In a previous post we covered the fact that many online video creators were not properly disclosing paid sponsorships according to FTC guidelines. In this video and post we discuss the state of the industry and how you can properly disclose your paid sponsorships or endorsements in online video.  Welcome to another episode of How To’s Day.

Why Video Creators Should Disclose Paid Sponsorships/Reviews

One of the most important connections between creators and their audience is their trust.  When an audience believes the video they are watching is a genuinely honest review or promotion, it carries much more weight than if it were just a paid advertisement.  But wait, there’s more.  Despite the value of an honest review to viewers, it may not always hold the most value for the creators.  Crafting a video that feels genuine, but is in fact a paid opinion or advertisement, could potentially make a lot more money for both the creator and the advertiser.  This is true especially when the creator is working on an inflated CPM for the endorsement.  It is in their best interest to get the maximum views on the video.  Walking that fine line can help the video feel less like an advertisement and increase the likelihood that viewers will watch it and take action based upon the opinions of the creator.

Microsoft and Paid Xbox Endorsements: Why it Mattered

Take for example Microsoft’s use of Machinima to promote the Xbox One last year.  As part of the leaked contract, partners were to feature 30 seconds of game footage and talk about the product without saying, “anything negative or disparaging about Machinima, Xbox One or any of its games” in the campaign video.   All of this would come with a substantial $3 CPM boost for creators.  Compound this with the fact that Machinima’s partners were not disclosing the partnership with Microsoft originally and it creates a situation that appears to be a hidden paid advertisement for positive comments about a new product. According to

"Microsoft was not aware of individual contracts Machinima had with their content providers as part of this promotion and [they] didn’t provide feedback on any of the videos”.

Leveraging the power of a community to promote a product is a huge value to companies like Microsoft, but also difficult to manage.  Once the details were discovered they requested that Machinima, “add disclaimers to the videos that were part of this program indicating they were part of paid advertising”. The Microsoft stirred up a lot of opinions in the industry, with many bloggers taking to YouTube to discuss the issue:

Disclose Sponsored Videos: FTC Guidelines are Standard

The crazy thing about this practice is not that it happened, but that it is actually commonplace.  And to be fair, it’s not necessarily wrong if properly disclosed by FTC standards.  It is only misleading and dishonest when not disclosed in a fashion that makes it obvious that it is a paid endorsement. The following may be a parody, but instances of blatant product promotion where the sponsorship hasn't been declared are becoming very common:

What are the FTC Guidelines for Video Creators?

The guides for how to handle disclosures have actually been around since 1980, but were recently updated in 2009 to reflect the changing landscape of mediaAre you a little surprised to hear the FTC reacted to YouTube so swiftly and yet here we are 6 years later having this conversation?  I am too.  The guiding principle to their rulings is centered on the idea that a paid advertisement or the opinion of an employee should be disclosed as such, to allow the consumers to make an honest decision about their purchases.

  1. Endorsements must be truthful and not misleading. You can’t make claims about a product that has proof you don’t have. Both the advertiser and endorser could be held responsible for a deceptive endorsement
  1. Testimonials claiming specific results generally mean the endorser’s experience is what other people can expect. Either have proof to back up results OR clearly disclose expected results for most people.  It’s not ok to just make blanket statements like “results may vary”.
  1. It is the law and has always been the law that any connection between an endorser and an advertiser must be disclosed. This is defined as any connection between the endorser and “seller” that could impact the opinion of the endorsement.
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As part of the 2009 update from the FTC, the list of things included in the guidelines was updated to include blogs, social networks and online discussions. If you are just connecting with friends and family and talking about what is going on in your lives, it will not apply to you. If you are getting paid or getting products or services in exchange for your thoughts on a product, your relationship should be disclosed. There is no hard and fast way to make these disclosures, but the fact they are required when endorsing a product is something that should always be done.

FTC Guidelines For Creators:

The simplest way to disclose these connections is to do so up front in your video.  Say it explicitly and out loud exactly what your connection is to the product or company.  Don’t rely on an annotation or a graphic that may not be available on an embedded version of your video.  Be up front and honest about your connection.  Yes, it may impact the views you get and your ability to maintain retention, but the transparency and honesty will make you completely covered.  A loyal fan base should understand that you have to pay the bills and will generally reward you for your honesty.  Explain to them that paid advertisements like this enable you to make the great content they love.

FTC Guidelines For Companies/Marketing Agencies:

Review endorsement videos before you allow them to go live.  This is particularly challenging when working with larger YouTube MCNs that may offer your advertising deal to hundreds of their partners, but make sure you are covered. According to the FTC:

....the Guides are not regulations, and so there are no civil penalties associated with them. But if advertisers don’t follow the guides, the FTC may decide to investigate whether the practices are unfair or deceptive under the FTC Act.

This really puts the onus on you to ensure that those you work with are speaking honestly about your product.  While the video creator may just get in some hot water with their audience, you could have real consequences, much like Sony did in 2014 when they were required to issue refunds over misleading ads.

YouTube: 2015 Updated Guidelines for Sponsored Content

Twitch has taken a hardline stance to how they handle sponsored content, requiring all sponsored content to be clearly identifiable.  Directly in line with FTC guidelines. YouTube recently modified their approach to urge brands to work through Google’s sales team for deals.  While YouTube is lacking in a real, enforced policy related to sponsored content, this move would give Google more direct control of how the deals become video.

Rather than making strict rules for endorsements, it appears that social media sites like YouTube are taking a slightly more hands off approach and waiting for creators and brands alike to realize that there are guidelines already in place from the FTC that apply to them and always have.

It doesn’t appear that the FTC is going to add any new rules for Web creators.  They seem to feel what is on the books is sufficient and has been working for years.  They are just looking for the new media industry to catch up with traditional media.  There continues to be no real risk for the content creators legally, but a dishonest approach that lacks transparency can not only offend an audience, it could scare off potential advertisers who wish to minimize their risk of an FTC probe.  It seems the responsibility of enforcing the FTC guidelines is clearly on the shoulders of advertisers, who need to ensure that those they work with in online video are following the proper guidelines.

What do you think about sponsored content and the FTC guidelines? Are they strict enough? Let us know in the comments below.