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Behavioural Study on Advertising and Marketing Practices in Online Social Media BEHAVIOURAL STUDY ON ADVERTISING AND MARKETING PRACTICES IN ONLINE SOCIAL MEDIA Final Report Specific contract No. 2015 85 01 under Framework contract No. Chafea 2015 CP 01 SpecificPrepared contract by the No.GfK 2015Consortium 85 01 underFinal Version:Framewo June,rk contract 2018 No. Chafea 2015 CP 01 Prepared by the GfK Consortium Revision:27/06/2018 Directorate-General for Consumers 2018 Consumers, Health, EUR 6 EN Consumers,Agriculture Health, and Agriculture and FoodFood ExecutiveExecutive Agency Agency EUROPEAN COMMISSION Produced by Consumers, Health, Agriculture and Food Executive Agency (Chafea) on behalf of Directorate-General for Justice and Consumers Unit 03 Economic analysis and evaluation Contact: Unit 03 E-mail: [email protected] European Commission B-1049 Brussels Directorate-General for Consumers 2018 EUR 2 EN EUROPEAN COMMISSION Behavioural Study on Advertising and Marketing Practices in Online Social Media Final Report Directorate-General for Justice and Consumers 2018 EUR 3 EN EUROPEAN COMMISSION LEGAL NOTICE This report was produced under the EU Consumer Programme (2014-2020) in the frame of a specific contract with the Consumers, Health, Agriculture and Food Executive Agency (Chafea) acting on behalf of the European Commission. The content of this report represents the views of GfK Belgium and is its sole responsibility; it can in no way be taken to reflect the views of the European Commission and/or Chafea or any other body of the European Union. The European Commission and/or Chafea do not guarantee the accuracy of the data included in this report, nor do they accept responsibility for any use made by third parties thereof. Project number: 2018.3823 Title: Behavioural study on Advertising and marketing Practices in Online Social Media – Final Report Language version Format/Volume Catalogue number ISBN DOI EN PDF PDF/Volume_01 EB-01-18-679-EN-N 978-92-9200-945-8 10.2818/290217 © European Union, 2018 Reproduction is authorised provided the source is acknowledged. Directorate-General for Justice and Consumers 2018 EUR 4 EN Table of contents 1 Introduction ............................................................................................................ 7 Study objectives and report structure 7 Methodological approach 8 Definition of Online Social Media 10 2 Online Social Media in the EU ............................................................................. 13 Key Online Social Media providers in focus 19 2.4.1 Facebook Inc. 20 2.4.2 YouTube 22 2.4.3 Twitter 23 2.4.4 Reddit 23 2.4.5 LinkedIn 24 2.4.6 Snapchat 24 Revenue streams of Online Social Media providers 25 Delivering marketing content to Online Social Media users 27 Commercial practices on Online Social Media 29 3. Disguised Advertising Practices ........................................................................ 30 Introduction 30 3.1.1 Native advertising 30 3.1.2 Influencer marketing 32 3.1.3 Advertorials 33 Consumer issues 34 3.2.1 Evidence from the qualitative research 34 3.2.2 Evidence from the behavioural experiments 37 3.2.3 Conclusions 44 Legal assessment and remedies 45 3.3.1 Options for regulatory action 46 3.3.2 Options for enforcement action 49 3.3.3 Options for self-regulatory action 50 3.3.4 Other remedy options 52 4. Social Proof Practices ......................................................................................... 54 Introduction 54 4.1.1 Artificial boosting of social proof indicators. 55 4.1.2 Extrapolation of social endorsements 56 4.1.3 Other practices linked to social proof 58 Consumer issues 59 4.2.1 Evidence from the qualitative research 59 4.2.2 Evidence from the behavioural experiments 62 4.2.2.1 Artificial boosting of social proof indicators 62 4.2.2.2 Extrapolation of social endorsements 66 Conclusions 68 Directorate-General for Consumers 2018 EUR 5 EN EUROPEAN COMMISSION Legal assessment and remedies 69 4.4.1 Options for regulatory action 71 4.4.2 Options for enforcement action 73 4.4.3 Options for self-regulatory action 74 5. Data Gathering and Targeting Practices ........................................................... 76 5.1 Introduction 76 5.1.1 User tracking 76 5.1.2 Audience targeting 77 5.1.3 Social media logins 78 5.2 Consumer issues 79 5.3 Conclusions 82 5.4 Legal assessment and remedies 83 5.4.1 Options for regulatory action 84 5.4.2 Practice-specific options for enforcement 85 5.4.3 Other remedy options 86 6 Other Problematic Practices ............................................................................... 88 6.1 Description of specific practices identified 88 6.2 Consumer issues, legal assessment and conclusions 89 6.3 Legal assessment and remedies 89 6.3.1 Options for enforcement action 90 7 Conclusions .......................................................................................................... 91 7.1 The OSM Landscape in the EU 91 7.2 Disguised advertising practices 92 7.2.1 Introduction and evidence of consumer issues 92 7.2.2 Options for regulatory action. 92 7.2.3 Options for enforcement action. 93 7.3 Social proof practices 94 7.3.1 Introduction and evidence of consumer issues 94 7.3.2 Options for regulatory action. 94 7.3.3 Options for enforcement action 95 7.4 Data gathering practices 95 7.4.1 Introduction and evidence of consumer issues 95 7.4.2 Options for regulatory action 96 7.4.3 Options for enforcement action 96 7.5 General discussion of the current legal context 96 8 Appendix – Limitations and Future Research ................................................... 99 9 Lists of Annexes ................................................................................................. 101 Directorate-General for Justice and Consumers 2018 EUR 6 EN EUROPEAN COMMISSION 1 Introduction Study objectives and report structure The key objective of this multi-method, exploratory study was to investigate advertising and marketing practices in online social media (OSM) from the perspective of consumer behaviour and consumer protection. It aimed to identify and assess commercial practices in the context of OSM that could be potentially unfair or misleading for consumers. Furthermore, the study aimed to investigate the factors that contribute to their prevalence, and to identify and assess potential remedies to these problematic commercial practices. The purpose of the study was operationalised via five key objectives. As a first step, it aimed to depict a comprehensive landscape of OSM providers in Europe and to describe their business models. The second objective was to investigate the commercial practices carried out in OSM in Europe and to assess them systematically from the perspective of consumer behaviour and consumer protection. The third objective was to study the drivers behind the effectiveness and propagation of these commercial practices from the perspective of both traders and consumers. The fourth objective was to assess the level of involvement and responsibility of OSM providers and other players in the design, implementation and follow up of the relevant commercial practices identified. Lastly, the study aimed to draw conclusions and suggest specific remedies for the problematic practices identified, based on the evidence collected, which would translate into options for policy and enforcement intervention. The Final Report consists of seven chapters, which summarise the key insights from several pieces of research conducted over the course of the project. The current Chapter 1 introduces the study’s main objectives and outlines the different methodological approaches taken in order to systematically address these objectives. The chapter also provides a definition of online social media and highlights the topic’s relevance for consumer protection online. Chapter 2 introduces the OSM provider landscape, focusing on the top OSM providers in the EU and differences in OSM usage across the EU. Chapters 3 to 6 present an overview of specific commercial practices in OSM identified during the study with each chapter dedicated to a group of practices, which can be tackled together in the context of consumer protection. Each chapter first defines and describes the practice studied in its most common forms using visual examples. Next, the practice is assessed from the perspective of consumer protection and its potential to be problematic for consumers. These assessments are based on key findings from four qualitative studies1 and four behavioural experiments conducted over the course of the project. Furthermore, each chapter proposes remedies to the risks identified for consumers, after assessing gaps in the current legislation and analysing the potential liability of OSM providers. 1 In-depth desk research; online communities conducted in four EU Member States; a B2B stakeholder survey with relevant stakeholders; and a mystery shopping exercise. Directorate-General for Justice and Consumers 2018 EUR 7 EN EUROPEAN COMMISSION More specifically, Chapter 3 focuses on Disguised advertising practices, Chapter 4 explores practices related to Social proof, Chapter 5 focuses on Data gathering and targeting practices, and Chapter 6 discusses the remaining practices identified. The overall conclusions of the study are presented in Chapter 7. Limitations and suggestions for future research on the topic are discussed in the Appendix. Due to the comprehensive nature of the research conducted during this project, the Final Report serves as a summary of the key insights. Detailed reports for all research activities conducted are available as Annexes and
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