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“Hey, how do we contract with a virtual influencer?” – Marketing

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In-house Legal Friends: If you haven’t received this email yet, you will soon. The use of hyper-realistic virtual influencers to endorse products is no longer fringe; it’s the next chapter of influencer marketing, and the Federal Trade Commission (FTC) wants brands to know the guides apply to all influencers, human and humanoid alike. The FTC’s newly-updated Guides Concerning the Use of Endorsements and Testimonials in Advertising (mercifully nicknamed the “Endorsement Guides”) broadened the definition of “endorser” to include what “appear[s] to be an individual, group, or institution.” Brands and agencies should approach the trend with clear eyes and a plan to both mitigate legal risk and protect brand integrity.

Virtual endorsers aren’t exactly new. Most don’t look human. The majority of popular brand mascots are cartoons, dolls, or avatars. Consumers are familiar with this model. Mattel’s Barbie is a fan favorite on social media, and she features collaborations – Barbie was enjoying playing Uno on the beach, last I checked (I’m betting Ken lost). Consumers can tell at a glance that these types of virtual influencers are marketing vehicles. Yet what about a computer-generated realistic virtual influencer? As far back as 2009, social media pioneers like “Magazine Luiza” out of Brazil featured Lu of <a href="https://www.magazineluiza.com.br/">Magalu</a>, a “virtual 3D influencer.” Lu now has millions of Brazilian followers, and her accounts feature product reviews and software tips. Ask your Gen Z teens about Lil Miquela, a “19-year-old Robot living in LA.” This fresh-faced, freckled humanoid first appeared in 2016 courtesy of Los Angeles tech startup Brud. By 2018, she was named to TIME magazine’s “25 Most Influential People on the Internet.” Lil Miquela has partnered with top fashion brands, and her audience of millions remains interested in the looks she’s wearing.

The trend isn’t limited to fashion and travel. Last week, Japan’s largest brokerage, <a href="https://www.bloomberg.com/news/articles/2023-08-03/nomura-hires-virtual-influencer-imma-to-get-young-japanese-to-invest">Nomura Holdings Inc., hired a computer-generated influencer</a> – <a href="https://www.instagram.com/imma.gram/?hl=en">Imma</a> – to connect with younger adults. Imma, which aptly means “now” in Japanese, sports a pink bob and has been active on social media since 2018, thanks to Aww Inc. Top car, retail, fashion, and home goods brands have engaged Imma in order to appeal to her audience. And now, Nomura is hoping Imma can encourage her 1 million+ young professional followers to divert tax-free dollars to investment vehicles instead of letting their dollars sit in savings accounts.

Nomura said its advertising agency suggested the tactic. Media and ad agencies look for novel ways to support client strategy and will recommend an influencer, virtual or real, if the audience and sway match client objectives. Here are some practical legal and brand integrity considerations when engaging a virtual influencer:

Authenticity: Is this a fit? Make sure it’s a natural alignment. While a virtual influencer can showcase fashion or beauty looks and even tourist locations, they may not be the best messenger for the personal benefits of a skin cream or sleep aid, depending on the context of the ad.

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Scarcity and Exclusivity: Virtual influencer accounts can create huge volumes of content. Ensure you understand the historical volume of a virtual endorser’s activity, and include expectations in your contract so your brand isn’t lost in a blizzard of posts by the humanoid who never sleeps. As you would with any influencer, outline your expectations clearly when it comes to exclusivity and interaction with a competing brand in posts. The good news? A virtual influencer can’t be caught on camera unexpectedly driving your competitor’s car in public.

Disclosures: The updated Endorsement Guides require a material connection to be unavoidable to consumers, so it must be crystal clear this virtual endorser has been hired by the brand for advertising. In addition to the material connection disclosures, consider reiterating this is a virtual influencer if it’s not obvious to the naked eye.

Endorsement Language: Keep it real-ish. Don’t go too far in implying the virtual endorser has actually experienced the benefits of a product that requires a truly human experience. The FTC encourages advertisers to use natural language disclosures; the same can be used for copy. Here’s a freebie: “I’m technically trapped in the grid, but if I could travel, I’d fly XYZ airline!”

Claim Substantiation and Typicality: Your virtual influencer’s experience should match actual consumer experience, and defensible substantiation is required. Even though they don’t live in the real world, virtual endorsers should showcase realistic world results and customer experiences when making claims, express or implied. Engaging a virtual influencer is not a path to showcasing atypical product results.

Approvals and Monitoring: A benefit of engaging with a virtual endorser is the ability to easily preapprove all content, including endorsement copy and disclosures. There’s no human nature to contend with, and surprises are unlikely. That said, monitoring and addressing any noncompliant posts remain critical for both risk mitigation and brand management.

Intermediary Liability: The updated Endorsement Guides make it clear agencies and other intermediaries – not just brands – are liable for influencer content and disclosures. Agencies and brands should agree upfront on the process for vetting potential influencers and the hiring process. Well before campaign launch, the process for preapproval, monitoring, and managing noncompliant posts should be agreed upon and clear to all parties involved. Making compliant posts a requirement for payment is a smart, commercial way to incentivize influencers to follow the program rules.

Advertising Targeted to Children: Use of a realistic virtual endorser should be considered very carefully if a brand’s target audience skews to minors. In this version of the Endorsement Guides, the FTC placed influencer advertising to children squarely on the radar. While offering no specific guardrails, the guides warn “practices that would not normally be questioned in advertisements to adults might be questioned” in kids’ advertising.

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Finally, it’s worth noting the FTC’s expanded definition of “endorser” is not limited to virtual humanlike endorsers. It also targets the writers of fake reviews and nonexistent entities that purport to give endorsements. The FTC has made it clear the actual standards outlined in the Endorsement Guides apply to virtually everyone.

Updated FTC Endorsement Guides Hold Virtual Influencers to Actual Standards