The impact of influencers on advertising and consumer ...

1 STUDY. Requested by the IMCO committee The impact of influencers on advertising and consumer protection in the Single Market Policy Department for Economic, Scientific and Quality of Life Policies Directorate-General for Internal Policies Authors: Frithjof MICHAELSEN, Luena COLLINI et al. PE - February 2022 EN. The impact of influencers on advertising and consumer protection in the Single Market Abstract Influencer marketing as part of the advertising industry has grown significantly in recent years, becoming one of the most popular and effective forms of online advertising . The fast- growing market of influencers comes with potential risks for consumers and creates several challenges for regulators.

2 This study provides information and analysis on the impact of influencers on advertising and consumer protection in the Internal Market, identifies best practices and makes recommendations for future action. This document was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Internal Market and consumer Protection (IMCO). This document was requested by the European Parliament's committee on Internal Market and consumer Protection (IMCO). AUTHORS. Frithjof MICHAELSEN (VVA Brussels) (Lead author). Luena COLLINI (VVA Brussels) (Lead author). C cile JACOB (VVA Brussels). Dr Catalina GOANTA (Utrecht University).

3 Dr Sara Elisa KETTNER (ConPolicy Institute). Dr Sophie BISHOP (University of Sheffield). Dr Pierre HAUSEMER (VVA Brussels). Prof Dr Christian THORUN (ConPolicy Institute). Dr Sevil YESILOGLU (London College of Communication). ADMINISTRATOR RESPONSIBLE. Christina RATCLIFF. EDITORIAL ASSISTANT. Mina DRAGANSKA. LINGUISTIC VERSIONS. Original: EN. ABOUT THE EDITOR. Policy departments provide in-house and external expertise to support European Parliament committees and other parliamentary bodies in shaping legislation and exercising democratic scrutiny over EU internal policies. To contact the Policy Department or to subscribe for email alert updates, please write to: Policy Department for Economic, Scientific and Quality of Life Policies European Parliament L-2929 - Luxembourg Email: Manuscript completed: January 2022.

4 Date of publication: February 2022. European Union, 2022. This document is available on the internet at: DISCLAIMER AND COPYRIGHT. The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the European Parliament is given prior notice and sent a copy. For citation purposes, the publication should be referenced as: Michaelsen, F., Collini, L. et. al., 2022, The impact of influencers on advertising and consumer protection in the Single Market, Publication for the committee on Internal Market and consumer Protection (IMCO), Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, Luxembourg.

5 Cover image used under licence from Adobe Stock The impact of influencers on advertising and consumer protection in the Single Market CONTENTS. LIST OF BOXES 5. LIST OF FIGURES 5. LIST OF TABLES 5. LIST OF ABBREVIATIONS 6. EXECUTIVE SUMMARY 9. 1. INTRODUCTION 13. Scope of the study 13. Methodological approach 14. 2. DEFINITION OF influencers 15. Various definitions of influencers are proposed in the literature 15. EASA, 2018, best Practice Recommendation on Influencer Marketing 16. Goanta and Ranchord s, 2020, The regulation of social media influencers : an introduction 17. Goanta, 2021, Human Ads beyond targeted advertising . Content monetisation as the blind spot of the Digital Services Act 19.

6 Trzaskowski, 2018, Identifying the Commercial Nature of Influencer Marketing'. on the Internet 20. Morteo, 2018, To clarify the typification of influencers : A review of the literature 21. European Commission, 2018, Behavioural study on advertising and marketing practices in online social media 22. Experts emphasise certain limitations when defining influencers 23. influencers are content creators who have a trust-based relationship with their audience 25. 3. THE ROLE OF influencers ON THE INTERNAL MARKET 27. influencers and the advertising industry 27. Market data show constant growth of influencer marketing 27. influencers are not the only actors in the value chain 34.

7 There are various business models pursued by influencers 37. Influencer marketing from a consumer perspective 42. Influencer marketing can impact the behaviour of consumers 42. Certain influencer marketing practices pose risks to consumers 52. The increasing role of influencers on the market raises legal questions 61. 4. THE REGULATION OF influencers 62. influencers are subject to existing legislation, regulatory practice and industry self-regulation at EU and national level 63. 3 PE IPOL | Policy Department for Economic, Scientific and Quality of Life Policies EU consumer protection rules apply also to influencer marketing practices 63. advertising definitions determine how national rules are applied to influencers 70.

8 Soft-law and self-regulation measures aim to fill gaps 73. Non-EU countries follow similar approaches 78. practices from legislators, authorities and the industry 82. Adopting specific influencer legislation 82. Applying existing consumer protection legislation to influencers 82. Publishing guidelines and codes of conduct to establish good practices 84. Using digital monitoring and enforcement tools 85. Offering training and certification of influencers 86. Raising awareness and providing support to consumers 87. Facilitating compliance on platforms via standardised disclosure tools 88. 5. CONCLUSIONS AND recommendations 91. Regulating influencers requires striking the right balance 91.

9 consumer protection legislation is the right path to tackle influencer marketing 92. Effective regulation requires strong monitoring and enforcement 94. Providing information and guidance can help influencers and consumers 95. A responsible and professional industry will provide better services to consumers 96. REFERENCES 97. ANNEX: NOTES ON THE METHODOLOGY OF THE STUDY 110. Country selection 110. Social media monitoring 111. PE 4. The impact of influencers on advertising and consumer protection in the Single Market LIST OF BOXES. Box 1: Examples of lack of transparency and unclear disclosure 55. Box 2: Examples of lack of separation between advertising and editorial content 56.

10 Box 3: Examples of misleading messages 58. Box 4: Examples of practices targeting vulnerable consumer groups 59. LIST OF FIGURES. Figure 1: Global value of influencer marketing (in billion US dollars) 28. Figure 2: Benefits of social media marketing for companies worldwide 2021 29. Figure 3: Monetisation business models 37. Figure 4: Example of endorsement 38. Figure 5: Example of affiliate marketing 38. Figure 6: Example of barter 39. Figure 7: Example of ad featured on YouTube content 39. Figure 8: Example of subscription 40. Figure 9: Example of tokenisation on Twitch 41. Figure 10: Example of direct selling 42. Figure 11: Influencer effect on brand attitude 46. Figure 12: Example of a disclosure tool on Instagram 89.