Jun 17, 2024 | ALI CLE, Entertainment, Arts, Sports, The Practical Lawyer

Navigating Legal Considerations in Influencer Marketing: A Guide for Attorneys by Jim Chester presented by ALI CLE

For many years, the most valuable form of consumer advertising involved television commercials. Many television ads featured people extolling the virtues of various products and services, and these endorsements typically came from the ranks of athletes and celebrities who had gained fame through their success in sports, modeling, or entertainment.

However, an increasing number of consumers no longer watch traditional television, opting instead for commercial-free streaming services like Netflix, YouTubeTV, and Hulu. This shift has forced makers of consumer products to find new ways to reach potential consumers.

Fortunately for makers of consumer products and their advertising firms, the downturn in television viewership coincided with the rise of social media platforms like Facebook, YouTube, Instagram, and TikTok. These platforms generated a new type of product spokesperson: content creators (commonly referred to as influencers).

Interested in learning more? Check out Jim Chester’s ALI CLE webcast, Influencers, Content Creators, and Business Clients: Key Legal Issues and Risks, on-demand now!

Most content creators are not anointed by a cabal of advertisers nor selected for their prowess at throwing a baseball or making action films. Instead, most start their own social media channels and produce content for a small number of followers. No special sports talent or studio backing is required. All one needs is a camera and microphone, a creative hook, and commitment to post regularly. A little luck never hurts, of course. Over time, they grow a grassroots following and eventually gain the attention of advertisers who provide free products and direct compensation to content creators willing to share their endorsements and reviews via their own platforms.

So-called “influencer marketing” has become immensely lucrative. According to some estimates, the global influencer market was less than $2 billion in 2016 but has exploded to more than $21 billion as of 2023.1 The rise of the global influencer market affords opportunities for individuals seeking to become influencers and content creators with very little startup costs. However, because content creators often do not have legal guidance, their assets and interests are vulnerable to attack and theft, and they could also face costly legal actions from others or from the government.

Of course, most do not become rich from their content creation venture. While only a small percentage of content creators earn over $1 million, nearly a quarter make $50,000 or more a year.2 Of those, about half are full time content creators, while the rest use social media platforms as a “side-hustle” or financially friendly hobby.

This article is tailored to attorneys who provide counsel to content creators and/or those clients engaging with content creators and influencers, offering a comprehensive exploration of legal considerations in this dynamic industry.

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Before an attorney can advise a content creator or brand, they must first understand the risks involved. Key to understanding these risks is an appreciation of the various ways brands can partner with content creators. Here are some of the ways content creators earn money from their content, and how they partner with brands:

Brand Ambassadors

One way that influencers earn money is by serving as brand ambassadors, based on their experience with a certain brand. Sponsored postings are comparable to brand ambassadorships, but there are a few differences.

For example, sponsored articles are often onetime events, whereas brand ambassadorships are frequently long-term commitments. An influencer might, for example, sign a six- to 12-month ambassador arrangement with a brand.

When an influencer is a brand ambassador, they do more than just promote the brand on social media. They frequently appear as a model or spokesperson for the product on the brand’s social media channels or website.

Affiliate Marketing

When influencers share a link to purchase a product, they receive a part of the transaction if a follower buys something through that link. As a result, affiliate marketing has become one of the most popular methods for influencers to earn money.

In their daily social media posts, fashion influencers, for example, are likely to offer links to the clothing they are wearing. Their fans buy the products, generating a cash stream for the influencer. The affiliate commission may be as low as a few percent, depending on the item. However, the money can quickly pile up for influencers with many followers.

Advertising Websites

Bloggers have been using advertising on their websites to monetize traffic for a long time. Bloggers may earn money only when a visitor clicks on an ad or whenever it appears on the screen, depending on the type of ad. Sidebar and in-content advertising can be incredibly profitable for bloggers with substantial traffic to their websites.

Digital Products and E-Courses

Many influencers sell digital items to educate their followers on a specific topic. A travel blogger, for example, might build an entire course on how to travel on a budget. A fashion influencer might write an eBook about putting together a capsule wardrobe. Selling online courses may bring in thousands of dollars every month for some people.

Donations, Tipping, and Subscriptions

Tipping and contributions are other methods influencers use to get money. Some influencers, for example, offer a page on their websites where followers can donate money to the influencer. Likewise, some feature a link where followers can purchase a cup of coffee from them. Using services like Patreon as a kind of tipping is another option. It works based on a membership model, in which followers can sign up to donate a set amount of money to an influencer each month. The influencer may create content only available to Patreon backers in other circumstances.

Reselling of Clothing

It’s becoming more typical for fashion influencers to generate money by reselling the items they promote. In addition, these influencers frequently purchase significantly more clothing than they require, primarily to show their fans a range of outfits. Then, many people sell their lightly used products on a separate Instagram page or Poshmark.

Sales from Live Events

Live events, whether in-person or online, provide another opportunity for influencers to generate income. A travel influencer, for example, could make money by booking a vacation for a limited group of followers. On the other hand, a fashion influencer might make money by conducting a live closet sale where fans can buy worn goods that they’ve showcased on their social media platforms.

Product Lines Created Particularly for Influencers

Influencers can also generate money by creating product lines. Some influencers start from the ground up with their own product lines. Other influencers leverage their following to form partnerships with businesses, launching beauty lines, clothing lines, and other products.

Each of the foregoing income streams creates its own type of legal issues that must be addressed by content creators.

CLICK HERE to read the full article, which was originally published in ALI CLE’s The Practical Lawyer.

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