's Instagram, according to Captiv8, one of the groups on the new council. About half of marketers plan to increase their influencer budgets this year, says eMarketer. The top players are meeting this week in Anaheim, Calif., for the Vidcon conference, which draws thousands of fans of digital celebrities.

"We don't want to be in the business of tricking consumers," said Blaise D'Sylva, VP-media at beverage giant Dr Pepper Snapple Group and a founding member of the new council.

Disclosing paid posts is getting a little simpler, as applications including Instagram start to give influencers the option to use a standard label. But what about the grey areas, like when social media stars get expensive gifts and trips for free? Does that make their related posts ads? "Those are some of the things that we have to figure out and define," D'Sylva said.

The council hasn't yet discussed its goals with the FTC. Krishna Subramanian, co-founder of Captiv8, hopes the group can represent the influencer market in discussions with regulators, as well as with Facebook, Snap Inc. and Alphabet's YouTube. The committee aims to publish guidelines, along with examples, in a few months, so others in the industry can comment and help revise them, he said.

Influencers often start out as private people, and their popularity can ramp so quickly that if they get in trouble they're unlikely to have sufficient legal representation or advice, Subramanian said.

Digital content makers tend to rely on agencies and brands to tell them how to work within the law. Even then, it can be frustrating. Fitzpatrick recalls making a post for a large technology company on his Vine account in 2015. He marked it with the hashtag #ad. The company called him with an urgent request: Their lawyers had told them to use #sponsored. He had to take the post down, and re-post it with the new tag, potentially limiting its rapid spread on social media.

"The rules around it are just completely cloudy,'' Fitzpatrick said. "If I can pick the shortest, easiest hashtag, that's the one I'm gonna want.''

-- Bloomberg News

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