You have to take the good with the bad, and internet mattress marketer Casper Sleep wasn’t taking any chances when it filed for its initial public offering in early January.
The US Securities and Exchange Commission doesn’t want investors to get blindsided so companies are cautious in their filings, making sure they list all possible factors and risks affecting an investment in their shares or bonds.
Casper didn’t hesitate to trumpetOpens a new window its “category-leading social media presence.†It claims one billion social media views, representing about 50% of the social media views in its industry, more than twice those of its nearest competitor. Some 80% of the mentions are positive.
Adverse effects
But then come the disclaimers. Under Summary Risk Factors, Casper cautions: “Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties.â€
With much internet marketing shifting to informal networks such as Instagram and YouTube, relying on paid or unpaid influencers to boost a product, it’s a timely admonition and one likely to appear increasingly often in regulatory filings. For companies that feel compelled to take this route, it’s a fair warning about the dangers posed by spokespeople you can’t control.
Influencers, Casper cautions, may communicate directly with its customers and engage in behavior that may reflect poorly on the brand and be attributed to the company or otherwise adversely affect its image.
Social media marketing
Casper says it maintains relationships with thousands of social media influencers in its Instagram, Snapchat, Facebook, Twitter and Pinterest accounts, as well as on the Casper Sleep Channel on YouTube and Spotify.
Casper’s mattress-in-a-box has relied on influencers like Kylie Jenner, the 22-year-old celebrity who has built a fortune estimated at $1 billion and who has 150 million Instagram followers.
Other companies have mentioned their reliance on social mediaOpens a new window in offering documents. Peloton Interactive, a provider of exercise bikes that went public in September, cautioned how difficult it was to monitor compliance across social media. J. Crew spin-off Madewell bragged about its sophisticated digital marketingOpens a new window through social media but also warned about some of the risks associated with this strategy, including monitoring compliance.
Rough ride
But Casper drew attention because of its warning specifically about influencers, their behavior and their independence.
Unicorn start-ups with an valuation exceeding $1 billion had a tough time with their IPOsOpens a new window in 2019. Uber and Lyft have seen their IPO valuations plummet, and WeWork never went public after its pre-IPO valuation of $47 billion plunged to $6 billion by the time SoftBank rescued it.
Big data cruncher Palantir Technologies and delivery company Postmates both postponed IPOs in view of the choppy market.
Influencer disclosure
In the meantime, social influencers have become a really big deal. There are celebrities, like Jenner or Dwayne ‘The Rock’ Johnson, who have developed wide followings on social media. Then there are social media sensationsOpens a new window who become celebrities because of their success on the web, such as beauty blogger Huda Kattan and lifestyle exponent Cameron Dallas.
But there are hundreds of thousands of social media influencers. The Federal Trade Commission felt obliged in NovemberOpens a new window to issue guidelines about when you’re required to disclose connections to a brand. Basically, whenever you have a material connection — employment, payment, discounted products or perks — you’re obliged to disclose that connection within the endorsement itself and not, for instance, on your profile page.
Marketing professionals have come to accept social influencers as an effective marketing channel, to the point that some even enlist their help in developing productsOpens a new window or refining the message. Just be aware, Casper warns investors, that the strategy can backfire.