by Maheen Naz
Often, at the very heart of a successful business is successful advertising. Advertising is a decades-old industry. Sponsorships, however, are relatively new and exciting, especially for new business owners. Small businesses may feel that brand deals and sponsorships are only something larger businesses can pursue. However, these advertising tools are incredibly valuable for businesses of all sizes. Business owners should not overlook them.
Brand Deal vs. Sponsorship
Brand deals and sponsorships are similar. Both involve compensating influencers to create content promoting a certain brand. However, when diving into the nitty gritty, the differences become important.
Brand deals are often also called brand endorsements. One example of a brand deal would be Apple sending an influencer an Apple device and asking them to make a video about it. Afterward, the influencer would get to keep the product while also receiving payment.
Sponsorships are when a business pays an influencer to create content promoting a brand, with or without a product. Essentially, sponsorships allow businesses to buy advertising within the influencer space, such as an ad on Instagram or Facebook stories.
At the end of the day, both sponsorships and brand deals are advertising tools. Sponsorships and brand deals dominate the social media space. Whether consumers recognize it or not, many of their favorite and most trusted social media influencers pursue sponsorships and brand deals to keep themselves and their social media careers afloat.
One of the most difficult parts of starting a business, particularly a small business, is gaining exposure. It may be a smart investment to pay a social media influencer with a large following to promote your business or brand. By doing this paid promotion, you provide the social media influencer with a brand sponsorship. However, brand sponsorships come with their fair share of regulations and disclosure requirements regulated by the Federal Trade Commission.
How do Sponsorships AND Brand Deals Work?
Sponsorships and brand deals can work in several ways. Often, a brand will reach out to an influencer they believe will bring attention to their product to help increase their revenue. In exchange for this advertisement, the brand or business will pay the influencer or send the influencer free merchandise.
Since sponsorships have become more prevalent, it is more common for businesses to compensate influencers with free products instead of traditional payment. As a business owner, particularly one with limited means, asking the influencer to accept free merchandise may be more economical.
The Federal Trade Commission
The Federal Trade Commission (FTC) is responsible for preventing fraudulent or deceptive advertising and “educating marketers about their responsibilities under truth-in-advertising laws and standards.” The FTC requires you to disclose when you have a financial, employment, or personal relationship with a brand.
The FTC Disclosure Provision
The FTC Disclosure Provision requires social media influencers to disclose any payment they receive to promote a product or service. The disclosure provision helps protect consumers from false or misleading advertising. If an influencer does not disclose the advertisement, consumers will not know that corporate funding is involved and might be swaying the influencer’s opinion. This business practice constitutes unfair competition.
For example, Lord & Taylor gave 50 influencers a free dress in 2015. The company then paid each influencer $1,000 to $4,000 to post a photo of themselves in the dress. The influencers’ posts reached 11.4 million Instagram users who bought the dress, selling it out in two days. Since each post failed to disclose that the influencer received a free dress and payment for their photo, the FTC got involved.
This example is a reminder that social media influencers and small businesses must be aware of the FTC Disclosure Provision. Everyone involved must make sure that the influencer discloses any relationship with the brand or business. Failure to disclose could result in severe penalties, including fines.
How to Properly Disclose Brand Deals or Sponsorships
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- Disclose, disclose, disclose! When it comes to the FTC, disclosure is your best bet to ensure you stay out of any legal trouble. Before asking for an influencer to post, your business should ideally proofread the post to ensure disclosure has occurred. Financial relationship? Disclose it! Personal relationship? Disclose it!
- Make sure the disclosure is VISIBLE. Place the disclosure within the endorsement message itself. Do not be sneaky about disclosures. Do not hide disclosures in about me pages, profile pages, or at the end of a caption. Do not mix your disclosure into a group of hashtags or links. The consumer should not have to click “more” or do any additional work to discover the disclosure.
- Photo Endorsements – The endorsement should be visible on the image or near the image. Ex: #Ad #Sponsorship #Paid
- Video Endorsements – The disclosure should be in both the video and the description.
- Use accessible language. Do not try to fool consumers. Be clear and concise. Make sure the disclosure is in the same language as the endorsement itself.
- Encourage honesty. At the end of the day, try to pick an influencer who actually believes in their endorsement. Their honesty will shine through in their post.
The Bottom Line
As a small business owner, a fine from the FTC is not a business expense one wants to incur. Small businesses should be cautious and judicious with sponsorships. However, they should not allow the FTC’s guidelines to limit them from pursuing sponsorships and advertising as a whole since it could be tremendously valuable to their business.
This post has been reproduced and updated with the author’s permission. It was originally authored on March 27, 2023 and can be found here.
Maheen Naz, at the time of this post, is a recent graduate of Penn State Dickinson Law. She was born and raised in New York City. She loves to read, watch horror movies, drink hot chocolate, and bake. She is passionate about people, linguistics, and fashion.
SOURCES:
https://heyjessica.com/brand-deals-sponsorships-the-good-the-bad-and-the-ugly/
https://later.com/blog/sponsored-instagram-posts/
https://news.bloomberglaw.com/tech-and-telecom-law/social-media-endorsements-cant-escape-ftcs-watch
https://www.ftc.gov/system/files/documents/plain-language/1001a-influencer-guide-508_1.pdf