As the fastest-growing social media platform, Instagram and its 700 million global users have fueled the rise of an influencer marketing industry expected to exceed $2 billion by 2019.

As many as 70% of brands across industries have influencer partnerships on Instagram, according to L2’s Influencer report, which analyzes 1,152 brands and their relationships with over 5,000 influencers. This explosive growth has given rise to several challenges.

Influencers

As traditional spend shifts to influencers, many brands are struggling to develop models that can clearly articulate ROI from influencer-based campaigns. It can also be challenging for brands to maintain the perception of authenticity in influencer relationships where money is changing hands.

The Federal Trade Commission requires influencers to use the hashtag “#ad” to disclose any “material connection” to a product or brand. This applies not only to posts for which there is an explicit monetary transaction, but also those promoting items the influencer received as a gift and any post that could be construed as a component of a larger endorsement deal, such as Rihanna’s relationship with Puma. Vague hashtags like “#partner” aren’t considered to be proper disclosures, and tagging the sponsor is also considered to be insufficient.

To date, these guidelines have been widely ignored. Less than 10% of endorsements by the 50 most popular celebrity influencers were properly disclosed, according to one estimate.  

However, the FTC is not standing idly by. More than 20 celebrity influencers including Amber Rose, Naomi Campbell, and Vanessa Hudgens recently received formal warnings regarding inadequate disclosures.

The good news here is that full disclosure and more cohesion around hashtag usage are both tactics that are in a brand’s best interest to pursue.  Because authenticity is so crucial to the way influencer campaigns are received by consumers, anything that detracts from this perception could cripple the effectiveness of the model. Defining memorable hashtags and discount codes that resonate with both paid influencers and consumer advocates makes it easier to track content and conversions, and by extension, ROI.

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