As we look toward a new year and a new decade, it is important to stop and see how far we have come. At the beginning of the decade, consumers were starting to dig out of the Great Recession.
In 2010, the iPhone 4 was released,1 as was Facebook Inc.’s mobile app and the introduction of the "like" button.2 Tesla Inc. would not introduce the Model S for another two years.3 In the fall of 2010, a small photo-sharing startup called Instagram Inc. was born.4 Advertising spend clocked in at $131 billion.5
Today, digital ad spend is nearly triple the entire ad spend by brands in 2010,6 and social media ad spend eclipsed print at 13% of the total ad spend last year.7 Apple Inc. is a $1.2 trillion company8 looking to release the iPhone 12 and next generation AirPods, and push into augmented reality.9 Tesla has three cars for sale, and recently released details on its first pickup truck.10 Facebook now owns Instagram,11 counting 68% of the American population as users.12
Advertisers need to be a step ahead of the market, in order to keep up with changing trends and attention spans of the Snapchat and Instagram generation. In 2020, advertisers will enter a world impacted by an increased sensitivity to privacy and the use of data, coupled with consumers who have grown savvy to influencer marketing and product placement. Let us not forget the political climate — 2020 will most certainly be impacted by digital marketing and social media. The legal landscape is ever changing, and we note some of the cutting-edge trends.
1. The California Consumer Privacy Act will impact advertising technology agreements, sweepstakes and loyalty programs and tracking technologies.
Although the California Consumer Privacy Act was passed in 2018, we watched a lively battle between consumer advocates, businesses and regulatory authorities play out ahead of the CCPA’s effective date of Jan. 1, 2020. In October 2019, the California governor signed seven amendments into law and its attorney general released draft regulations that provide additional guidance.
While it is anyone’s guess how exactly the CCPA will be implemented and enforced, the advertising industry is coming up with creative solutions to grapple with one of the CCPA’s major requirements: do-not-sell.
Under the CCPA, businesses must allow California consumers to opt-out (or opt-in, in the case of consumers under 16 years of age) of the sale of their personal information.13 This is tricky for two reasons: (1) personal information is very broadly defined;14 and (2) “sale” is tremendously broader than what our law school professors and Black’s Law Dictionary taught us.15
There are certain instances of data-sharing that the CCPA does not consider a sale, for example, sharing for purposes of verifying positioning and quality of ad impressions and short-term, transient use for the contextual customization of ads shown as part of the same interaction.16 However, a large part of sharing in the context of advertising technology will likely constitute a “sale.”
This means the collection of information in Burger King’s latest sweepstakes, Hilton’s loyalty program and most advertising technology agreements between brands and their agencies will be implicated. A brand offering a rebate for the latest Sonoma County wine, or an on-site activation at the Lakers game may require additional disclosures or revisions to existing policies, or a change in procedure.
Many brands are working to revise template agreements (or renegotiate existing ones), and official contest rules or loyalty program terms are being modified — both in language and the underlying process for data collection — in order to ensure compliance with the CCPA. We further expect to see advertising technology companies start to collect information that falls outside of the do-not-sell requirements. To that end, we anticipate a rise in the use of first-party data as companies rely less on third-party data.
Finally, the advertising industry will develop new tools to help advertisers comply with the do-not-sell requirements. Tools such as the Interactive Advertising Bureau’s CCPA Compliance Framework17 and the Digital Advertising Alliance’s CCPA opt-out icon are rolling out.18 Other trade associations and companies are certain to throw their hats in the ring with additional tools and options for compliance.
2. Social media will butt heads with politicians.
With the 2020 presidential election fast approaching, it is only a matter of time before political advertisements dominate social media feeds. In the wake of the Cambridge Analytica scandal, however, online platforms face growing pressure to take down — or not allow in the first place — political advertisements that contain false or misleading claims.
Under Facebook’s policy on elections and political speech,19 politicians are exempt from the platform’s third-party fact-checking program. According to Nick Clegg, Facebook’s vice president of global affairs and communications, “[Voters] should be able to judge what politicians say themselves,” but the company “draw[s] the line at any speech which can lead to real world violence and harm.”20
Lawmakers have decried Facebook’s stance, saying it could spread misinformation and lead to voter suppression. Google Inc., by contrast, does prohibit certain kinds of misrepresentation in the advertisements it runs on its platform,21 such as misinformation about public voting procedures, but does not have a complete ban on false or misleading political advertisements.
Some online platforms, like Twitter, LinkedIn and Pinterest, have banned political advertisements altogether. At the end of December, Spotify Technology SA announced that it will also suspend political advertisements this year.22
Note that these platform policies do not apply to the communications made on candidates’ social media handles themselves, though candidates must still follow the platforms’ terms of service.23 Politicians will continue to post their own content and repost third-party content, regardless of the veracity of the messages made or the (lack of) substantiation, including on platforms that ban political ads.24 In this way, politicians may be able to skirt platform bans by promoting posts on their own handles.25
As a response to the growing use of online platforms and technologies to serve political advertising, the Digital Advertising Alliance devised a political advertising transparency initiative in 2018 centered on a new political ad icon.26 When users click on the icon, they can learn more about the political advertisement they are currently viewing. The new creative guidelines became effective on Nov. 1, 2019, and enforcement of compliance, run by the Advertising Self-Regulatory Counsel of the Better Business Bureaus and Association of National Advertisers, began on Jan. 1, 2020.
In the coming year, we could see self-regulation of the advertising industry with this DAA political ad initiative — though robust enforcement is unlikely. In the first quarter of 2020, social platforms may further refine their respective policies regarding political advertisements. What we probably will not see, however, is a decline in political messages clogging our social media news feeds.
3. Advertisers will grow revenue with an expansion in personalized products and services.
The growth of personalized products exploded last year, and we have every reason to believe this trend will continue in 2020. From customizable sneakers27 to choose-your-own adventure video games and television shows,28 consumers are in search of products and experiences that are unique and personalized. Consumers can create their own eyeshadow palettes,29 build their own shaving sets,30 curate customized vacation packages31and design their own bespoke suits.32
Personalized products have emerged from the chaos of a cluttered marketplace as a means for consumers to create a connection to a brand and for retailers to gain brand loyalty, generate repeat business and increase customer satisfaction. The growth of personalized products will continue to be significant and material — it is estimated to be a $3.47 billion business by 2022.33
We note personalization growth continuing in two particular areas. The instant-gratification economy, wherein consumers have access to services — such as ride-sharing and food delivery — almost instantaneously with the touch of a button or tap of a screen will contribute to this growth. Some experts predict an 11% growth in ride hailing in the coming years,34 while the growth in food-delivery apps has exploded.35
Others are using this model for nontraditional products like THC edibles. We also see growth in personalization of products in social media — where consumers can instantly share and comment on purchases, advertisers can tailor their ads based on highly granular and personal information.36
With personalization, however, comes a greater need by advertisers to ensure authenticity of products and services. Counterfeit products are a booming business.37 Although the federal government is attempting to respond with the Counterfeit Goods Seizure Act,38 brands and e-commerce sites alike will need to increase spending to combat these bad actors in order to maintain the key element in the whole process: trust.
4. Advertisers will tap into student athletes as endorsers and influencers.
In October, the National Collegiate Athletic Association’s governing board voted unanimously to allow college athletes to be compensated for the use of their names, images and likenesses “in a manner consistent with the collegiate model.”39 The decision was monumental, since the NCAA previously prohibited college athletes from being paid, in an effort to preserve its amateurism rules.40
This change will largely benefit only a small group of individuals, such as certain high-profile players and revenue-generating sports such as football and basketball.41 This historic decision notwithstanding, the NCAA’s three divisions must still formulate their own rules and the NCAA will be gathering feedback from stakeholders through April 2020.
In the meantime, states are forging ahead with their own legislation regarding the commercialization of student athletes. California became the first state to pass a law allowing student athletes to hire sports agents and get paid for endorsement deals.42 Florida has proposed two bills, which follow California’s lead, prohibiting the NCAA from retaliating against student athletes who earn money from their names, images and likenesses.43
New York has introduced the New York collegiate athletic participation compensation act that, among other things, allows student athletes to receive compensation for the use of their names, images or likenesses and to seek professional representations.44 As public support for NCAA student athlete compensation grows, expect more states and potentially even federal legislation to come down the pipeline.
While advertisers and their agencies may wish to tap into this new talent pool for promoting products and services, hiring of student athletes is not without risks. Unlike Lindsay Vonn, Serena Williams, Taylor Swift or Kim Kardashian, student athletes are new to the world of endorsement deals with brands. They may not be familiar with the need to comply with the FTC Endorsement & Testimonial Guides.45 They will not likely have loan-out companies to mitigate their liability. They may not understand ownership in copyright or carry liability insurance.
With their class schedule, they further may not have as much flexibility to attend service days, personal appearances or other required activities in a multiservices agreement. After all, their primary role is to be in school. Some of them may even be minors. Advertisers should be patient, aware and prepared to take a more hands-on role with these students.
5. Cannabis companies are getting creative with advertising despite legal challenges.
Due to the patchwork of state and local legislation, and a federal prohibition on the recreational use of THC-based products,46 advertising in the cannabis industry is challenging. Social media platforms like Facebook, Snapchat, Instagram and Google do not allow cannabis-related advertising in the United States.47 Despite this, the market is flourishing and there is an opportunity for cannabis companies to get creative with their sale, distribution, advertising and promotional tactics.
Some cannabis companies are electing to create social media handles despite the ban, citing low enforcement by the social platforms. Other companies and dispensaries are turning to email and direct marketing, while some turn to traditional geotargeting in the Aspen Times print editions.
Startups are applying the personalized product models to cannabis products. Like the growth in food-delivery apps, there has been material growth in the cannabis-delivery apps. Companies like Eaze, Weedmaps and NuggMD offer tools, maps and same-day delivery services to supply any number of products, from chocolate bars and teas to bath and body care, to consumers through personalized digital platforms.48
As demand for cannabis products rises, regulatory enforcement will also increase. To be blunt, the U.S. Food and Drug Administration and the Federal Trade Commission, sharing joint jurisdiction will lead the enforcement. The FTC is wary of companies making unwarranted health-related claims about cannabidiol- or CBD-infused products.
In September, the FTC sent a handful of warning letters to companies that advertised their products as treatments for diseases such as cancer and Alzheimer’s, with reminders that it is illegal to make such claims without competent and reliable scientific evidence.49 For example, one company claimed CBD works “better than prescription opioid painkillers” and another claimed CBD had been clinically proven to treat multiple sclerosis and fibromyalgia.50 The use of unsupported claims could violate the FTC Act and lead to legal action.
The FDA is similarly active in its enforcement. The agency is investigating reports of CBD containing unsafe levels of contaminants and companies making health-related claims.51 In November, the FDA issued warning letters to 15 companies for illegally selling CBD products such as oil drops, capsules, syrups, food products and topical skincare.52 The companies were marketing their products as dietary supplements and adding CBD to human and animal foods, in violation of the Food Drug and Cosmetic Act.53
While we expect to see a growth in creative advertising of cannabis products, we will also see increased attention from regulators concerned about false and misleading advertising claims.
The Bottom Line
As we step into the next decade, consumer privacy and data collection concerns will grow — leading to additional statutory authority54 and regulatory enforcement. Consumers will continue to demand more control, over their data and over the products and services they purchase. Changing social media advertising policies and new legislation in a variety of areas are on the horizon. Faced with these challenges, advertisers in all industries will need to get creative with fresh and unique ideas. Bring it on, 2020.