By Michael Bugeja
otal social media influencer spending in the U.S. is projected to hit $6.16 billion this year. (Photo illustration by Iowa Capital Dispatch with images via Canva)
President Joe Biden signed a congressional bill late last year banning TikTok on federal government devices, and now more than half of the states, including Iowa, have followed suit.
There also is talk in Washington about banning the app altogether because it is owned by a Chinese company, ByteDance, with officials fearing user data being accessed by the communist government.
Often omitted from discussions about the popular social media app — patronized by more than 1.5 million Americans — is the impact on influencers who depend on the platform for their livelihood.
That also has tax implications.
Social influencers increasingly are commanding marketing and advertising dollars that once went to legacy media, such as newspapers. Total influencer spending in the U.S. is projected to hit $6.16 billion this year as opposed to $5.51 billion for newspapers.
Instagram, by far, commands 44.6% of influencer dollars, followed by YouTube, 17.7%, and TikTok, 17.1%.
Influencers receive free gifts, hospitality and other amenities, not included in the above figure. The field also is monitored closely by the Federal Trade Commission, with legal consequences for those who fail to disclose endorsements and other connections with corporate brands.
In 2021, the FTC sent notice of penalty offenses to some 700 businesses concerning deceptive practices in such venues as customer endorsements, testimonials, reviews and influencer marketing.
The agency recently settled for $9.4 million with Google LLC and iHeartMedia for airing a whopping 29,000 deceptive endorsements by radio hosts who promoted the Pixel 4 phone without ever actually using it.
FTC rules support truth in advertising laws. Media outlets and influencers must disclose their brand partnerships in clear, unambiguous language. In other words, they cannot drop a phrase about that partnership in the body of a review about a product or require a viewer to click a link for that information.
If the endorsement is in a photograph, without text, such as might appear in the app Snapchat, the disclosure has to superimposed on the image itself. If accompanied by text, the sponsorship or paid advertising has to be in a prominent upfront position.
In videos, the disclosure should be in the description and spoken about during the session or superimposed on it.
Olivia Hanson, a New York-based social influencer and graduate of Iowa State University, currently is a campaign manager on the business development team at Dotdash Meredith. Her video segments do not interfere with her day job, she says, “because the brands that I work with on an influencer basis reach out to me via my personal email.” As such, she notes, there is no conflict of interest between the two.
Hanson also maintains a comprehensive personal website that includes brands she has worked with as well as her activities across media platforms, including influencer work on Instagram and TikTok.
Hanson says she and counterparts are under no obligation to post about products unless they are under contract with the brand. “However,” she adds, “companies are gifting in good faith in hopes that you’ll post something.” Many are open to constructive criticism if an influencer doesn’t like the product or service for whatever reason.
In addition to following FTC guidelines, Hanson believes that disclosures build trust and community.
Product review videos require a lot of work. “It starts with concept ideation for a video, research on whether or not it’ll resonate with my audience, then producing the video, then editing, then planning the social post. It’s no small feat!”
Here are samples of her work from TikTok.
Reputation plays a big role in product reviews, she says. Honesty remains the best policy if you want to enhance your audience.
As for TikTok, Hanson gives a reasoned answer. If it is better for America to ban the application, she accepts that, “However, something would have to come in its place considering the amount of people, information, and commerce that happens there now.”
That commerce also can be taxed, which often comes as a surprise to an influencer whose posts go viral. State and federal governments worried about TikTok’s algorithms and service terms might pay more attention to the fiscal impact of banning the platform.
The IRS believes influencer payments, gifts and other amenities are all taxable, typically requiring a 499 form. Turbo Tax has TikTok-styled videos to help influencers navigate the tax code.
Banning TikTok will affect tax receipts until that revenue flows to other social media, primarily platforms like Facebook, Instagram, YouTube and Snapchat.
Michael Bugeja is the author of “Living Media Ethics” (Routledge/Taylor & Francis) and “Interpersonal Divide in the Age of the Machine” (Oxford Univ. Press). He is a regular contributor to Iowa Capital Dispatch and is writing a series of columns on the topic of “Living Ethics.” These views are his own.