The alarm bells rang in March 2016, when the Federal Trade Commission went after Lord & Taylor. The company failed to disclose that it had paid fifty influencers up to $4,000 each to post photos to their personal Instagram accounts promoting the brand. None of those accounts made it clear that their posts were advertisements.
For decades, the FTC has required clear disclosure of advertising, but its guidelines have often lagged behind internet platform mechanics. Over the years, the FTC had issued a number of rulings, targeted at covert marketing and sponsored content on blogs, but social media remained a gray area. Instagram punished blatant ads early on for going against the spirit of the platform, but that was then. The whole point of sponsored content was to make it not look like an ad.
By the summer of 2016, industry watchdogs began calling out celebrities and content creators for deceptive advertising. Bloomberg reported that DJ Khaled failed to disclose that his Snapchat posts about Cîroc vodka were ads. Fashion lifestyle blogger Cara Loren Van Brocklin failed to disclose a sponsored post for PCA Skin sunscreen. Tavi Gevinson, who had come to fame when she started the fashion blog Style Rookie as an eleven-year-old, promoted her life in a luxury Brooklyn apartment building without revealing that she’d been given a discount on rent.
Members of the Kardashian family, who were famous for their sponsored-content deals, also came under fire. They followed tactics that bloggers had pioneered before them, weaving sponsored posts into their content and building up aspirational online personas. Even as most celebrities had yet to embrace the platform, members of the Kardashian family were using it to communicate directly with their fans, building a valuable and very monetizable bond with their audience. As Kim put it, social media was “my free focus group.”
The Kardashians’ investment in online spaces upended the format of modern celebrity. Kim launched a mobile app and a line of “Kimoji”custom emojis, netting her millions of dollars. (Her then-husband memorably rapped, “We made a million a minute.”) Khloe launched a clothing line called Good American. Kylie launched a beauty and skincare line called Kylie Cosmetics. After Kylie copped to using lip fillers, requests for information about the injectables rose by 70 percent within twenty-four hours in the U.K. When she tweeted about not using Snapchat anymore in 2018, the company’s market value plunged by $1.3 billion.
Back in 2016, a few months after the FTC confronted Lord & Taylor, Truth in Advertising, a consumer protection nonprofit, sent a “legal letter” to the Kardashians, lambasting them for their failure to disclose sponsored-content deals “as is required by federal law.” Puma, Calvin Klein, Karl Lagerfeld, and Estée Lauder were among the twenty-seven companies the organization listed as part of the complaint. Truth in Advertising threatened to report the Kardashians to the FTC if the sponsored posts were not removed. Days later, recent posts from Kim, Kourtney, Kylie, and Khloe Kardashian were updated to include the hashtag #ad.
While this short hashtag at the bottom of a long post may seem slight, the issue was of tremendous importance in the online creator world. Some influencers’ livelihoods depended on the money they made from unacknowledged endorsements. Creators worried that revealing which brands were paying them would kill their authenticity, repelling their audience. Even the influencers who strove for transparency were wary of angering advertisers by adding disclosure if they weren’t explicitly asked to. Advertisers, for their part, thought consumers would be less likely to buy products if they saw influencers’ posts as ads. Disclosure, they all understood, would stop the music.
By 2016, Instagram had stopped interfering with all but the most egregious promotional schemes on its platform. The company didn’t tolerate outright scams, but it no longer wished to steer its fast-growing and influential user base away from monetizing. Plus, brand activity of any kind boosted Instagram’s official ad rates and established Instagram as the place to be seen.
It fell on the FTC, then, to rein in the bonanza. In April 2017, it issued a warning to advertisers and content creators, sending over ninety letters to celebrities, athletes, and content creators as well as to the brands they worked with. Their message was clear: disclose sponsorships or face consequences.
The last thing advertisers wanted was for their multimillion-dollar marketing campaigns to lead to an embarrassing lawsuit. Nick Cicero, the former CEO of influencer marketing agency Delmondo, told Bloomberg, “For a lot of years it was really really loose, and you could get away with a lot more.” Now, he was telling all of his clients to use the hashtag #ad without exception.
Fohr’s James Nord said that after the FTC crackdown, the industry changed overnight. “If a post for a brand campaign that Fohr had organized didn’t include disclosure, they could stop us from doing sponsored posts for two years,” he said. “It would ruin our business. So all of the agencies and brands that worked with influencers took that very seriously. We started to push influencers to disclose. Influencers didn’t want to disclose, but we had to make them do it.”
Throughout 2017, more creators began to openly disclose sponsorships. YouTubers explained that they were being paid for unboxing videos. Instagram creators disclosed that the hotels they were staying in were comped. Musical.ly stars revealed that they were paid to promote the clothing brands they wore.
Instagram itself introduced a new feature designed to increase transparency around sponsored content and help users better differentiate between paid posts and organic ones. The feature displayed the phrase “Paid partnership with . . .” above sponsored posts and stories created by users promoting brands or products.
“There was a lot of fear,” said Nord. Creators and advertisers alike worried that transparent disclosure would destroy everything that made the content creator space work. “People thought that this type of marketing was so effective because it didn’t feel like an ad,” said Nord, “and by saying it was an ad, people thought it wouldn’t be effective.”
Once the “paid partnership” labels and #ad hashtags appeared, everyone held their breath. They waited for engagement to plummet. Advertisers and creators alike readied themselves for big losses. The media and many in the tech industry reveled in influencers’ imminent downfall. Silicon Valley venture capitalists and journalists gloated that finally online creators would have get “real jobs.” “[Influencers are] eager to assert the legitimacy of influencing as an actual business,” one snarky story from 2017 read, “even though no one is exactly sure what influencing entails besides taking selfies.”
But the crash never came.
“We all waited, but then nothing happened,” said Nord. “It was a big nothing. No one’s engagement dropped.”
Advertisers and creators were shocked. Not only did their followers not seem to care that their posts were sponsored, some actually engaged with sponsored content at an even higher rate when labeled as such. “What we misjudged is that audiences actually thought it was cool that brands they knew and respected were working with creators that they respected and followed,” said Nord.
The episode demonstrated that followers’ admiration for their favorite social media stars was stronger than their distaste for ads. The bond between online creators and their audiences had become so deep that brand deals could be experienced vicariously too. Followers celebrated when creators landed bigger and bigger brand deals. Followers felt that they were playing a role in their favorite creators’ success, which they were: when it came to brand interest, follower count and engagement metrics mattered.
Before the FTC ruling, most creators took on brand partnerships selectively. Once they realized their followers didn’t care about ads, and in fact celebrated them, all bets were off.
“Once they became open with disclosures and the audiences didn’t rebel, it was like floodgates opened,” Nord said. “People’s feeds went from five to ten percent sponsored content to forty percent sponsored content really quickly, because they felt like they had permission to do it.” Now everyone wanted to know how they could cash in. “That’s when the rat race really started in the creator space,” Nord added. “Everyone wanted to know who was getting what deals, who was growing, who was not, and what were they charging.”
The FTC could not have done creators a bigger service.
The boom in sponsored content in the late 2010s also had some strange consequences, consequences that brands could never have imagined even a few years earlier.
In 2018, a content creator named Palak Joshi posted a photo that looked like standard sponsored content: a shiny white box emblazoned with the red logo of the Chinese phone manufacturer OnePlus, shot from above on a concrete background. The post included the branded hashtag tied to the marketing campaign for the phone’s launch, and her post tagged OnePlus’s Instagram handle. The post was nearly identical to posts from the company and other content creators announcing the launch of OnePlus’s new Android phone. Joshi’s post, however, wasn’t an ad. “It looked sponsored, but it’s not,” she told me. Her followers viewed it as just another sponsored post. “They just assume everything is sponsored when it really isn’t,” she said. Joshi said she wanted it that way.
Sponsorship was no longer seen as selling out. By 2018, a brand deal had become a status symbol. If you got a good brand deal, you were seen as successful; if not, you were negligible. Content creators began faking sponsored content. Sydney Pugh, a lifestyle influencer in Los Angeles, staged a fake ad for a local café, purchasing her own mug of coffee, photographing it, and writing the caption in a highly promotional way as if to sound like it was sponsored. “Instead of [captioning] ‘I need coffee to get through the day,’ mine will say ‘I love Alfred’s coffee because of A, B, C,’” Pugh said. “You see the same things over and over on actual sponsored posts, so it becomes really easy to emulate, even if you’re not getting paid.
Creators paid their own way for luxury vacations but posted as if the airlines and hotels had comped them. They tagged the clothing they wore and promoted the food they ate as if it were given to them for free. When Christian Dior relaunched its famous Saddle bag in a massive marketing blitz in mid-2018, scores of creators were gifted the $2,000-plus bag and paid to post about it on social media. The campaign was chaos—and a perfect encapsulation of the state of influencer marketing. While some creators who were actually paid to promote the bag failed to disclose they were part of the campaign, other creators who were never part of the campaign simply purchased their own bag and posted as if they had been invited to participate in the campaign, tagging their posts with #ad.
While the FTC had been explicit that paid advertisements needed to be disclosed, there was no rule against pretending that a post was a paid advertisement. Monica Ahanonu, an illustrator and Instagram creator, told me at the time that fake sponsored content was so rampant that she was losing track of what was sponsored and what wasn’t. Members of Generation Z, who were coming of age immersed in this ecosystem, were some of the most likely to fake sponsored content. “People pretend to have brand deals to seem cool,” one fifteen-year-old told me. “It’s a thing, like, I got this for free while all you losers are paying.”
“We did a big NARS campaign and there were a bunch of people posting #ad that weren’t in the campaign,” said James Nord. “We asked them to take it down. We said, ‘You’re not part of this.’ But it became this validation.”
“In the influencer world, it’s street cred,” said Brian Phanthao, a young lifestyle influencer. “The more sponsors you have, the more credibility you have. It’s really common with kids in high school. They’re very influenced by influencers.”
Most marketers were thrilled with the free advertising, but high-end brands were frustrated. They worried that their brands were being devalued by teenagers and low-level content creators acting like they’d partnered on campaigns. Some resolved this by creating lists of “official partners” or highlighting the creators they had real partnerships with on their own Instagram feed. Few users consulted these references, however, and the imposters campaigned on.
From EXTREMELY ONLINE: The Untold Story of Fame, Influence, and Power on the Internet by Taylor Lorenz. Copyright © 2023 by Taylor Lorenz. Reprinted by permission of Simon & Schuster, Inc.