By Aimee Levitt
When planning a major purchase, Jingwen Zhang, an assistant professor of business administration at the University of Illinois’ Gies College of Business, researches products the way millions of consumers do: by watching YouTube product reviews. Like many of us, she wants to see how the item functions in real life and holds up over time.
A few years ago, she began to notice that some of the YouTubers she followed were affiliated with retailers like Amazon. This means that if a user follows a special link embedded in the YouTube review and makes a purchase, the YouTuber receives some sort of benefit, usually money, from the retailer.
Zhang found this disturbing. “I was thinking, if those YouTubers are affiliated, does this bias the product review?” she says. “Like, even if a product isn’t good at all, they may just want to earn some benefits from a consumer purchase.”
Affiliate marketing is a huge business that’s poised to get even bigger: spending was $20 billion in 2022 and is projected to exceed $39 billion by 2031. Zhang’s next question was if the government had taken any action to regulate it. She found that it had: in September 2017, the Federal Trade Commission (FTC) had instituted guidance that required influencers to disclose affiliations with retailers.
Because Zhang studies causal inference and social platforms, she took a professional interest in whether the FTC’s policy was effective. Her initial research, based on data from YouTube, showed that fewer than 50% of influencers follow it.
“The number is quite shocking,” she says. “It’s a guidance, not a law, so it’s not mandatory.” The government has filed warning letters to some of the larger influencers for not disclosing their affiliations, but it’s possible for smaller, less-known influencers to fly under the radar.
How the researchers studied YouTube engagement
But what was the impact of the disclosure policy on the people watching the videos? Along with two colleagues, Stephanie Lee and Yong Tan, both of the University of Washington, Zhang designed a study to find out. They recently published their findings in a paper, “The Effects of the FTC Policy and Affiliation Disclosures on Product Review Video Engagement: Evidence from YouTube,” in the journal Information Systems Research.
Zhang, Lee, and Tan’s study was twofold: an observational study of the effects of the policy on actual YouTube users when it was implemented in 2017, followed by a controlled experiment that directly asked people about their reactions to videos with affiliation disclosures.
They focused on the users because, Zhang says, “we were trying to find an angle to measure the effectiveness of the policy. Engagement is an important measure for YouTube influencers.”
For the observational study, the researchers collected 4,179 technology product review videos posted to YouTube in the two months before the FTC disclosure policy went into effect on September 7, 2017. They were able to tell the difference between affiliate marketing and organic recommendations by analyzing the links: the URLs of affiliate marketing links contain tracking codes. Then they compared the engagement from before September 7 and after and did robustness checks on likes and views.
As they suspected, the disclosure policy did result in an overall decline in user engagement. But, paradoxically, affiliated content with disclosures had higher engagement than affiliated content without it. They also found that disclosure effects were stronger for influencers with greater popularity, longer YouTube tenure, and more negative review content.
“We found that because people are commonly aware of that strategy after the implementation of the policy, if you are honest and disclose your affiliation, people perceive you as a more credible influencer,” Zhang explains.
The researchers were aware, however, that observational data has its limitations, especially when it comes to human behavior. So in order to validate their findings, Zhang says, they designed the second half of the study, the controlled experiment.
The experiment took place entirely online and was meant to mimic the experience YouTube users would have had before and after the FTC policy. Everyone had to watch the same video twice, a review of a technology product. Half the research subjects saw a version of the video with a disclosure and the other half without. Before the second viewing, all the subjects were informed about the FTC policy. After each viewing, subjects answered a series of questions about their knowledge of affiliate marketing, their willingness to engage with the video, and their perceptions of the influencer’s trustworthiness.
As in the observational study, the experiment subjects found the influencer’s review more credible when he disclosed that he was part of an affiliate program.
Now Zhang is working on a new project that studies how influencers could disclose their affiliations and how affiliate marketing works in tandem with other marketing strategies. She’s also examining how users might behave differently on other social media platforms.
Overall, though, it seems that when it comes to affiliate marketing, honesty is the best policy. “Disclosure,” Zhang says, “is a good thing.”