The murky world of influencer marketing

The social media influencer business is not one to be taken lightly today – they are known to make and break trends. Many companies have tapped into the potential of social media influencers to market their products and services in a much cheaper and faster way. The Indian influencer marketing industry is valued at Rs 900 crore and is expected to grow at a CAGR of 25 per cent to reach Rs 2,200 crore by 2025.

With great power comes great responsibility – it is especially true for the influencers who command massive following. Unlike other professions, a social media influencer needs no particular qualification; one may need just a phone with the app and a working internet connection. Case in point – an Instagram influencer with a following of over 100,000 people hosts a program that claims to offer counselling sessions for inner child healing, treating parent-inflicted traumas, emotional hygiene and others. Be noted that this influencer holds no degree or training in mental health counselling but claims to ‘help’ their followers with serious issues that usually require intervention from trained professionals. Not surprisingly, they were called out for misleading their followers. This is not the first of its kind incident and is unlikely to be the last.

Where do we draw the line?

Catalyst for spreading misinformation

When the world was battling COVID-19, the vaccines came as a hope. However, there were sceptics whose paranoia was further fanned by concerted anti-vaccine campaigns. Many media reports spoke about how there was a lucrative cottage industry that mainly pushed vaccine disinformation. Interestingly, research found that there were just 12 people responsible for the bulk of the misleading claims about the COVID-19 vaccines being propagated on Facebook, Instagram, and Twitter. The Center for Countering Digital Hate, which identified these accounts, said that this ‘Disinformation Dozen’ produced 65 per cent of the shares of anti-vaccine misinformation.

On a regular basis, too, many social media influencers make unsubstantiated claims on matters of health. Weight management is among the most popular topics that the influencers target, passing opinions as facts and even insinuating unhealthy eating habits and exercise routines. Many advertise supplements that ideally should not be taken without a prescription from a physician; in some cases, influencers fail to tag such posts as sponsored/advertised posts.

Research showed that 21 per cent of teenagers go to social media influencers to get their health advice rather than approaching a health professional. This has emerged to be a leading cause of eating disorders in young people.

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False advertising

Meesho, an online shopping site, depended heavily on influencer marketing—a major part of its success can be attributed to influencers who took their campaign live. However, this very strategy of influencer marketing backfired when the company realised that several influencers were bad-mouthing them in what seemed to be a coordinated campaign. People like Udita Pal, co-founder of SaltPe, and Aashima Arora, investment lead at Polygon, said that they were approached for tweeting negatively against the company for monetary benefits. In June, Meesho finally issued a legal notice to influencers and their agencies for defamation. 

The collapse in crypto prices in recent months pointed toward the celebrity marketers who sell virtual currencies to their vast audiences. Crypto promotions, often rife with possible conflicts of interest and exaggerated claims, flourished on social media. Celebrities like Kim Kardashian have made massive fortunes for themselves by endorsing crypto investments, urging unsuspecting fans to buy obscure coins and NFTs, which have later crashed in value.

For example, Logan Paul, one of the most popular and followed YouTubers, advertised the new cryptocurrency Dink Donk to his over 6 million followers on Twitter. What he failed to disclose was he was close friends with the creator of this cryptocurrency, and they had together come up with the idea for this project. This information came to the fore only when the price of Dink Donk plummeted to a fraction of a cent, and Paul started receiving massive online backlash.

Putting a leash

Last year in February, the Advertising Standards Council of India (ASCI) released draft guidelines, as per which it placed the onus on the influencers to add disclosure labels on their sponsored products. The body allowed five hashtags to mark paid content – #ad, #collab, #promo, #partnership, and #sponsored. Although ASCI does not have penal powers, the decisions taken by the body are binding on members and non-members alike. The Consumer Protection Act, which penalises misleading ads, also recognises ASCI’s status as a self-regulatory industry body.

This year, ASCI said that ads for all virtual digital assets (VDAs), including exchanges and products, should begin with the disclaimer: “Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.” The guidelines come after this year’s budget, which announced a 30 per cent ‘crypto tax’ on all digital assets and a 1 per cent TDS for each crypto-related transaction.

Earlier this week, the Central Board of Direct Taxes (CBDT) issued new guidelines under which social media influencers will have to pay TDS for the gifts and freebies they receive. The freebies that influencers receive from businesses for promotion will attract a 10 per cent tax. Insertion of a new section, 194R in the Income Tax Act, 1961, was introduced in the Union Budget to levy TDS on such income to keep a check on the tax revenue leakage. Persons receiving these freebies would be required to reveal them while submitting an income tax return.