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Sponsorships' Rapid Growth Prompts New Look at Category

Internet ad revenues are still posting strong growth, according to the latest figures from the Interactive Advertising Bureau, rising 23.2% to $14.9 billion in the first half of the year. Leading the charge is display-related advertising — a category that includes banner ads, rich media, digital video and sponsorships.  It is the latter two, digital video and sponsorships, that are the fastest growing format in display.

While there is a significant industry knowledge base about digital video ad campaigns, as well as many providers, the area of sponsorships is a little more murky. As ad revenues in this category grow, for that reason, it is worth a second look.

What It Is

As defined by Izea, sponsorship is the practice of providing compensation to a publisher in exchange for mention, promotion or review. Compensation can be in the form of cash or non-cash incentives. Total social media sponsorships equaled $46 million in cash and non-cash incentive in 2009. The bulk of this total, $35.7 million, or 77.6%, was in the form of non-cash incentives. The remaining $10.3 million, or 22.4%, was in the form of cash.

Where It Can Go Wrong

However some campaigns, especially in the social media space, can create distrust with users, Izea also found in a study published in 2010. Namely, social media publishers are frequently engaging in different types of sponsorship for increasing compensation and often not fully disclosing the practice. Many social media publishers are unfamiliar with the concept of disclosing sponsorships and the fact that the FTC now has disclosure regulations in place.

When asked what form of disclosure they use when working with advertisers, 21.6% asked what it meant. In addition, one-third (35%) of PR, social media and marketing professionals have no familiarity with FTC guidelines regarding disclosure. Another 26.1% have heard of them but not read them, meaning six in 10 professionals in the social media sponsorship space effectively do not know the content of the FTC regulations.

Different Paths

For brands that are aware, they have adjusted their relationships to meet regulations - and thus developed a wide range of models. US fashion brand Forever 21 has signed on fashion blogger Bip Ling to represent it as it prepares to open its second store in the UK - a flagship establishment on Oxford Street. There is little doubt about Ling’s relationship with Forever 21: she stars in the chain's latest ad campaign for its high summer and autumn collections. In other cases, the retail brand does not want to give the appearance of a blogger getting paid to influence his or her readers.


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