- Casper, the online seller of mattresses, warned of the risks of influencer marketing in paperwork filed last week to become a publicly traded company. The direct-to-consumer (DTC) startup said a bad product review from a social influencer could adversely affect its reputation and diminish the company's value as a business, Business Insider reported.
- Casper also warned that the Federal Trade Commission (FTC), which has rules to protect consumers from false and misleading advertising, could crack down on influencers who tout the company's products without properly disclosing when Casper pays them to publicize its products. Casper has the "burden" of monitoring influencers to prevent them from violating federal law, per its disclosure.
- The warning appeared in an S-1 filing, which the U.S. Securities and Exchange Commission requires most companies to file in an initial public offering (IPO) of stock. It's customary for businesses seeking to go public to disclose the biggest risks they face, including competition and possible changes in the marketplace.
Casper's IPO filing highlights the risks of influencer marketing, which is a key growth area as brands seek to cut through ad clutter by working with social influencers who share their advice and opinions with followers on platforms such as Instagram, Snapchat, Twitter and YouTube. The following for an influencer can range in size from a few thousand people to more than 100 million worldwide. Advertiser spending on influencer marketing is forecast to reach as much as $15 billion by 2022 from $8 billion in 2019, according to Mediakix data cited in a separate Business Insider report.
Fitness gurus, teen stars, radio hosts, social media strategists and even famous pets have mentioned Casper in social media posts, per Business Insider. Kylie Jenner, the influencer and cosmetics entrepreneur with 157 million followers on Instagram, in 2015 posted a picture showing the arrival of a shipping box from Casper.
Casper's disclosures may be the result of its contentious history with social influencers, as Business Insider notes. The brand in 2016 sued three mattress review sites, including Sleepopolis, for touting rivals while allegedly failing to disclose that they received commissions on the sales they generated. Casper a year later settled the lawsuits and defended its aggressive approach to protect its brand, Fast Company reported.
As Casper notes in its filing, negative or non-reviews from influencers may receive widespread attention from consumers that possibly damages its reputation and brand value while resulting in lower sales. Influencer behavior isn't possible to prevent, and the company's precautions to detect the activity may not be effective, as Casper notes. The inability to fully manage relationships with influencers to promote accurate product reviews is a key risk. Third-party mattress review sites may go out of business, eliminating a key marketing channel that's difficult to replace, as Casper notes.
The filing also mentions the FTC as a possible risk for influencers that don't follow guidelines to prevent false and misleading advertising. The agency has cracked down on influencers who don't disclose their financial relationships with sponsors. In 2017, the FTC settled its first complaint against two social media influencers for not disclosing their connection to a business they touted to online followers.
Since then, the FTC has published more comprehensive guidelines for the social influencer industry. The agency in November released a latest publication, "Disclosures 101 for Social Media Influencers," on its website to help influencers understand rules on disclosures about endorsements. The FTC guide emphasizes that social influencers are responsible for the disclosures and provides examples of wording that meets its guidelines.