U.S. digital advertising revenues rose 21 percent in 2017 to a record $88 billion and social media advertising revenues—including Facebook, Twitter, Instagram and YouTube—exploded over the same period, increasing 36 percent to $22.2 billion, according to the most recent report from the Interactive Advertising Bureau (IAB).

This is a heady time for advertisers working to use social media to win new brand loyalists, offering significant rewards for companies able to successfully navigate legal issues that arise when using new digital advertising formats. But it is also a frustrating time for advertisers whose competitors skirt the rules of truthful and accurate advertising in an attempt to win the advantage.

NAD's Efforts to Promote Digital Advertising Transparency

Generally, advertisers have an obligation to market their products in a truthful and non-misleading manner pursuant to §5 of the Federal Trade Commission (FTC) Act, which prohibits unfair or deceptive advertising. For nearly 50 years, the National Advertising Division (NAD), an investigative unit of the advertising industry's system of self-regulation, has evaluated advertising claims for truth and accuracy to protect consumers and promote fair competition. NAD and its body of case decisions apply time-honored standards to new advertising challenges, providing guidance for social media campaigns, as well as a dispute resolution forum for those seeking to uphold truth-in-advertising standards in digital advertising.

Influencer Marketing

Both the FTC and NAD require that connections between advertisers and endorsers be disclosed that materially impact the weight or credibility of the endorsement. NAD's decisions provide specific, context-based guidance on the application of this standard to influencer marketing campaigns.

For example, NAD reviewed Instagram posts by Kourtney Kardashian, Khloe Kardashian and Kylie Jenner endorsing the FitTea beverage. The Kardashians posted selfies describing FitTea as their “favorite” and a staple of their daily routine. However, the advertiser did not disclose that the Kardashians were paid to endorse the product. NAD found that consumers would likely weigh the Kardashians' opinion differently if they knew the Instagram posts represented paid endorsements. In connection with NAD's inquiry, FitTea voluntarily decided to disclose the material connections between FitTea and its endorsers.