3 rules for doing influencer marketing right

Kim Kardashian showed just how easy it is to slip up legally — here’s how to do it better.

Kim Kardashian, not a third party, was ultimately held responsible by the SEC. (Photo credit: Getty Images).

NEW YORK: Agencies are showing no sign of slowing down their influencer marketing efforts. Firms are building out their influencer teams and can’t get enough of using TikTok and Instagram stars to share messages with hundreds of thousands of followers.

With all the buzz about influencer marketing, it’s important to take a step back to reflect. Ask yourself, why are social media celebs the right vehicle to share my message, and have I done the legwork to understand how to properly enter that space?

Influencer marketing can blow up in one’s face without proper research. The Securities and Exchange Commission recently fined Kim Kardashian $1.26 million for failing to disclose a $250,000 payment for promoting crypto brand EthereumMax on Instagram, even though she put #ad at the bottom of her post. With that in mind, here are three things to keep in mind before you work with the hottest influencers on the market.

Be wary of promoting emerging products with ill-defined regulations

The SEC hasn’t decided whether or not to formally define cryptocurrency as a security, the same way it might a stock, bond or option. SEC chair Gary Gensler has hinted that crypto may fall under the category several times, but has not provided a clear and unified set of regulations for it. By getting involved in the Kardashian case, the commission has taken one of its strongest stances yet. 

When it comes to influencers marketing crypto or a similarly nebulous product, agencies and firms need to be wary of setting precedents as Kardashian did.

“It means a lot in terms of the next generation of influencer marketing,” said Mae Karwowski, CEO of influencer marketing agency Obviously. “Anything investor related, the SEC has clearly weighed in at what’s acceptable and what’s not. They’ve made Kim Kardashian an example of that.”

Navigating nascent markets, especially financial ones, will be a challenge as the SEC defines how emerging digital currency and financial practices fit into pre-existing laws. They include the anti-touting provisions in the Securities Act of 1933, which requires people who are getting paid to promote a security to disclose how much they are getting paid and the source and nature of those payments.

Karwowski’s plan? Just stay away until the rules become clearer.

“I don’t think we’re going to work on any cryptocurrency campaigns anytime soon,” she said. “Maybe several years from now, once the space is much better to find the legality of promoting online.”

If things go wrong, it’s on the influencer

Money didn’t go right from EthereumMax into Kardashian’s hands. The crypto brand paid her through an unnamed intermediary.

And yet, it’s Kardashian herself who took the brunt of the SEC’s wrath.

“It’s incumbent ultimately on the creator since they’re the one that ends up holding the bag if things go sideways,” said Jordan Fox, CEO of marketing agency Laundry Service. “If money flowed from point A to point C, it doesn’t matter what point B is.”

“If you’re using an influencer marketing agency, it’s really worth diligently looking at their compliance policies and the extent to which they adhere to those compliance policies because it ends up being really important to protect you,” Fox said. 

Ultimately, it’s influencers who are responsible for providing sound endorsements that won’t harm consumers, especially when it comes to financial endorsements. Any influencer should know that they’ll be held responsible if things go wrong.

Don’t promote things you don’t understand or genuinely endorse

Putting aside moral claims about believing in the things you stand for, influencers need to know some things about what they’re endorsing on top of knowing how to talk about them.

“Make sure you know a lot about and have done your own research on what you’re promoting,” Karwowski said. “That’s sound advice for building your career as a creator because if you lose that voice of authenticity…you’re going to turn off a lot of people when you do that.”

In 2019, the Federal Trade Commission released a guide for influencers and disclosing advertisements on social media. It includes information that influencers should know, lest they face the consequences, like where to place disclosures, how to use plain language and why you shouldn’t place disclosures amongst a sea of hashtags. Influencers should familiarize themselves with these rules and the products they endorse.

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