Sponsorships and Brand Deals: Small Businesses Welcome!

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 when it comes to new business owners. Small businesses may feel that a brand deal or sponsorship is only something a larger business would be able to pursue, but sponsorships are an incredibly valuable advertising tool for all businesses that should not be overlooked.

First and foremost, business owners may be wondering…

What is a brand deal?

A brand deal and sponsorship are similar– it’s when influencers are compensated to create content promoting a certain brand. However, when diving into the nitty gritty, the differences become important.[1]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 and receive payment as well.[2]

What is a sponsorship?

A sponsorship is when influencers create content promoting a brand with or without a product and are paid for it by a business. Essentially, this allows businesses to buy advertising within influencer space, such as an ad on Instagram or Facebook stories.[3]

At the end of the day, both are tools used for advertising.

Sponsorships and brand endorsements 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 as a means of keeping themselves and their social media career afloat.

One of the most difficult parts of starting a business, particularly a small business, is gaining exposure. One smart investment may be 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 that are regulated by the Federal Trade Commission (FTC).

How do sponsorships or brand deals work?

Sponsorships or brand deal can work a number of ways. Often, a brand will reach out to an influencer they believe will bring attention to their product that will help increase their revenue. In exchange for this advertisement, the brand or business will pay the influencer, send the influencer free merchandise in exchange for the merchandise.

As sponsorships have become more prevalent, it has become increasing more common for businesses to compensate influencers with free merchandise or product instead of a traditional check or payment. As a business owner, particularly if you are a business owner with limited means or a tight budget, asking the influencer to accept free merchandise may be more economic.

Federal Trade Commission (FTC)

The Federal Trade Commission (FTC) is tasked with the prevention of fraudulent or deceptive advertising, and “educating marketers about their responsibilities under truth-in-advertising laws and standards.”[4]

The FTC requires you to disclose when you have a financial, employment, personal, or family relationship with a brand.[5]

What is the FTC Disclosure Provision?

“The FTC Disclosure Provision is a law that requires social media influencers to disclose when they are being paid to promote a product or service. This provision was implemented to help protect consumers from false or misleading advertising. If you are a social media influencer, it is crucial to be aware of this law and to make sure you disclose any relationships with brands or businesses. Failure to do so could result in severe penalties, including fines.”[6]

FTC Additional Concerns

“The FTC is concerned that consumers can be misled if corporate funding sways an influencer’s opinions, or sponsorship isn’t disclosed. It considers this unfair competition.

For example, six years ago, Lord & Taylor (now defunct) gave 50 influencers a dress, and paid them each $1,000 to $4,000 to post pictures of themselves wearing it. Their posts, which reached 11.4 million Instagram users, made no mention of the payment or free goods. The dress sold out in two days. The FTC got a consent order.” [7]

How to Properly Disclose Brand Deals or Sponsorships  

1. 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 influencers to post, your business should ideally proofread the post. Financial relationship? Disclose it! Personal relationship? Disclose it!
2. Make sure the disclosure is VISIBLE. The disclosure should be placed with the endorsement message itself. Do not be sneaky about disclosures – make sure they are not hidden in about me pages, profile pages, or at the end of a caption. The consumer should not have to click “more” or do any additional work to discover the disclosure. Don’t mix your disclosure into a group of hashtags or links. [8]
   1. Photo Endorsements – The endorsement should be visible on the image or near the image. Ex: #Ad #Sponsorship #Paid
   2. Video Endorsements – The disclosure should be in both the video and in the description.
3. Use accessible language. Do not try to fool consumers. Be clear and concise. It is important the disclosure must be in the same language as the endorsement itself.
4. 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 endorsement.

The bottom line: As a small business owner, a fine from the FTC is not a business expense a small business would want to incur. Small businesses should be cautious and judicious with sponsorships. However, they should not allow these guidelines to limit them for pursuing sponsorships and pursuing advertising, as it could be tremendously valuable to their business.

SOURCES: 

Disclaimer: Images do not belong to me. Original source links to images can be reached by clicking on the image. The last image was obtained from this link.

[1] https://heyjessica.com/brand-deals-sponsorships-the-good-the-bad-and-the-ugly/

 

[2] Id.

[3] Id.

[4] https://later.com/blog/sponsored-instagram-posts/

 

[5] Id.

 

[6] https://www.linkedin.com/pulse/social-media-influencers-take-note-ftc-disclosure-provision-/?trk=pulse-article_more-articles_related-content-card

 

[7] https://news.bloomberglaw.com/tech-and-telecom-law/social-media-endorsements-cant-escape-ftcs-watch

 

[8] https://www.ftc.gov/system/files/documents/plain-language/1001a-influencer-guide-508_1.pdf