Moderating influence

The recent incident where football star Cristiano Ronaldo brushed aside two Coca-Cola bottles on his table and replaced them with a water bottle, starkly brought home how in today’s social media-driven world a small action by an influencer can make or mar brands. Ronaldo’s little gesture wiped off $4 billion from Coca-Cola’s market value. The power that influencers wield — and not just mega stars like Ronaldo, but even popular YouTubers and Instagrammers — is scary. Consumers regard them as authoritative, objective voices, providing them with authentic information. Unfortunately, with more and more brands turning to these “authentic” voices to sell their products, consumer interest is getting compromised. Several pieces of research have shown how people struggle to identify whether posts made by influencers are ads, and can be taken in. The “objectivity” of the influencer also comes into question when it is a paid post. This is why the Advertising Standards Council of India (ASCI)’s guidelines on influencer advertising which came into force on June 14 are so timely.

The guidelines make it mandatory for influencers to label promotional content in a manner that is easily distinguishable by their followers. Disclosure labels have to be clearly visible across picture posts, video posts, live streams or audio posts. ASCI also impresses upon influencers the need to do appropriate due diligence about claims made by advertisers regarding the products that they promote. Spends by brands on influencer marketing are rising — from $1.7 billion in 2016, it has grown to $9.7 billion globally in 2020. But the question is: are the guidelines enough to tip the balance of power from the influencer to the consumer, given that the ASCI is a self-regulatory body without legal backing?

Given the growing trend of influencers guiding consumers in financial products, and the immense following they have amassed, perhaps stock market regulator SEBI too needs to get into the act. We need guidelines for disclosures from people using social media platforms to broadcast their views on stocks, commodities, mutual funds and so on. If a company is paying social media influencers to promote its investment service or product, this should be disclosed prominently. Checks should be considered on unsupervised airing of views on stocks and derivatives by influencers. There could be front-running in some instances, and therefore disclosures on the holding of the influencer needs to be mandated. While SEBI had issued a circular last October cautioning investors against unsolicited messages containing stock tips, more needs to be done. Especially now when the number of retail investors trading in the stock market has surged over the past year.

COMMENT NOW