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The Effects of Advertising Disclosure Regulations on Social Media: Evidence from Instagram

Daniel Ershov, Matthew Mitchell. 2025. RAND Journal of Economics, 56(1), 74-90.

Abstract

We study the effects of advertising disclosure regulations in social media markets using Instagram data from Germany and Spain and a difference-in-differences approach. The German strengthening of disclosure rules increased the use of disclosure terms, but also increased sponsored content by 12% and raised the share of undisclosed sponsored content consumers were exposed to. We also find reductions in engagement, suggesting that followers were likely negatively affected.

Main Finding

Disclosure rules increased disclosure, but they also increased sponsored content by 12% and raised consumers' exposure to undisclosed sponsored posts.

Policy Relevance

Disclosure regulation can change the supply of sponsored content, not only labeling compliance; this matters for consumer-protection policy on social media.

Notes

• Extended abstract published in the ACM-EC 2020 Conference Proceedings.