The Ethics of Product Placement on Social Media

If you’ve used social media for any length of time, you’ve probably said something kind about a company’s product or service that you’ve used. Maybe you’ve even said something unkind about a company. There’s nothing wrong with doing that, if that’s what you believe and you weren’t compensated by the company (or anyone else) for doing so.

When you are compensation, either in the form of cash, a discount or a free item/service, that’s another issue entirely. I have no problems with companies paying people to promote their company. Celebrities have thousands, even millions of followers on social media and companies would be missing out if they did not attempt to leverage that to their benefit.

Take a look at how many fans these celebrities have on social media:

Justin Timberlake – 34.5 million followers on Instagram

Ariana Grande – 2.6 million followers on YouTube

Lady Gaga – 18.5 million followers on Instagram

Vin Diesel – 100 million followers on Facebook

Kim Kardashian – 81.3 million followers on Instagram

This is important because of the influence that they can put on their fans. Simply mentioning a product in a favorable way can create a huge impact to a company’s bottom line.

Consider the case of PhunkeeDuck, a company that makes a two-wheeled scooter. According to co-founder Matt Waxman, the company hasn’t spent any money at all on marketing fees (advertising). Instead, they’ve worked with celebrities to show off their product on social media, mainly Instagram.

Waxman told Bloomberg Businessweek, “Without Instagram, particularly, I can’t say we would be where we are now. We were able to spread the word so fast.”

PhunkeeDuck is not alone in this type of product promotion. DHGate, a company which wholesales hoverboards credits social media postings of celebrities riding on the boards for increasing sales by three thousand percent!

The problem arises, however, when the celebrities make their online activities look like natural, unbiased endorsements. According to the Federal Trade Commission (FTC), any paid endorsement must be CLEARLY identified as such.

Recently for example, postings made by the Kardashian sisters have noticed that their postings include “#ad” to indicate that they are getting compensated for their kind words.

This is not limited to the United States or the Kardashians. Nor is it a new phenomenon. At least as far back as 2012, a similar situation was noted in the United Kingdom, where celebrities were posting pictures of themselves with Snickers candy bars as if it were an un-staged happening.

This is something that I’ve been involved with in my career for many years. At one point in my career, it was my responsibility to get key opinion leaders in the professional dental field to use my company’s products when they did hands-on workshops and lectures. We calculated that of the people that would attend a lecture at a major dental convention, about a third of the attendees would visit out booth after seeing our products in use. Out of that, about a third of them would make a purchase, roughly 10% of the audience size.

Like any company, we calculated the potential revenue against the cost of giving the free merchandise to the speaker, along with any fees that they wanted. When I started doing it, around 1996, most of the speakers only asked for free product. In a few years, it was customary for people to ask for additional compensation. I was once approached by a speaker who said he’d use/promote any product we wanted, so long as we paid him. We declined, as we wanted people who believed in the product, not just a payday.

It makes a difference if someone is using a product with or without being paid to do so. Jaclyn Johnson, the president of a company that works with top cosmetics companies told the New York Times that when they have bloggers include “#ad” or “#spon” (sponsored) hashtag to their content, they see a noticeable drop in the engagement level.

Those tags are frequently used sites such as Instagram and Twitter. Remember that Twitter limits tweets to 140 characters, some of which are used up if a picture is included. The FTC recommends that such announcement be done at the beginning of the posting so that it’s clearly visible to anyone who sees it. While the first may be easy to understand, I wonder how many people realize what “#spon” means.

Parents, be sure that your children realize that what appears to be an unbiased endorsement may in fact be a paycheck for someone. Hopefully, the endorser puts their reputation above wallet. If you own a company, make sure that anyone you ask to endorse your company follows the rules, or risk action by the FTC. There’s a reason why we want consumers to know when someone is being paid or otherwise compensated to promote a company. And it’s a good reason, especially when you consider how impressionable younger consumers can be when they see their favorite singer or reality show host using a product.

About the Author

Joe Yeager is the founder of Safety Net of PA, LLC and has been a cyber safety advocate for several years. He is an adjunct professor at Philadelphia University, where has been teaching several classes that involve using technology to improve the quality of their schoolwork.

As the founder of Safety Net, Joe provides a variety of presentations on improving the online experience, both in better educational performance and in cyber safety. It was after his own daughter came across inappropriate content online that got him involved in helping others in the area.

His work on cyber safety has been published by the Family Online Safety Institute, the Social Media Club, Calkins Media and more. He is also the author of #DigitalParenting- A Parent's Guide to Social Media, Cyberbullying & Online Activity, which was chosen as an Editor’s Pick in April 2016.