The US government will issue fines for dishonest influencer marketing: - **An estimated $13.8 billion will be spent on influencer marketing** in 2021, and the feds are cracking down on fake online reviews and shady influencer tactics. Here's how to m
The US government will issue fines for dishonest influencer marketing:
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An estimated $13.8 billion will be spent on influencer marketing in 2021, and the feds are cracking down on fake online reviews and shady influencer tactics. Here's how to make sure you're in compliance.
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Facebook will now count one person as two on all of its platforms, presenting new challenges in advertising. Below, we break down the implications of this change.
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Founder Jesse Farmer hit a $250 million valuation with his ethical clothing line, Everlane. He shares his top tip on keeping ethics at the forefront, and why founders shouldn't go to press too soon.
Want to share something with nearly 85,000 indie hackers? Submit a section for us to include in a future newsletter. —Channing
🥊 US Federal Government Targets Fake Reviews
from the Indie Economy newsletter by Bobby Burch
The US Federal Trade Commission (FTC) warned hundreds of Fortune 500 companies that they’ll pay steep fines if they engage in dishonest influencer marketing or reviews. While the warning was sent to large advertisers, retailers, and multinational firms, the fines will apply to any business that is leveraging influencer marketing. Here's what this means for founders.
Knocking out the fakes
The news: The FTC notified more than 700 companies, including Facebook, Yelp, Aeropostale, and Dunkin’ Donuts, that it will begin issuing fines of up to $43,792 per violation for fake reviews and sketchy influencer marketing tactics:
The rise of social media has blurred the line between authentic content and advertising, leading to an explosion in deceptive endorsements across the marketplace. Fake online reviews and other deceptive endorsements often tout products throughout the online world.
The context: Consumers are increasingly being persuaded by influencer endorsements on social media, prompting businesses to spending billions on influencer marketing. Companies are expected to spend about $13.8B on influencer marketing in 2021, up from $9.7B in 2020.
Fake reviews: Amazon, and other marketplaces, have long been flooded with fake reviews. In a recent investigation, Safety Detectives discovered a well-organized scheme involving more than 200K people posting fake 5-star reviews on Amazon in exchange for free products. In 2020, a Fakespot analysis reported that about 42% of 720M Amazon reviews were unreliable.
Compelling: About 46% of consumers say that they trust online reviews, while only 15% trust companies’ posts on social media, according to Forrester Research.
A new set of rules
Deceptive practices: If you’re using influencer marketing, the FTC says that endorsers of your product must be actual users of the product, and must give an honest account of their experience, be truthful about the product’s abilities, and disclose that they’re being paid or received a product as a gift. Businesses also:
- Can’t misrepresent an endorser as an actual, current, or recent user of a product.
- Can’t misrepresent an endorser's individual experiences as representative of people’s typical experiences.
- Can’t use an endorsement without good reason to believe that the endorser still holds the views expressed.
- Can’t use an endorsement to make deceptive claims about how a product performs.
- Can’t fail to disclose the relationship between the endorser and the advertiser (i.e. a business or family relationship, a payment, or a gift of a free product).
Following the rules: To make sure your influencer marketing is in line with the law, read over the FTC endorsement guides for advertisers.
Enforcement nightmare: We all know how nimble the federal government is (insert gif of container ship stuck in the Suez Canal). So, how will it police tens of millions of influencers? It will rely on the Consumer Sentinel Network, an online database for law enforcement that captures millions of complaints from citizens, businesses, and other agencies. In 2020, the network fielded more than 2.3M fraud reports, at a reported loss of about $3.4B.
Gotcha: The FTC has cornered a few major players over misleading advertising. Notably, Warner Bros. settled with the FTC in 2016 on charges that it duped consumers during an influencer marketing campaign for the video game Middle Earth: Shadow of Mordor. The FTC also hit a gaming advertiser for deceptive influencer videos that hyped the Xbox One.
What are your thoughts on the FTC warnings? Let's chat in the comments!
Discuss this story, or subscribe to Indie Economy for more.
📰 In the News
🍎 Apple has announced new Macbook Pros, M1 chips, and more.
🍼 How tech is changing baby names.
🎞 YouTube's in-house agency for digital superstars.
👾 New Roblox features give developers more flexibility on the platform.
🦋 Butterflies introduced to this Finnish island have morphed into a real-life nightmare.
👥 Facebook is Changing How it Counts Users
from the Growth & Acquisition Channels newsletter by Darko
The most dangerous Facebook changes are sometimes hidden behind obscure press releases. Last week, Facebook published this news release: An Update on How We Count People For Ads Planning and Measurement.
Read on for a full breakdown, including how you can navigate the changes.
Down for the count
Here's the gist of the update:
Starting today, if someone does not have their Facebook and Instagram accounts linked in Accounts Center, we will consider those accounts as separate people for ads planning and measurement.
Essentially, Facebook will count one person as two on its platform for advertisers, unless the users have explicitly linked their accounts in the Accounts Center.
How many users?
Here's is the tricky part: Facebook didn't reveal how many users have both accounts linked versus how many don't. Facebook rolled out Accounts Center on September 29, 2020, and made it globally available on November 18, 2020. It's only been around for about a year.
Accounts Center should be available under Settings on Facebook, Instagram, and WhatsApp, but...that not the case for everyone.
I couldn't find it anywhere in my Instagram account. I did some research, and found this Facebook page:
Accounts Center is being tested and may change in the future. It isn't available to everyone at this time, and is only available on Android and iPhone apps.
That's for Instagram. What about Facebook? Similar information appears on Facebook's Help Page:
Accounts Center is being tested and may change in the future. It is only available on Android and iPhone apps.
Based on Accounts Center's history and availability, it's safe to assume that the percentage of people who have actually linked their Facebook and Instagram accounts is quite low. If it were high enough, Facebook would brag about it, rather than making generic statements like these:
...advertisers may see an impact to campaign planning estimates and performance reporting for unique metrics. There will be increases in pre-campaign estimates such as estimated audience size, but for most campaigns we do not believe this will have a substantial impact on reported campaign reach.
How things were before
According to Facebook:
Previously, we counted someone with multiple accounts as one person for ads purposes if they linked their Facebook and Instagram accounts via those apps, or if we believed that the accounts were owned by the same person.
For example, if someone used the same email address across their Facebook and Instagram accounts or accessed both platforms from the same device, we counted them as one person when they interacted with ads.
Why is Facebook removing this? Apparently, to honor its users:
Now, we are using this setting to determine how people may want their accounts connected or unconnected, and we will honor the choices that are selected for ads planning and measurement purposes.
Something is fishy here. Facebook seems to only respect users' choices when it's within the company's own financial interest.
Which brings me to the last part...
The implication of this change
Understand that when you advertise on Facebook, you are reaching accounts, not people. This has never been more true in light of this recent update.
We will likely see advertisers misled in many ways, namely thinking that they're reaching more people than they are when they look at their unique link clicks metrics.
If only a small percentage of your target audience has linked their accounts, when you run Facebook and Instagram ad campaigns, you'll (falsely) see that you're reaching double the amount of people (accounts). After all, Facebook will count that one person as two if your ad shows on both Facebook and Instagram.
This makes sense for Facebook from a financial perspective, as the company warned investors that Apple's privacy changes will have a significant impact on Facebook's bottom line. So, it makes sense for the company to do everything (moral and immoral) in their power to keep their numbers up.
Advice for indie hackers
Facebook and Instagram ad prices are already skyrocketing due to Apple's update.
Fortunately, new channels are emerging, and some founders have already found success with them. These recent interviews that I posted, about using TikTok influencers and Reddit outreach, are examples of strategies that you can try.
Decentralized social networking is also on the way, which should provide new advertising opportunities for founders as well.
What are your thoughts on Facebook's update? Share in the comments.
Discuss this story, or subscribe to Growth & Acquisition Channels for more.
🛠 Building in Public: Share The Harsh Truth
by Ivan Romanovich
#BuildInPublic is a great opportunity to show the vulnerable side of being a founder, including harsh truths about what to expect.
Honesty wins.
Discuss this story.
👕 Jesse Farmer Hit $250M with Ethical Clothing Line
from the Deep Dive newsletter by Seth King
Jesse Farmer founded his first business, a computer repair shop, in 1998 while still in high school. He's been indie hacking ever since.
Jesse met his future cofounders while attending The University of Chicago as a math major. They collaborated to build Beehive, a book exchange app for University of Chicago students. The app ended up being used by two-thirds of the students on campus, but was never monetized or managed like a commercial project.
Jesse has since founded several profitable businesses, including Dev Bootcamp, a software engineering bootcamp that was acquired by Kaplan, and Everlane, an ethical clothing brand.
Everlane is currently valued at $250M. Indie Hackers sat down with Jesse to pick his brain on starting an ethical business.
Founder's journey
With Dev Bootcamp, I started a thread on Hacker News saying:
Spend nine weeks in San Francisco and we'll help you get a job. If you don't get a job within three months, we'll give you a full refund.
And that post was enough. It took off. We had 10 people or so in our first cohort. It's the only thing I've ever worked on that really worked immediately. The demand was just so high that we could not service all the students. Within two months, we were booked out for the entire year of 2012. You take advantage of that, or competitors move in.
Later, going into Everlane, I wanted to focus on the ethics of it all. The phrase I had in my head was:
Just because something will work isn't a good enough reason to do it anymore.
The test for ethicality is really easy. The test fails if you explain to someone all the consequences of them taking a particular action, and they don't want to do that, but you still design the page so that they do it anyway.
The funny thing is even if you ignore the ethical aspect of business, there's a good chance you wind up in a situation where suddenly you have all these customers, but they aren't the customers you want. You built something, but is that what you wanted?
With growth hacking, it's like how many kids are you going to trick into buying ringtones on their parents' cell phone plan? When you look at where the money was coming from with growth hacking, it was nonsense like that. You're making good money, but is this what you want to build and is the audience who you want to build it for? Maybe it is, but if you're only chasing growth, it's really easy to trap yourself in a situation where you just feed the beast forever and ever.
Biggest mistake
One of the mistakes I made was going to press too soon. Going to press quickly with Dev Bootcamp cued a lot of people to think "hey, do you want to do a bootcamp in Boston? Well, look at these results Dev Bootcamp is seeing." There were lots of people who came to us looking to franchise, but we wanted to be in the business of teaching people, not administering franchise arrangements. Before we sold to Kaplan, we had around 400 students a year.
Discuss this story, or subscribe to Deep Dive for more.
🐦 The Tweetmaster's Pick
by Tweetmaster Flex
I post the tweets indie hackers share the most. Here's today's pick:
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Special thanks to Jay Avery for editing this issue, to Nathalie Zwimpfer for the illustrations, and to Bobby Burch, Darko, Ivan Romanovich, and Seth King for contributing posts. —Channing
