Welcome to DigiConsumers, a trimonthly exploration of recent courts and decisions about digital consumers in European law & policy. Authored by Catalina Goanta, an Associate Professor of Law specialized in the field, this series goes through the latest and most important developments in the space. Enjoy!
Why content creators are here to stay
Content creation is a growing business worldwide.
According to Forbes’ selection of top creators, the 50 honorees designated for 2023 have a combined 2.6 billion followers, and they allegedly made a whopping $700 million in earnings in 2023 alone. By comparison, Forbes’ 2022 top included 49 ‘social media savants’ who had garnered a total of $570 million in earnings for that year. In addition, Forbes reports that in 2023 brands have been spending an estimated $21 billion on creator marketing. Even US finance giant Goldman Sachs has an eye on the development of the content creator economy, which it estimates will reach half a trillion dollars by 2027.
While it might be difficult to get a clear estimate of this market due to the volatility and speed of social media business models, data opacity, and the general informal nature of these economic activities, one thing is for sure. Content creation has been on the rise as a way for Internet users to become semi/professional Internet entrepreneurs who generate content to monetize their online presence. But what exactly is content creation, and how is it different from influencer marketing?
In a report for the European Parliament from last year, I answered this question by providing an overview of five specific business models I have been studying for the past six years (earlier reported here and here). As can be seen in Figure 1, these models focus on the following transactions:
Figure 1 – Content monetization business models
- Influencer marketing: brands hire influencers (whether through intermediaries or not) to promote goods and/or services. This process can entail an exchange of money/services (endorsements), an exchange of services/goods (barter), or an exchange of services/referral commissions (affiliate marketing). Influencer marketing can therefore be seen as only one of the business models in the content creator economy, focused on the provision of advertising services by influencers/creators. It should also be noted that influencer marketing is primarily done off-platform, meaning that social media platforms do not participate in these transactions.
- Ad-revenue or on-platform influencer marketing: these are other types of advertising revenues that are mediated by the platform. In the case of ad revenue (e.g., YouTube’s AdSense), the platform gives creators some of the advertising money it receives from brands based on the views garnered by their content, as well as the purchasing power of their audiences. In the case of on-platform influencer marketing, platforms act as marketplaces to mediate the matching between brands and creators looking for collaboration opportunities (e.g., Twitch Bounties).
- Subscriptions/tokens: this type of revenue is mediated by platforms but not based on advertising. Subscriptions indicate the possibility of removing platform ads or obtaining premium content from specific creators, while tokens reflect the trend for social media platforms to use microtransactions during live streams and beyond (e.g., TikTok’s coins and emojis).
- Direct selling: in this business model, creators rely on platforms, whether social media and/or dropshipping (e.g., Shopify), to generate their own goods and/or services. Examples include selling merchandise but also offering digital content in the form of apps or online courses.
- Creator funds: creators can also be supported by platforms for driving engagement and bringing new users to the platform or keeping existing users on the platform. Not all social media platforms offer this possibility, but an example is the TikTok Creator Fund.
These business models showcase the breadth of the content creator economy. From a legal perspective, the implications are incredibly complex. From advertising disclosure to qualifying microtransactions and to labour and tax regimes, not to mention the specific situations of product safety, criminal scams, and controversial practices around child influencing. There are a lot of influencers who have specialized in this wide portfolio of activities. The Forbes list mentioned above includes Internet personalities such as Mr. Beast, who gains a lot of revenue from ads and endorsements, but also owns, for instance, a burger chain (Mr. Beast Burgers) and has launched other food items of his own. These activities reflect networks of corporations supporting commercial expansion across different business models. However, not all creators enjoy the resources or the professionalization level, which may bring legal expertise and know-how with it.
This category of social media stakeholders has fundamentally changed the social media environment. Social media is no longer merely a space for networking, but it has become increasingly a place for watching content as well as engaging in transactions (buying things). This reflects the findings of Agarwal and Sastry, who looked at 25+ years of web data to see what people do on the Internet. The top three activities recorded for 2021 included streaming media, shopping, and social networking (see below).
Whether they know it or not, creators have a lot of legal obligations, which they very often fail to meet. Due to repeated scandals and consumer problems, authorities have turned their attention to the economic activities of creators. If you read these lines at the end of 2023, the European Commission is currently coordinating the biggest operation of investigating influencer practices at European level from a consumer protection perspective. The results are expected in the first half of 2024. I anticipate the results will show a general picture of undercompliance with European Union law. This is due to many factors, including the lack of consistent enforcement in some Member States, but for some creators, it can be as simple as not being aware of the complex web of rules that they ought to apply to their commercial activities.
Why it’s important to support creators with legal knowledge: the Influencer Legal Hub
Not knowing the law is not a defense to not apply it as a commercial operator (or in the terminology of European consumer protection, a ‘trader’). Yet even for the most seasoned analysis of social media commercial practices, the variety and complexity of the laws that apply to content monetization are often overwhelming. For this reason, together with the European Commission, Sophie Bishop and I have developed the Influencer Legal Hub.
This resource is designed for content creators, who frequently promote or sell products, as they fall under the legal classification of traders according to European law. Just like any business engaging with consumers in the European Union, influencers are subject to a myriad of rules. The Influencer Legal Hub steps in to simplify these seemingly complex rules and provide assistance. The Influencer Legal Hub comprises various materials, including video tutorials, written legal briefs, summaries of key European laws, and decisions by the Court of Justice of the European Union. It also includes links to relevant national consumer authorities and additional resources. All videos underscore the significance of product safety, urging influencers to verify the safety of products they sell or endorse on Safety Gate, a Commission website listing product recalls. Recalled products should not be promoted or sold due to potential risks to consumer safety and health.
The seven video tutorials focus on acquainting influencers, agencies, PR firms, brands, and even consumers with the most pertinent consumer rules in the European Union. By engaging with the video tutorials and familiarizing themselves with the materials in the Influencer Legal Hub, they can gain insight into the European consumer protection standards applicable to advertising, selling goods, and providing services.
The videos are structured around three main themes:
- Introduction to consumer protection laws in the European Union: Providing an overview of various consumer protection rules relevant to influencer activities, delving into the rich history of European consumer law over the past 50 years.
- Influencers as advertisers: Exploring in detail when advertising rules apply to influencers and how best to comply, particularly when they are categorized as ‘traders.’
- Influencers as sellers: Examining the rules influencers must adhere to when selling goods and/or services directly to consumers, including transparency obligations and additional consumer rights.
We welcome any feedback on the Hub!
|Citation: Catalina Goanta, The need for legal education among Internet entrepreneurs in the content creator economy, Network Law Review, Autumn 2023.