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22 J. L. Bus. & Ethics 59 (2016)
YouTube Marketing: Legality of Sponsorship and Endorsements in Advertising

handle is hein.journals/jourlbun22 and id is 69 raw text is: YoUTUBE MARKETING: LEGALITY OF SPONSORSHIP AND ENDORSEMENTS IN ADVERTISING Katrina Wu* ABSTRACT YouTube endorsement marketing, sometimes referred to as native advertising, is a form of marketing where advertisements are seamlessly incorporated into the video content unlike traditional commercials. This paper categorizes YouTube endorsement marketing into three forms: (1) direct sponsorship where the content creator partners with the sponsor to create videos, (2) affiliated links where the content creator gets a commission resulting from purchases attributable to the content creator, and (3) free product sampling where products are sent to content creators for free to be featured in a video. Examples in each of the three forms of YouTube marketing can be observed across virtually all genres of video, such as beauty/fashion, gaming, culinary, and comedy. There are four major stakeholder interests at play - the YouTube content creators, viewers, YouTube, and the companies - and a close examination upon the interplay of these interests supports this paper's argument that YouTube marketing is trending and effective but urgently needs transparency. The effectiveness of YouTube marketing is demonstrated through a hypothetical example in the paper involving a cosmetics company providing free product sampling for a YouTube content creator. Calculations in the hypothetical example show impressive return on investment for such marketing maneuver. Companies and YouTube content creators are subject to disclosure requirements under Federal law if the content is an endorsement as defined by the Federal Trade Commission (FTC'). This paper applies the FTC Guide to the YouTube context and identifies disclosure practices that may be problematic under the FTC guidelines. Pervasive issues with disclosure on YouTube include inconsistency as to how content creators disclose as well as the lack of conspicuousness for disclosures buried in description boxes. This paper proposes that there is an urgent need to increase transparency for YouTube endorsement marketing and that YouTube should promote a uniform standard of disclosure. Contrary to the argument that disclosures would undermine the effectiveness of * J.D./M.B.A., University of San Diego; LL.M. in Taxation (Candidate), University of San Diego School of Law. The author would like to thank Dr. Seth Ellis from the University of San Diego (M.B.A.) for his guidance and feedback on this paper. The author would also like to thank the editorial board and staff at the Journal of Law, Business, & Ethics (JLBE) for their meticulous editorial work and feedback. 59 22 J.L. Bus. & ETHIcs 59 (2016)

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