New influencer rules ‘will raise transparency & costs’; PhonePe’s India shift cost Rs 8,000 crore: CEO

Last Friday, India’s Department of Consumer Affairs announced new guidelines for social media influencers and celebrities, saying they must disclose promotional content or face fines of up to Rs 50 lakh. The new rules could increase transparency but also raise costs for advertisers, who will need to spend more on compliance, according to social media and influencer marketing company DigitalROI.

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Also in this letter:
■ PhonePe’s India shift cost Rs 8,000 crore: CEO
■ US sues Google over digital ads dominance
■ Expunge amendments to IT Rules, says Editors Guild


New influencer rules will increase transparency but also raise costs: DigitalROI

social media influencers

The new guidelines to social media influencers to regulate promotions could lead to higher costs for advertisers as they may need to spend more on creating compliant content, according to DigitalROI, a social media and influencer marketing company.

Catch up quick: Last week, the government announced endorsement guidelines for celebrities and social media influencers, mandating disclosure of benefits for promoting goods or services on social media.

“This includes not only benefits and incentives, but also monetary or other compensation, trips or hotel stays, media barters, coverage and awards, free products with or without conditions, discounts, gifts and any family or personal or employment relationship,” the Union Consumer Affairs Ministry said in a release.

Such disclosures must be prominently displayed with terms such as ‘advertisement’, ‘sponsored’ or ‘paid promotion’, it added. Failing to do so will attract a fine of up to Rs 50 lakh.

Quote: Vikas Mangla, founder of DigitalROI, said, “Consumers may become more aware of when an endorsement is sponsored, which could lead to increased scepticism about the authenticity of the endorsement. Advertisers may need to be more transparent in their relationships with influencers and other endorsers, which could lead to increased scrutiny of these relationships.”

Yes, but: “The overall impact of the disclosure will likely depend on how strictly the regulations are enforced and how effectively they are communicated to both advertisers and consumers,” Mangla added.


It cost PhonePe Rs 8,000 crore to come to India, says Sameer Nigam

It cost PhonePe Rs 8,000 crore to come to India, says Sameer Nigam

PhonePe cofounder and CEO Sameer Nigam said on Wednesday that since the company shifted domicile from Singapore to India, about 20 unicorn startups and their investors have asked the company how it went about the process, saying they too are interested in moving their headquarters to India.

PhonePe completed its shift from Singapore to India in October 2022.

Indian law poses challenges: In a YouTube Live session with PhonePe cofounder and chief technology officer Rahul Chari, Nigam said Indian law poses many challenges for startups that want to shift to India, such as a capital gains tax on shareholders and investors, reset of the vesting period for employee stock options (Esops), and the inability to offset losses. “Our investors paid almost Rs 8,000 crore in taxes just to allow us to come back to India,” he said.

Huge tax bill: We reported on January 4 that the government is likely to gain as much as $1 billion in taxes from US-based retailing giant Walmart and other shareholders of PhonePe as part of its shift to India.

Esop challenges: Nigam said that the company also had to convince several thousand employees about being back to a “zero-vesting one-year cliff” or a reset of the vesting period for their stock options.

Can’t offset losses: “One of the things that is very common in the pre-profit startup world is your accumulating losses. As the company becomes profitable, you get to actually offset the losses, which saves you some tax. And in this case, by domiciling into India, unless the law changes by the end of March, we stand to lose about $900 million of accumulated losses, because it’s considered a restructuring event,” he said.


Sharechat founders Farid Ahsan, Bhanu Pratap Singh to step down

SC Founders

Sharechat cofounders Bhanu Pratap Singh and Farid Ahsan will step down from their active roles at the social media platform, cofounder and CEO Ankush Sachdeva told staff in an internal email. His note said that both Singh and Ahsan will remain on the company’s board.

Ahsan was the company’s chief operating officer, while Singh was its chief technology officer.

Quote: “Bhanu and Farid believe that all the critical business functions they are owning are now in steady hands and have decided to step down from their active roles in the company. They would, however, continue to be a guiding force for the company and stay on the board,” Sachdeva said in the mail.

MohallaTech, the parent firm of ShareChat and Moj, sacked around 500 employees, or about 20% of its staff, earlier this month, after axing at least 100 jobs in December.


US sues Google over digital ads dominance

google

The US Justice Department and eight states filed a lawsuit against Alphabet’s Google on Tuesday over allegations that the company abused its dominance of the digital advertising business, according to a court document.

The Justice Department asked the court to compel Google to divest its Google Ad manager suite, including its ad exchange AdX.

Allegations: The government said in the complaint that Google is looking to “neutralise or eliminate” rivals in the online ad marketplace through acquisitions and to force advertisers to use its products by making it difficult to use competitors’ offerings.

Why it matters: This is part of a new, if slow and halting, push by the US to rein in big tech companies that have enjoyed largely unbridled growth in the past decade and a half.

Digital ads currently account for about 80% of Google’s revenue, and by and large support its other, less lucrative endeavours. But the company, along with Meta, has seen its market share decline in recent years.

Google held nearly 29% of the US digital advertising market in 2022, according to research firm Insider Intelligence.


Expunge amendments to IT Rules, says Editors Guild

Expunge amendments to IT Rules: Editors Guild

The Editors Guild of India has written to Electronics and Information Technology Minister Ashwini Vaishnaw, urging him to “expunge” the amendments to IT Rules that seek to direct social media platforms to take down news or information identified as “fake” by the PIB’s Fact Checking Unit.

In a letter sent to IT Minister Ashwini Vaishnaw, the Guild asked the ministry to initiate consultations with press bodies, media organisations and other stakeholders on the regulatory framework for digital media.

Catch up quick: The govt on January 18 proposed that any content marked ‘fake’ or ‘false’ by the Press Information Bureau (PIB) will have to be taken down by social media intermediaries. The government then invited comments from the public on the proposed amendment.

Quote: “This new procedure basically serves to make it easier to muzzle the free press, and will give sweeping powers to the PIB, or any ‘other agency authorised by the Central Government for fact checking’, to force online intermediaries to take down content that the government may find problematic,” the letter said.

Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai and Siddharth Sharma in Bengaluru. Graphics and illustrations by Rahul Awasthi.

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