5 social media marketing challenges and how to mitigate their risks

As marketing on social media becomes a larger, established lever for small and medium-sized businesses, in-house counsel face the need to balance business growth and innovation with the inevitable risks that come with social media platforms.

The wrong move by an employee or user can result in reputational harm. For this reason, it is important for general counsel (GC) to note concerns associated with paid media, use of influencers, user-generated content, paid search, and other regulatory risks of social media marketing.

Here’s a marketing quick-start guide for modern GC at growing businesses that can help you identify the top areas to watch for and how to manage their risks.

1. Paid media and similar advertising

A paid social media strategy involves the use of ad tools within a given social media platform to target a certain user group. Companies pay for these promotions by click, impression, or view. Some companies develop relationships with third-party influencers to advertise on their behalf. These affiliates get paid by the click. 

For marketers, the challenge in this approach is finding the right audience, inspiring viewers to click through, and calculating return on investment (ROI). But these approaches can incur liabilities; as with any advertising, laws require claims to be truthful, accurate, and substantiated. Additionally, a social media platform’s terms of use often include stipulations that apply to advertising, marketing, promotions, and sponsored content. These rules may restrict ads for items such as alcohol or guns. 

Relationships to third-party affiliate marketers also carry management risks, as companies must require that their affiliates comply with advertising rules and laws. Regardless of the situation, the general counsel for a small business is responsible for ensuring that management and marketing teams are aware of the guardrails set up on these platforms and for understanding the legal risks involved. Drafting and maintaining a robust social media policy is a good way to keep all stakeholders on the same page. 

2. Influencer relationships

Influencer marketing, which involves partnering with social media creators who endorse products, has become common in social media marketing. Influencer marketing is worth almost $14 billion per year, and companies have already spent 33% more on influencer marketing in 2021 than the year before. While the opportunity exists for improving marketing efficacy in this area, working with social media influencers also brings unique challenges. It is a good idea to establish an endorsement policy for influencer campaigns before your company starts one.

General counsel should be aware that the Federal Trade Commission (FTC) requires influencers with whom you have a “material connection” — that is, to whom you’re paying money or providing other perks — to publicly disclose their relationships with your company — and your company must do likewise. Failure on either part could lead to regulatory problems that damage your reputation. It’s vital to ensure that any influencer your company works with is aware of these legal obligations.

3. User-generated content

Social media is built on user interaction, which may include comments on company posts or reviews of services. This is a way for your company to engage users, measure engagement, and showcase your brand’s loyal following.

There’s no guarantee that all those comments, postings, and reviews will be positive — or even legal — and that’s when things get challenging. As a best practice, in-house counsel should ensure that the organization’s corporate social media use guidelines reference the terms of use and privacy policy of each social media platform the company uses.

The policy can lay out regulations regarding intellectual property rights and a plan for monitoring company pages for unsuitable, infringing, or illegal content. Counsel should evangelize this policy with their marketing, sales, and social media teams to align on protocols for responding to users and for addressing issues with content users create. And don’t forget to share the rules with users themselves to help them avoid running afoul of your company or platform policies.

4. Paid search

Google AdWords and similar programs allow businesses to pay to have their listings appear at the top of a section for sponsored listings. Paid search presents a legal problem that is as old as advertising: making sure that advertisements are clearly indicated as such so as not to mislead consumers. Accordingly, the FTC requires that paid ranking search results are clearly labeled to distinguish them from nonpaid results.

General counsel should also ensure that paid ads are presented as such wherever they appear. Your business also may have questions about where your ads appear, how much control you have over that placement, and who else may be advertising near your ad.

Legal counsel needs to be aware that there’s much discussion in the intellectual property world about trademark infringement on Google AdWords. It’s common to design a paid search ad using a word or phrase that may be registered as a trademark. The question is whether this could expose the company placing the ad to liability; in many cases, it will not because various rulings make it permissible to use trademarked words and phrases in such a way. But general counsel should be alert to this question, consult with case law when there’s any doubt, and relay findings to marketing or sales teams to level-set with all stakeholders.

5. Managing regulatory risks

Social media content is subject to the Security and Exchange Commission’s (SEC) Regulation FD (Fair Disclosure), which forbids selective disclosure of nonpublic information to prevent insider trading. While social media marketing is effective because of the way users can segment their audiences, some of those segments are not allowed to be privy to communications that others aren’t. Other regulations restrict the disclosure of particular financial information on social media. Simply put, the legal standards for social media communications are the same as for other kinds of corporate communications.

General counsel should put a plan in place for employee education regarding insider trading rules and the legal liabilities involved. This plan would outline the essential information that employees must know, together with what information — including financial data — they can disclose publicly and the rules for selective disclosure. Employees need to know how to stay on the right side of the law in their social media communications.

An ounce of prevention is worth a pound of cure. Anticipating potential risks ahead of time and taking action to mitigate them is the best approach to managing your social media marketing strategy from a legal perspective. A successful small business lawyer will be proactive about assessing risk and communicating needed actions to executives clearly and early. With a resource like Thomson Reuters Practical Law in your toolbox, you can quickly find the insights and information you need to guide your organization’s social media marketing approach. 

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