By: Cambridge Lestienne,
Paid brand endorsements are on the rise, and the trend seems to be causing a quite a stir for celebrities and marketers alike. Some social media and celebrity personalities, such as the Kardashian sisters, now find themselves at the center of an ethical debate over the nature of this form of advertising. The issue at hand is whether these types of endorsements made by celebrities and public figures are deceptive because the individuals posting them are being paid for their posts. While celebrity Instagram and Snapchat accounts may be a visual example of such potentially deceptive advertising, the practice is also taking place in another booming media market that is not visual at all: podcasting.
As media transitions to more mobile consumption, podcasts continue to surge in popularity. Reports from both Edison Research and Wondery found that about 20% of adults in the U.S. listen to at least one podcast a month, which is an increase of 17% from last year. This boom is likely due in part to the success of podcasts such as Serial, which had 75 million episode downloads within the first six months of its debut. As the popularity of podcasts increases, so does their money-generating potential. Podcast advertising is up 48% over last year and projected to grow another 25% a year through 2020. ZenithOptimedia estimates that advertisers will spend approximately $35.1 million on podcasts in 2016, up roughly 2% from 2015.
While podcasters may not be posting visual advertisements like celebrities do on Instagram and Snapchat, they are still advertising on behalf of their sponsors. These advertisements are most often conducted through “host-read” ads. According to Mark DiCristina, marketing director at MailChimp, one of the largest podcast advertisers, “When the host is personally reading the ad and telling a story about the product in her own words, it lands with the audience in a different and more authentic way than a traditional ad spot.” But what happens when listeners are unaware that the podcast hosts are being paid to tell these personal stories? Are podcasters not falling into the same rabbit hole as celebrities like the Kardashians? And where does the law draw the line between paid endorsements and deceptive advertisements?
The Federal Trade Commission (“FTC”) has been grappling with this issue for years in light of developments in the social media space. In its Guides Concerning the Use of Endorsements and Testimonials in Advertising, the FTC stated, “Advertisers are advised that using unrepresentative testimonials may be misleading if they are not accompanied by information describing what consumers can generally expect from use of the product or service.” The FTC also stated that endorsers should avoid describing experiences with a product they have never used. Endorsers should further disclose any connection between themselves and the marketer of a product that could affect how consumers evaluate the endorsement.
Though the FTC has issued guidelines for advertising through endorsements, they have stopped short of enacting regulations on the practice. This has led podcasters, like those from Gimlet Media, to question how they advertise on behalf of their sponsors. In an effort to make the distinction between content and advertisements clear to listeners, Gimlet Media uses special musical backgrounds and disclaimers to notify listeners of when an ad has begun. Additionally, while the hosts of Gimlet Media podcasts talk about their personal experiences using products, they have opted to stop explicitly endorsing the products of their sponsors.
It seems that for the time being, podcasters, like celebrities on Instagram and Snapchat, should proceed with caution when advertising on behalf of their sponsors. A director of the FTC’s Bureau of Consumer Protection said, in relation to a settlement with Warner Bros. regarding paid endorsements, “Consumers have the right to know if reviewers are providing their own opinions or paid sales pitches.” As media advertising continues to grow, specifically in the context of podcasts, it likely will not be long before firm regulations are put into place to constrain these potentially deceptive practices.
 See Sapna Maheshwari, Endorsed on Instagram by a Kardashian, But Is It Love or Just an Ad?, N.Y. Times (Aug. 30, 2016), http://www.nytimes.com/2016/08/30/business/media/instagram-ads-marketing-kardashian.html.
 See Andrew Meola, Podcasts are Becoming More Popular Among Listeners and Advertisers, Bus. Insider (Jun. 6, 2016, 11:07 AM), http://www.businessinsider.com/podcasts-are-becoming-more-popular-among-listeners-and-advertisers-2016-6.
 See Id.
 See Ken Doctor, An Island No More: Inside the Business of the Podcasting Boom, NeimanLab (Sept. 12, 2016), http://www.niemanlab.org/2016/09/an-island-no-more-inside-the-business-of-the-podcasting-boom/.
 See Steven Perlberg, Podcasts Face Advertising Hurtles, Wall St. J. (Feb. 18, 2016), http://www.wsj.com/articles/podcasts-face-advertising-hurdles-1455745492
 Ken Doctor, And Now a Word From Our Sponsor: Host-read Ads and the Play Between Nice and Scale, NeimanLab (Sept. 13, 2016,), http://www.niemanlab.org/2016/09/and-now-a-word-from-our-sponsor-host-read-ads-and-the-play-between-niche-and-scale/.
 Dino Grandoni, Ads for Podcasts Test the Line Betweem Story and Sponsor, N.Y. Times (Jul. 26, 2015), http://www.nytimes.com/2015/07/27/business/media/ads-for-podcasts-test-the-line-between-story-and-sponsor.html.
 See Manatt, Phelps & Phillips, LLP, Advertising Law – September 2016 #3, JD Supra (Sept. 22, 2016), http://www.jdsupra.com/legalnews/advertising-law-september-2016-3-88862/
 Fed. Trade Comm’n, The FTC’s Endorsement Guides: Being Up-Front with Consumers, https://www.ftc.gov/news-events/media-resources/truth-advertising/advertisement-endorsements.
 See id.
 See id.
 See Grandoni, supra note 7.
 See id.
 See id.
 See id.
 See Fed. Trade Comm’n, Warner Bros. Settles FTC Charges It Failed to Adequately Disclose It Paid Online Influencers to Post Gameplay Videos (Jul. 11, 2016), http://www.mediapost.com/publications/article/280028/ftc-warner-bros-paid-influencers-to-promote-vid.html?edition=94532.