Gay Jones & Kuhn Small Business Series
INFLUENCING 101: WHAT YOU NEED TO KNOW TO STAY LEGAL
January 13, 2021
Questions come into our office every day from small business clients who have been approached about “influencing” a product or maybe they have a product/service they want to influence. Where do they start? How do they do it right? What is the law?
According to InfluencerMarketingHub.com, an influencer is someone who has:
the power to affect the purchasing decisions of others because of his or her authority, knowledge, position, or relationship with his or her audience.
a following in a distinct niche, with whom he or she actively engages. The size of the following depends on the size of his/her topic of the niche.
Free Products and Services Are Influencer Compensation
Playing by the rules isn't limited to those who get a check. The regulations make it clear – you can be paid for influencing or you can be compensated by free products or services.
According to the Federal Trade Commission (FTC) https://www.ftc.gov/tips-advice/business-center/guidance/disclosures-101-social-media-influencers:
If you endorse a product through social media, your endorsement message should make it obvious when you have a relationship (“material connection”) with the brand. A “material connection” to the brand includes a personal, family, or employment relationship or a financial relationship – such as the brand paying you or giving you free or discounted products or services.
Telling your followers about these kinds of relationships is important because it helps keep your recommendations honest and truthful, and it allows people to weigh the value of your endorsements.
As an influencer, it is your responsibility to make these disclosures, to be familiar with the Endorsement Guides, and to comply with laws against deceptive ads. Don’t rely on others to do it for you.
Making Money Influencing
Small businesses can make money as a result of these relationships by sharing or having their product/service shared. For many, these relationships last beyond a single post or share, allowing for collaboration on long-term marketing goals. Monetizing the value of these relationships is key. It can be a win-win for everyone if done correctly.
Influencer: Making Money Influencing
Do not wait until you haven’t been paid to ask the hard questions. More times than not, influencers wait until after they have completed an “influence gig” to ask for help getting paid. Although lawyers can help, getting an agreement with payment and terms signed before you start can save a lot of time and energy.
Things to ask: What exactly do I have to post or share? When do I have to do it? Does content have to be approved? Do you need proof/screenshots? How long do I have to keep it up on my pages? Does the agreement limit me from influencing other products or services? And finally, when and how do I get paid?
Having your business set up can save you a lot of time and headache, and legal help doesn't have to break the bank. For example, our firm does flat fees for small business clients to get them set up. It only takes a few days, and it protects the owner personally from liability. If Jane Anne (we are Southern, so it has to be a double name) posts her influencer posts about a really great deal on the local trampoline park for birthday parties, and someone goes and gets hurt SHE CAN BE SUED personally! (Don’t start with 'but they would never win'. Maybe you are right, but do you want to be named in a lawsuit!?!?!) If Jane Anne operates as Jane Anne Mom Blogger, LLC, instead of her personal name, she would have protection. For about the same amount of money that she would make in one influencing contract, she could have paid a lawyer to protect her and her family. Not to mention, Jane Anne would be able to call that lawyer, who knows her business, to make sure the contract is correct.
Side note here: If you are worried about big fees or scary lawyers, don’t be! Look around town. Ask your small business friends who they use. The successful businesses usually have someone in their back pocket. And don't be afraid to ask your lawyer how much legal help costs.
Before You Start – Get Good Advice
Before you venture out, know the law and get everything in writing. Have you seen those #ad #sponsorship #paid tags? Those aren’t just for funsies. They are people complying with the law.
Your parents have likely told you not to mess with the IRS and follow the law. In 2021, you can add don’t mess with the Federal Trade Commission (FTC) and follow the law. They regulate social media and influencers.
In fact, they wrote a whole guide on it!
We review influencer contracts every day. Some are for $10 and others are for thousands. Every contract we look at says something like “it is the influencer's responsibility to follow the FTC law and failure to do so may result in fines, penalties and termination of the contract.” In short, you mess it up and you pay. And if you think they are only going after big name celebrities, you are wrong. Early last year, the FTC put out a warning letter https://www.ftc.gov/system/files/documents/public_statements/1566445/p204500_-_endorsement_guides_reg_review_-_chopra_stmt.pdf and it seems that COVID hasn’t slowed them down. In fact, news seems to be that the pandemic has heightened the need for social media regulations.
Influencing: Long-term Risks
Know the product/service you are influencing. Don’t sell lemons! No one wants to purchase a product that you, personally, don't use or haven't at least checked out. The biggest risk is influencing a product that can tarnish your brand. Although you can't know everything about a product and company, do your homework. You work hard to create a brand and run a business. Don't let someone else cutting corners diminish your value with influencing.
You can try influencing or an influencer relationship for your brand without much investment, but as we all know, the internet creates something that never goes away. So, think hard about whether an influencer or product/service you may influence fits with your brand and goals.
Influencer Agreements: The Small Print Matters
Some agreements require you to keep a post forever. In two years, will that post be something that could cause you stress or affect the value of your brand? Read the small print. You are signing a contract which you are now responsible to carry out. Having a lawyer walk you through this process can really help familiarize you with risks, expectations and standard legalese.
When Influencing Goes Bad: How to Protect Your Brand
Is the person doing the influencing doing it correctly? The last thing you want is to influence your brand with someone who does it wrong and gets negative attention. You hear all the time “[insert Fortune 100 company] pulled their relationship with Jane Doe because she was getting negative attention. They are able to end that relationship because they had it in writing! You cannot make someone “take down” an influence unless that was part of the original agreement. Owning your content, brand and graphics needs to be covered in the contract!
If you are brave enough to launch a business, create a brand or influence, get a lawyer. Many lawyers are small business owners just like you and will help you through the process. And lawyers have an interest in you succeeding. Find a business marathon partner and save yourself a lot of stress and headache – if nothing else, save yourself time reading things you don’t always understand and following the constant changes to the influencing law.