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Snapchat has become a Wild West of sponsored content

Lucrative advertising deals have become commonplace, but do users know what's sponsored and what's not?

On a sunny day last week, Shaun McBride (known on Snapchat as Shonduras) went to the supermarket. His hundreds of thousands of followers were alerted to the expedition through a Snapchat showing McBride holding a hastily drawn watermelon and a box of Cap'n Crunch.

"What's up, Snapchatters? Welcome to grocery shopping with Shonduras!" he said in the opening salvo. "You might be like, ‘Grocery shopping's boring!’ But that's because you've never been with Shonduras!"

Regular followers would already know about McBride's ongoing obsession with sugary cereal, so it was no surprise he headed straight for the cereal aisle, specifically the Crunch Berries. "If you don't get these then you are blowing it," McBride said.

"That's right, Cap'n Crunch Berry Delights are a real thing."

Holding up a box of the Berries, he began to shake uncontrollably. Followers then saw McBride sucked into the box, disappearing in a flash of light. In the following scene, he dropped from the ceiling into Taco Bell's headquarters, where the branding team was engaged in a deep brainstorming session. McBride's appearance inspired the team to invent the deep-fried Cap'n Crunch Berry Delight, segueing into a tour of Taco Bell’s official test kitchen. "That's right, Cap'n Crunch Berry Delights are a real thing," McBride explained. "They come out tomorrow, and I'm going to try to make the first batch." Followers who wanted to watch McBride make the Delights himself could switch over to the Taco Bell account, where they could continue the rest of the story.

This is a new kind of ad campaign, one that has become increasingly popular on Snapchat. It works by the same basic logic as traditional ads: Shonduras has an audience, just like Time magazine or The Today Show, and Taco Bell wants to tell that audience about its new dessert. Since it's a valuable audience, they're willing to pay for the privilege, often as much as $100,000 for an involved story like this one. At the same time, there’s rarely a clear disclosure up front that what followers are seeing is an ad, and none of the traditional restrictions on advertising apply. It’s a no-man’s-land of partnerships, but for brands and influencers alike, it’s proven too lucrative to pass up.

Shonduras isn’t the only Snapchatter making money off his account. When Universal wanted to promote its cyberbullying horror movie Unfriended earlier this year, they brought on Brittany Furlan, who ran a series on her Vine and Snapchat accounts. Another successful Vine star named Jerome Jarre made waves by moving entirely to Snapchat. This year, Pepsi flew him to Colombia to build homes from two-liter soda bottles, and L’Oreal Paris brought his mother to the red carpet at Cannes. In each case, brand names were mentioned prominently, but formal disclosure was haphazard at best.

It’s easy to see why McBride has become one of Snapchat's most appealing stars for advertisers. A 28-year-old Utah native, he's naturally cheerful, talking to the audience like friends and often asking them to interact with his stories as if they’re there with him. Even simple snaps generate a huge response, and McBride typically spends a full hour just sorting through replies. "People just want to be doing what I'm doing and interact with me," McBride says. "It's crazy that that happens, and it's super valuable from a brand perspective."

McBride says his audience is in the hundreds of thousands, well short of the muti-millions you'd get from popular YouTube or Vine accounts, but he's been able to draw in major sponsors thanks to his close bond with followers. He doesn’t know exactly who his followers are, but he suspects they skew young based on the people that reply. His snaps also seem likely to attract a younger crowd, focused on skating tricks, eating huge bowls of cereal, and playing pranks on friends at the airport. It’s a valuable demographic, and alongside Taco Bell, McBride has done stories with Red Bull, Disney, and Unicef, and in April, he partnered with American Idol for his first appearance on national television. Advertisers see Shonduras as a way to form a more direct connection with consumers. "As a society, we've kind of learned to tune out advertisements on TV," McBride says. "With Snapchat, we're not used to it. When you advertise on Snapchat, if you do it in a fun and creative way that adds value; they don't see it as an annoying ad. They actually enjoy it."

"As a society, we've kind of learned to tune out advertisements on TV.... With Snapchat, we're not used to it."

Snapchat the company wasn't involved in Shonduras' partnership with Taco Bell, and while it's recently backed away from promoting brand stories directly, the company has taken a hands-off approach to independent partnerships. That has left McBride and Taco Bell to work out a deal on their own, with no clear best practices to abide by. McBride does put limits on the brands he'll work with, but they’re mostly personal. A practicing Mormon, he won't endorse alcoholic drinks, and tries to work with products he personally uses. "I'm not going to do advertisements that I don't believe in," McBride says. "I legitimately like Taco Bell. I'll work with them. I legitimately love cereal so I'll work with Honey Nut Cheerios. I love Samsung phones over iPhones, so I'll work with Samsung. I just try to keep it real."

While some form of sponsored content can be found on every social network, Snapchat presents a unique challenge for disclosing when a series has been paid for. "Snapchat in particular is pretty unusual because it's all visual," says David Berkowitz, the chief marketing officer at digital agency MRY. "It really does become much more of a decision between the influencer and the brand." For most social channels, the popular answer is to drop "#ad" or "#spon" hashtag into the post description. You might not always notice it, but if you're wondering whether a pair of shoes was comped or paid for, you'll know where to find the answer. But Snapchat doesn't include any space for those hashtags, leaving marketers in an awkward place.

"It's hard to be too cautious if you're the marketer," Berkowitz says, "especially because marketers have been fined for going too far." In 2014, the FTC formally investigated a Cole Haan Pinterest campaign that asked users to re-pin Cole Haan posts in exchange for a chance at a $1,000 prize. The FTC concluded that the contest was fundamentally deceptive, and while it declined to press the matter in court, the letter signaled serious consequences for future campaigns that follow a similar path. As a result, marketers frequently point to the case as a cautionary tale.

Snapchat’s self-destructing nature makes it hard for regulators to keep up

But Snapchat’s self-destructing nature makes it hard for regulators to keep up. Many of the FTC's targets come from external referrals, whether from consumer complaints, congressional correspondence or outside advocacy groups. But if a video disappears as soon as you watch it, it can’t be sent to regulators, and recording and hosting a Snapchat Story is still out of reach for most consumers. Advertisers on broadcast channels face even stronger restrictions, spurred by concerned parent groups, but there’s no equivalent for social media, and the ephemeral nature of Snapchat means there’s little concerned parents can point to.

Then there's the simple fact of how quickly these platforms are changing. The FTC's most recent paper on social media partnerships was published in March 2013, a full seven months before Snapchat launched the Stories feature used by Shonduras and Taco Bell.

In June, the FTC updated its endorsement FAQ to require more explicit disclosures any time money changes hands, particularly on social platforms. Mary Engle, head of the FTC's advertising practices division, told The Verge that under the new guidelines, any video disclosures need to happen within the video frame, since the description and other metadata may not be visible when the video is embedded. For the disclosure to be effective, Engle says, "it has to be made in the advertising medium itself." In cases like Snapchat, where there's no second space, that could force marketers to choose between a prominent disclosure or no partnership at all. "If it's not possible to make the disclosure on a platform for whatever reason then that platform should not be used for that advertisement," Engle says.

Still, McBride worries that too much disclosure could ruin his connection to the audience. "I like how it is right now, and I dislike that when you post on Instagram you have to put #ad," McBride says. "It kind of takes away from the vibe." It's unclear where that leaves him with regulators, but McBride says he doesn't think his followers will be confused. "When you watch the Taco Bell Story, you know I'm working with Taco Bell. I'm not trying to hide that."

12:28pm ET: Updated to clarify the typical sources of FTC referrals and more accurately distinguish the agency's endorsement guides from its FAQ.

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