The Effects of the FTC Policy and Affiliation Disclosures on Product Review Video Engagement: Evidence from YouTube

Affiliate marketing has become a widely adopted business model on social media platforms, where social media content creators post affiliate links along with product reviews and earn compensation when viewers purchase a product through the links. The Federal Trade Commission (FTC) published Guides Concerning the Use of Endorsements and Testimonials in Advertising (hereafter referred to as the guides or FTC policy), which require content creators to disclose affiliate relations along with product reviews. Despite the prevalence of disclosure policies across nations, academic researchers and policymakers have lacked clear empirical evidence on the effect of such disclosure policies on viewer engagement with product review videos. In this paper, we examine the effect of the FTC policy on viewer engagement with affiliated content, which refers to product review videos that contain affiliate links. We find that after the FTC policy, viewers have significantly lower engagement with affiliated content relative to nonaffiliated content. The paper also examines the moderating effect of the affiliation disclosure on the effect of the FTC policy. We find that affiliation disclosure mitigates the negative effect of the FTC policy on viewer engagement such that affiliated content with disclosures has higher engagement compared with affiliated content without disclosures after the policy. To examine potential underlying mechanisms behind the moderating effect, we examine the heterogeneity in the moderating effect of affiliation disclosure in regard to content creator characteristics and video characteristics. We find that the mitigating effect of affiliation disclosures on the negative effect of the FTC policy on engagement is stronger for content creators with greater experience and higher popularity. In addition, the mitigating effect is stronger when the video content is more negative. Overall, these findings have important policy and practical implications for policymakers, content creators, and social media platforms.

History: Bin Gu, Senior Editor; Xitong Li, Associate Editor.

Supplemental Material: The web appendix is available at https://doi.org/10.1287/isre.2023.0158.