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Weismueller, Jason, Harrigan, Paul, Wang, Shasha, & Soutar, Geoff

(2020)
Influencer Endorsements: How Advertising Disclosure and Source Credi-
bility Affect Consumer Purchase Intention on Social Media.
Australasian Marketing Journal, 28(4), pp. 160-170.

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https://doi.org/10.1016/j.ausmj.2020.03.002
Influencer Endorsements: How Advertising
Disclosure and Source Credibility Affect Consumer
Purchase Intention on Social Media
Jason Weismueller, University of Western Australia
Paul Harrigan, University of Western Australia
Shasha Wang, Queensland University of Technology
Geoffrey Soutar, University of Western Australia

Abstract

This paper investigates the impact of social media influencer endorsements on purchase intention, more specifically, the impact
advertising disclosure and source credibility have in this process. The proposed framework argues that advertising disclosure
has a significant impact on source credibility subdimensions of attractiveness, trustworthiness and expertise; subdimensions
that positively influence consumer purchase intention. Empirical findings based on 306 German Instagram users between 18-
34 years of age reveal that source attractiveness, source trustworthiness and source expertise significantly increase consumer
purchase intention; whilst advertising disclosure indirectly influences consumer purchase intention by influencing source
attractiveness. Furthermore, the results reveal that the amount of followers positively influences source attractiveness, source
trustworthiness as well as purchase intention. All in all, this paper makes a unique contribution to product endorsement
literature, with evidence highlighting how social media influencers and advertising disclosure may be used on Instagram to
effectively increase consumer purchase intention.

Keywords: Social Media Influencer, Advertising Disclosure, Source Credibility, Number of Followers, Purchase Intention,
Instagram

1. Introduction

Brands around the globe are well aware of people’s uptake of social media activities and are increasingly
capitalising on their use of social networking sites, such as Facebook, Twitter and Instagram (Statista,
2017). Revenue in the social media advertising segment worldwide amounted to 68 billion US dollars in
2018 and is expected to reach 185 billion US dollars in 2022 (Statista, 2018a). In particular, influencer
marketing has become an important marketing communications tool as it offers engagement with a large
number of potential buyers in a short time period at lower cost than traditional advertising (Evans et al.,
2017). The growing use of influencer marketing on social networking sites and public concerns on
consumer protection have led to an increasing obligation for brands to disclose advertising, which should
be prominent, well-placed and clear in meaning (FTC, 2015). However, the Advertising Standards
Authority noted a rise of 193% in complaints about advertisements posted on social media from 2012 to
2016 (Marsh, 2017).

The non-disclosure of advertisements on social networking sites is a breach of consumer protection

legislation and can be viewed as a misleading practice (Marsh, 2017). This raises a question of why brands
and influencers involved in influencer marketing do not always follow the guidelines suggested by several
consumer protection agencies. The answer is most likely because brands and social media influencers are
aware that ad disclosures impact influencer credibility and consumers’ purchase intention (Wodjnski and
Evans, 2016; Evans et al., 2017). Evans et al. (2017) found a simple sponsor label, such as ‘SP,’ had a
different impact on ad recognition and purchase intention than did a disclosure label that contained ‘Paid
ad’. While traditional advertising with celebrities is highly regulated, social media advertising with non-
traditional celebrities appears to be still in the process of becoming appropriately regulated. Celebrity
endorsers tend to have built their influence through traditional channels, such as television, radio and
magazines, and can include writers, television personalities, film stars and sporting icons. Non-traditional
celebrities include famous bloggers, vloggers and celebrities who have achieved fame through social
media (Lee, 2018). Hall (2015) described such people as ‘micro-endorsers’. Such a description suggests
these endorsers are used at a micro level, with organizations spending small amounts of money on
endorsers who are useful for targeting specific audiences, rather than spending large amounts of money
on celebrities with a wider audience appeal. This paper examined the impact different disclosure
conditions had on influencer credibility and consumer purchase intention. More specifically, it examined
product endorsements from a variety of non-traditional celebrities on Instagram in order to gain new
insights into the role ad disclosures play on social networking sites. The study was expected to contribute
to our knowledge of ad disclosure effectiveness and suggest influencer marketing strategies for managers.
Moreover, it was expected to contribute to the efforts of closing the existing gap between digital marketing
theory and practice (Ruyter, Keeling, and Ngo, 2018).

The paper’s structure follows a standard format in which prior research into influencer marketing,
advertising disclosure, source credibility, purchase intention and number of followers is reviewed,
followed by a presentation of a conceptual framework. The research approach, data analysis approach and
findings are then reported, followed by a discussion of how these findings contributed to theory and
practice, after which limitations and further research options are discussed.

2
2. Influencer Marketing and Advertising Disclosure

2.1 Influencer Marketing

Influencer marketing involves the identification and use of opinion leaders who might influence potential
buyers and take part in the marketing activities of a brand through sponsored content (Scott, 2015). The
concept of opinion leaders and their influence has its origins in a study of the US presidential election of
1940 (Lazarsfeld, Berelson, and Gaudet, 1948). In their study, opinion leaders were people who acted as
an information bridge between the mass media and people’s opinions and choices (Feick and Price, 1987).
Later studies emphasised opinion leaders’ roles as influential information sources (Katz and Lazarsfeld,
1955; Hoonsopon and Puriwat, 2016). With the recent growth of social media, opinion leader’s importance
has risen, as many consumers seek peer’s opinion when making purchase decisions (Audrezet, 2018).
While social media has been of high importance for customer relationship management (Harrigan et al.,
2015), it is increasingly used to identify opinion leaders and reach consumers through these opinion
leaders.

A social media influencer creates and shares content related to niche areas of interest or expertise (e.g.
fitness, food, video games) on social media channels such as YouTube, Twitter and Instagram. Individuals
or consumers with an interest in the particular area can follow and interact with influencers to keep up
with the latest news and trends. Thus, influencers can be at the centre of a sufficiently large, engaged and
trusting community (Hair, Clark, and Shapiro, 2010; Hall, 2016) to attract the interest of relevant brand
marketers, who need to engage with such influencers. Lou and Yuan (2019, p. 2) defined a social media
influencer as “first and foremost a content generator: one who has a status of expertise in a specific area,
who has cultivated a sizable number of captive followers -who are of marketing value to brand- by
regularly producing valuable content via social media”. Influencers are different to traditional celebrities,
as they built their online personality and fame by creating content on social networking sites. In contrast,
traditional celebrities built their fame in traditional channels and use social networking sites as an
additional source to connect with fans. Here, we use the terms social media influencer and influencer
endorsement.

3
Previous research has investigated influencer marketing’s impact in various contexts (e.g. Lyons and
Henderson 2005; Watts and Dodds 2007; De Veirman, Cauberghe, and Hudders, 2017; Djafarova and
Rushworth, 2017; Lou and Yuan, 2019). Most studies emphasised the uniqueness (e.g. credibility, number
of followers) of social media influencers and found this uniqueness is the underlying reason for their
effectiveness. For example, Djafarova and Rushworth (2017) found social media influencers, such as
‘Youtubers’ and ‘Instafamous’ personalities, are more powerful than traditional celebrities. Further,
Youtubers’ perceived credibility (i.e., video bloggers’ perceived credibility) can enhance brand attitudes
(Munnuka et al., 2018). It was also found that Instagram influencers with a high number of followers are
more likeable and popular (De Veirman et al., 2017). An emerging area of interest in influencer marketing
is around influencers’ advertising disclosure (i.e. whether they are paid to promote a brand or not). Evans
et al. (2017) found disclosure language, such as ‘Paid ad,’ in an Instagram post positively influenced
advertisement recognition but negatively influenced brand attitudes. However, more research is needed in
this area.

2.2. Advertising Disclosure

Advertising disclosure is information that tells consumers a promotional message is advertising.

Disclosures should be prominent, well-placed and clear in meaning (FTC, 2015). This can include terms
such as ‘ad’ or ‘advertisement’ and statements such as ‘Promoted by (brand)’ or ‘Sponsored by (brand)’.
Such regulation is also applicable in social media contexts. There are two main types of disclosures on
social media platforms. Influencers can label their post with a statement ‘Paid partnership with (business
name)’ to disclose their product endorsement. Alternatively, a disclosure hashtag can be used with
influencers using hashtags such as ‘#brand name’ or ‘#ad’ to disclose their product endorsement (Stewart,
2017). To the best of our knowledge, no previous research has studied the different roles of disclosure
statements and disclosure hashtags on source credibility in social media contexts and only a few have
considered disclosure wording (Evans et al., 2017; Stubb and Colliander, 2019). Such research is
important for researchers and influencers due to their potentially reversed effect on consumers’ responses
toward the influencer and sponsored brands.

The type of advertisement disclosure adopted may impact differently on source credibility and purchase
intention, as the persuasion knowledge model suggests consumers tend to interpret such messages
differently. Persuasion knowledge is defined as the knowledge that “enables consumers to recognise,
analyse, interpret, evaluate and remember persuasion attempts and to select and execute coping tactics
believed to be effective and appropriate” (Friestad and Wright, 1994, p. 3). Further, the perceived

4
appropriateness of the message impacts on whether the persuasive attempt has a negative or positive
impact. Negative effects on brand and influencers are only expected if the product endorsement is seen as
inappropriate or unethical (Nelson, Wood, and Paek, 2009), a view supported by reactance theory (Brehm
and Brehm, 1981), which suggests consumers place considerable importance on their independence and
autonomy and feel threatened when they perceive manipulation. If they feel a product endorsement is
inappropriate, they deem an advertising message is manipulative, which leads to reactance.

Previous research has examined the effect different disclosure types have on advertising recognition and
found clear language (Wojdynski and Evans, 2016) and brand name (Van Reijmersdal et al., 2015)
increase advertising recognition. In particular, a clear disclosure makes the persuasive nature of a message
overt and help consumers identify the intention behind a persuasive attempt (Rozendaal et al., 2011). A
simple logo for product placements, such as ‘PP,’ impacts less on advertising recognition than a statement
stating the consumer is exposed to product placement (Tessitore and Geuens, 2013). We expect a
disclosure statement provides more information about the nature of the paid relationship between an
influencer and a brand, which is likely to affect consumers’ attitude towards the influencer and purchase
behaviour positively. In contrast, a simple ‘ad’ hashtag provides less information about the nature of the
paid relationship between an influencer and a brand, which is likely to affect consumer attitude towards
the influencer and purchase behaviour negatively.

3. Conceptual Development

3.1. Source Credibility

Previous research suggests one of the most important factors in celebrity endorsements is credibility.
Various studies found information from a credible source affects consumer attitudes and behaviour
(Hovland, Janis, and Kelly, 1953; Dholakia and Stemthal, 1977). The source credibility model suggests
the perceived level of an endorser’s attractiveness, trustworthiness and expertise impact on the
effectiveness of an endorsement (Dholakia and Stemthal, 1977; Ohanian, 1991; Solomon, 1996).

The source credibility model helps explain message efficacy. It suggests the three most influential source
effects on purchase intention, brand attitudes and attitude toward an advertisement (Amos, Holmes, and
Strutton, 2008; Wang and Scheinbaum, 2018; Phua et al., 2018). Attractiveness is the extent to which an
endorser is perceived as classy, sexy and beautiful (Erdogan, 1999). Attractiveness is a leading factor for
the impact of a celebrity endorsement on consumer buying behaviour (Kahle and Homer, 1985).
Trustworthiness refers to the perceived reliability, dependability and honesty of an endorser (Erdogan,

5
1999). Therefore, it is crucial marketers choose a celebrity endorser who is ranked high on these attributes
(Shimp, 1997). Expertise is defined as the degree to which a celebrity is perceived as experienced,
knowledgeable, qualified and, in general, a valid source (Erdogan, 1999). The focus lies in how consumers
perceives a celebrity, rather than their actual expertise (Hovland, et al. 1953; Ohanian 1991).

In recent years the influence of attractiveness, trustworthiness and expertise have been increasingly
discussed within social media contexts. Credibility was found to impact on social media advertising value,
as advertisements from peers on social media are seen as more credible than traditional media (Shareef et
al., 2019). Recent papers investigated the source credibility model on Instagram (Colliander and Marder,
2018) and within different online communities (Hui, 2017; Sokolova and Kefi, 2019). However, this
research has focused on the effects of source credibility, not on the impact of advertising disclosure.

A disclosure statement and a disclosure hashtag can affect consumer attitude towards the influencer and
their own subsequent purchase behaviour differently. A disclosure statement shows the social media
influencer has a paid partnership with a brand, which suggests some success, as the social media influencer
is in demand by brands. Such demand also indicates that his/her community is large and engaged. This
sign of online popularity can enhance source credibility and, more specifically, source attractiveness (Jin
and Phua, 2014). This impact can be explained by the halo effect and consistency theory. The halo effect
is defined as “the influence of a global evaluation on evaluations of individual attributes of a person”
(Nisbett and Wilson, 1977, p. 250). Studies suggest the halo effect can have a powerful influence on our
impressions of others (Smith, Read, and López-Rodríguez, 2010). Further, consistency theory suggests
people feel comfortable when their judgements about a person are consistent (either positively or
negatively) (Solomon, 1996). Therefore, a disclosure statement transparently communicates a post is an
advertisement (rather than withholding this information), which can, itself, be positively interpreted by
consumers, thereby enhancing source attractiveness.

However, a disclosure hashtag may have a reverse effect because it does not clearly communicate the
partnership between a social media influencer and an endorsed brand. The missing information suggests
a lack of transparency and does not indicate a successful partnership between a brand and an influencer
(Evans et al., 2017). Persuasion knowledge theory suggests consumers tend to generate negative attitudes
or behaviours toward an advertising message or the source of an advertising message if they perceive
strong manipulative intent (Friestad and Wright, 1994; Nelson, Wood, and Paek, 2009). While a disclosure
statement can be perceived as honesty of endorsement, an influencer using a disclosure hashtag without
clear communication about the endorsement can be perceived as having strong manipulative intent (van

6
Reijmersdal et al., 2015). Therefore, consumers exposed to a disclosure hashtag may develop a negative
attitude about source credibility and source attractiveness, suggesting:

H1a. The use of a disclosure statement increases source attractiveness.

H1b. The use of a disclosure hashtag decreases source attractiveness.

The type of advertising disclosure used influences source trustworthiness due to their different
transparency. Advertising disclosure is understood as transparent communication about the fact that a post
is an advertisement (FTC, 2015). Transparency can generally be regarded as making a promotional
message’s motives clear (Carl, 2008), revealing bonds between contributors (Zhang and Watts 2008;
Otterbacher, 2011) or emphasising honest opinions (Hwang and Jeong, 2016). Plaisance (2007, p. 188)
suggested “transparent behaviour can be defined as conduct that presumes an openness in communication
and serves a reasonable expectation of forthright exchange when parties have a legitimate stake in the
possible outcomes or effects of the communicative act”. Carl (2008) found being clear about a promotional
message’s motives can enhance source trustworthiness, which can be explained by the persuasion
knowledge model (Friestad and Wright, 1994). The disclosure statement shows transparency, as it clearly
informs consumers that a post is the result of a paid partnership between an influencer and a brand. It is
likely consumers do not deem the manipulative intent of a post as inappropriate, which can enhance source
trustworthiness (Carl, 2008; Nelson et al., 2009; Reichelt, Sievert, and Jacob, 2014). On the contrary, if
an influencer instead uses a simple hashtag, consumers may deem the manipulative intent of the post as
inappropriate, as the influencer has not clearly indicated the post reflects a paid partnership with a brand,
suggesting:

H2a. The use of a disclosure statement increases source trustworthiness.

H2b. The use of a disclosure hashtag decreases source trustworthiness.

The type of disclosure conditions can result in differences in the perceived expertise of the source due to
their different level of professionalism. Similar to organisations using social networking sites as a
professional platform, social media influencers use social networking sites as a business and are, therefore,
making use of a business profile rather than a private profile. The possession of a business profile on
Instagram offers the use of a disclosure statement in endorsement situations (Instagram, 2018). On
Facebook, a business profile offers features such as display of message responsiveness (Facebook, 2019).
These features are only available for business profiles and indicate a level of professionalism. As
mentioned earlier, persuasion knowledge theory suggests consumers develop negative attitudes or
behaviours toward an advertising message or the source of an advertising message when they perceive

7
strong manipulative intent (Friestad and Wright, 1994; Nelson et al., 2009). A disclosure statement can be
expected to be perceived as a professional way of communicating an advertising message and can reduce
perceived manipulative intent. In contrast, a disclosure hashtag is likely to be perceived as a less
professional way of communicating an advertising message and greater perceived manipulative intent,
suggesting:

H3a. The use of a disclosure statement will increase source expertise.

H3b. The use of a disclosure hashtag will decrease source expertise.

3.2. Purchase Intention

Purchase intention is “an individual’s conscious plan to make an effort to purchase a brand” (Spears and
Singh, 2004, p. 56). While brand attitude is only a summary evaluation of a brand, purchase intention is a
personal tendency relating to a brand with an intention of carrying out a buying behaviour (Bagozzi et al.,
1979; Ostrom, 1969; Eagly and Chaiken, 1993).

In recent years, social networking sites received increasing attention from marketers wishing to capitalise
on opportunities to influence consumers’ purchase intention. One major factor that can influence consumer
purchase intention on social networking sites is electronic word-of-mouth (Erkan and Evans, 2016; Zhu
et al., 2016). Another influential factor is the credibility of a social media influencer in an endorsement
situation (Hui, 2017; Sokolova and Kefi, 2019). Research on celebrity endorsement relies on several
models, including the source credibility model and the source attractiveness model. These models suggest
attractiveness, trustworthiness and expertise impact on consumers’ purchase intention. Influencers’
perceived attractiveness impacts on purchase intention. The halo effect and consistency theory suggest
influencers who are perceived as physically attractive are also perceived as smarter and are ranked higher
on other attributes (Kahle and Homer, 1985; Lee and Watkins, 2016; Wang and Scheinbaum, 2018),
suggesting:

H4. Greater source attractiveness increases consumers’ purchase intention.

Influencers’ perceived trustworthiness can impact on purchase intention, as influencers’ credibility defines
the expected value of the information provided by their product endorsements (Cheung, Lee, and Rabjohn,
2008). Most researchers found a positive relationship between source trustworthiness and purchase
intention (Pornpitakpan, 2003; Gunawan and Huarng, 2015; Wang and Scheinbaum, 2018). However, a
few researchers did not (Hakimi, Adbedniya, & Zaeim, 2011), perhaps because of cultural differences and
differences in the type of the advertising tools used. It is likely consumers on social networking sites are

8
generally sceptical towards ads, as they might not have as much information about social media influencers
as they have about traditional celebrities (De Veirman and Hudders, 2019). Further, while most consumers
have extensive experience with television advertisements, the uptake of social media advertising has
occurred in the last decade (Statista, 2018a), suggesting:

H5. Greater trustworthiness increases purchase intention.

Influencers’ perceived level of expertise can impact purchase intention for two reasons. First, it is
important whether an influencer can be expected to have a certain level of experience with a product or
general expertise. Second, it is important whether an influencer can be expected to be a valuable source
of knowledge about the purchase decision-making process. As already mentioned, influencers’ perceived
expertise defines the expected value of the information they provide (Cheung et al., 2008). Several
researchers have found expertise has a significant impact on purchase intention (Ohanian, 1991;
Pornpitakpan, 2003; Thomas and Johnson, 2017). If social media influencers can show their expertise in
an area through their profile or their expertise about a product in a relevant post, this is likely to increase
purchase intention, suggesting:

H6. Greater perceived source expertise increases purchase intention.

3.3. The Number of Followers

The number of followers or friends on social networking sites is a measure of online popularity, which
can be a predictor of social media user credibility (De Veirman et al., 2017). Influencers with a large
number of followers are perceived as a more credible source than influencers with a small number of
followers (Jin and Phua, 2014). Further, past research found a significant relationship between the number
of followers and perceived social attractiveness (Tong et al., 2008). It can also be a sign of social
dominance, as every follower can potentially re-post an initial post, exposing it to an even wider audience
(Scott, 2015). As previous studies found there is a positive relationship between a large number of
followers and source credibility, it is likely the number of followers impacts on endorsement outcomes.
Consequently, it was included as a control variable in the present research model, which is shown in Figure
1 and which was examined in the present study, as outlined in subsequent sections.

4. Research Methods

4.1. Participants

9
The needed data were obtained by using a web questionnaire, which was distributed to university students
aged between 18 and 34 year in Germany who were active Instagram users (at least weekly use of
Instagram). This group was seen as appropriate, as there is a large number of German Instagram users (18
million) (Statista, 2018b). Further, users between the ages of 18-34 were targeted, because they are the
largest group of Instagram users in Germany (Napoleoncat, 2017). The study used convenience sampling
for sampling students from the total population (Bryman, 2016). University students were expected to be
an appropriate sample because most students are within the intended age range and are heavy Instagram
users. A total of 306 students completed the distributed questionnaire, of which 72% were females and
28% were males. As expected, most (82%) used Instagram on a daily basis.

4.2. Procedures

The questionnaire used in this study was first developed in English and then translated into German. A
back-translation process was used to ensure readability, clarity and the linguistic equivalence; as well as
to increase the reliability of the measures (Brislin, 1986). The questionnaire was pre-tested on 15 students
to ensure that all items were clear and presented no confusion in answering the questions. Respondents
were randomly assigned to a specific social media influencer. Very positive verbal feedback was obtained
about the design, wording, and completeness of the questionnaire.

Ten different social media influencers were chosen to assist in the testing of the various hypotheses.
Characteristics that were considered in choosing these Instagram celebrities were gender, product type,
number of followers and advertising disclosure. The influencers had a range of the number of followers,
ranging from 0.3 million followers to 3.8 million followers. To avoid respondents being biased by gender
and to improve external validity (Calder, Phillips, and Tybout, 1981), five male and five female influencers
were included, all of whom endorsed low or medium involvement products that were in a similar price
range. The influencers were all considered as famous on Instagram due to their work on Instagram or other
social media platforms, such as YouTube.

After exposure to the Instagram profile and an Instagram post of one of the ten social media influencers,
participants were asked to answer a question based on this profile and the post they had seen. The
Instagram profile contained information such as the number of followers and the number of posts, as well
as a short biography of the influencer. The post included a product endorsement as an image, an image
description and a comment section. If the product endorsement was disclosed, there was either a disclosure
statement (‘Paid partnership with (brand)’) or a disclosure hashtag (‘#ad’) in the image description.

10
4.3. The Measures

The disclosure conditions were coded as a multi-categorical variable. One category related to the case in
which no disclosure existed in the Instagram post, one related to the case in which an integrated option
was used and, finally, one related to the case in which a disclosure hashtag was used. Source credibility
was measured though the 15-item 7-point semantic differential scale suggested by Ohanian (1991) that
has been used in several previous studies. The scale represents the three source attractiveness dimensions
(i.e. source trustworthiness and source expertise), with five items for each dimension. Source
attractiveness used items such as ‘unattractive – attractive’ and ‘plain – elegant’, while source
trustworthiness used items such as ‘untrustworthy – trustworthy’ and ‘dishonest – honest’ and source
expertise used items such as ‘unqualified – qualified’ and ‘unskilled – skilled’. Purchase intention was
measured by the three item 7-point Likert-type scale developed by Holzwarth, Janiszewski and Nuemann
(2006). The scale used items such as ‘I can imagine buying (product) from (brand)’. The number of
followers was measured by a multi-categorical variable (i.e. a small number of followers (< 1 million
followers), a moderate number of followers (1-2 million followers) and large number of followers (> 2
million followers). The number of followers was obtained from influencers’ Instagram profiles, with the
upper end representing the highest number of followers, German social media influencers have on
Instagram, while the lower end represented the lowest number.

5. Data Analysis and Findings

5.1. Reliability and Validity

SmartPLS 3.0 was used to test the model with a component-based partial least squares structural equation
modeling approach (PLS-SEM). Previous literature suggests that PLS-SEM has superior functions in
exploratory studies to deal with a smaller sample size and multiple mediators, compared to covariance-
based SEM (Hair et al., 2006; Hayes et al., 2017). The multi-item scales’ reliability was assessed by
computing coefficient alpha (Cronbach, 1951). In every case, the Cronbach’s alpha coefficient was above
.90 (see Table 1), which was well above the recommended .70 level (Nunnally, 1978), suggesting a high
level of internal consistency. Following Churchill’s (1979) suggestion, convergent and discriminant
validity were also assessed. Convergent validity was confirmed in every case, as all of the AVE scores
exceeded 0.50 (see Table 1), which suggested there was more information than noise in the scales (Fornell
and Larcker, 1981). Discriminant validity was confirmed for all four constructs as per Fornell and
Larcker’s (1981) recommendation that the shared variation between two constructs (i.e. their squared

11
correlation) should be less than their AVE scores. In this study, the highest squared correlation was .47,
while the lowest AVE score was .72. Thus, discriminant validity could be assumed for all of the constructs
(Espinoza, 1999). In addition, discriminant validity was assessed by computing the HTMT ratio of the
correlations (Henseler, Ringle and Sarstedt, 2015). As the ratios were all below .67, they met the most
stringent requirement for discriminant validity (i.e. less than .85), suggesting they could be used safely in
the subsequent analysis.

(Insert Table 1 about here)

(Insert Table 2 about here)

Finally, as all of the data were collected in a single questionnaire, the possibility of common method bias
was assessed using the full collinearity VIF test suggested by Kock (2015, p. 7), who argued that if all of
the VIF scores were less than 3.3, “the model can be considered free of common method bias.”. The full
collinearity VIF scores ranged from 1.05 to 1.87, suggesting common method bias was not a problem in
this case. To further examine the common method bias issue, a marker variable technique was applied in
this study (Lindell and Whitney, 2001). Due to the lack of a variable which should be theoretically
irrelevant to constructs in the testing model, the researchers selected a variable that had the lowest
correlation with other constructs in the model – age. This approach is suggested by Ngo et al. (2016). The
correlations between age and the other constructs range from -.088 to -.029 without any significant
correlations (p>.05). The chosen marker variable was then tested in PLS-SEM according to the construct
level correction approach (Chin et al. 2013; Tehseen, Ramayah and Sanjlan, 2017). As suggested by these
researchers, common method bias is not influencing the results of the study if dropping the marker variable
does not change the path significance and direction as well as R2 significantly. This is supported by a very
low difference between the model with and without the marker variable on path coefficients (range from
0 to .01) and R2 (range from 0 to .01). Moreover, the significance level of t-statistics is not changed by the
marker variable. Therefore, common method bias is not influencing the original testing model which is
reported in the following section.

5.2. Hypotheses Testing

Based on the PLS-SEM analysis, the model explains 25%, 14%, 2% and 0% of the variance in purchase
intention, source attractiveness, trustworthiness and expertise. To show the predictive relevance, Q2

12
scores should be higher than 0 (Hair et al., 2014). This is achieved for purchase intention (.20), source
attractiveness (.10) and source trustworthiness (.02).

As shown in Table 3, the presence of disclosure statement increases source attractiveness (PC = .23, t =
4.00, p < .001), but the presence of disclosure hashtag decreases source attractiveness (PC = -.19, t = 3.64,
p < .001). Therefore, hypothesis 1 is fully supported. No support was found for hypothesis 2 and 3. This
can also be seen from the low variance explained for source trustworthiness (2%) and source expertise
(0%). The positive links between the three source credibility dimensions and purchase intention are
supported. More specifically, purchase intention increases with greater source attractiveness (PC = .16, t
= 2.24, p < .05), source trustworthiness (PC = .22, t = 3.08, p < .01), and source expertise (PC = .16, t =
2.30, p < .05). Therefore, hypotheses 4-6 are supported. The variable number of followers was designed
as a control in this study. The result show that the higher the follower number is, the higher the social
media influencer scores on attractiveness (PC = .14, t = 2.64, p < .01), trustworthiness (PC = .13, t = 2.26,
p < .05), and purchase intention (PC = .19, t = 3.60, p < .001).

(Insert Table 3 about here)

The mediation effects of the three source credibility dimensions were analysed and identified based on
the four types of mediation suggested by Zhao et al. (2010). To test the mediation effects of attitudes, we
drew the direct paths from the two independent variables (i.e., disclosure statement and disclosure
hashtag) to purchase intention. We analysed the indirect effect, bias corrected confidence interval
(significant when 95% confidence interval excludes 0) and direct effect. As shown in Table 4, the
indirect effect from disclosure statement and source attractiveness to purchase intention was significant,
however, the direct effect was not significant. Therefore, it is an indirect-only mediation. The indirect
effect from disclosure hashtag and source attractiveness to purchase intention was significant. Moreover,
the direct effect was significant with opposite directions. Therefore, it is a competitive mediation. There
is no mediated effect from source trustworthiness and source expertise.

(Insert Table 4 about here)

6. Discussion

Advertising disclosure continues to be an important issue and the growth of social media and social media
influencers has added additional complexity. There was a lack of prior empirical evidence and existing
studies were contradicting about advertising disclosure’s impact on source credibility and purchase
intention in social media contexts. Consequently, this study sought to understand how different disclosure

13
conditions affected consumers’ perception of influencers’ credibility and, ultimately, their purchase
intention.

The results suggested a disclosure statement improved source attractiveness, while a disclosure hashtag
had a negative impact on source attractiveness. None of the disclosure conditions had an impact on source
trustworthiness or source expertise. The findings confirmed the positive impact of all source credibility
sub-dimensions on consumers’ purchase intention. This study also found the number of followers had a
positive influence on source attractiveness, source trustworthiness and purchase intention. The next
section provides a summary of the key findings, followed by a more detailed discussion and suggests some
theoretical contributions of the key findings.

6.1. Advertising Disclosure

The study suggested a disclosure statement has a positive influence on source attractiveness, thereby
indirectly increasing purchase intention. A disclosure statement indicates a social media influencer has a
paid partnership and is in demand by a brand. In most cases, this demand is based on their large and
engaged community. This proof of online popularity can enhance source credibility (Jin and Phua, 2014).
Moreover, a disclosure statement transparently communicates a post is an advertisement, which can be
positively interpreted by consumers and, in turn, enhance source attractiveness. In contrast, a disclosure
hashtag seems to have a negative influence on source attractiveness, indirectly reducing purchase
intention. The main reason for the difference is that a disclosure hashtag does not clearly communicate
the partnership between a social media influencer and an endorsed brand, demonstrates a lack of
transparency and does not indicate a successful partnership between a brand and an influencer (Evans et
al., 2017). While a disclosure statement can be perceived as honesty in endorsement, an influencer using
a disclosure hashtag without clear communication about the endorsement can be perceived as having
strong manipulative intent (van Reijmersdal et al., 2015).

Persuasion knowledge theory suggests consumers tend to develop negative attitudes or behaviours toward
an advertising message or the source of the advertising message when they perceive strong manipulative
intent (Friestad and Wright, 1994; Nelson et al., 2009).

The study also found that neither of the disclosure conditions affected source trustworthiness and source
expertise, perhaps because of the nature of the investigated social networking site. Instagram is an online
photo and video application in which users share their life images and videos with others (Djafavora and
Rushworth, 2017). The elaboration likelihood model of persuasion (Petty and Cacippo, 1986) suggests

14
images or videos can be treated as peripheral cues which are easy to process in contrast to complex facts
and arguments. It can be argued consumers are less likely to elaborate on a disclosure hashtag or disclosure
statement on Instagram for two reasons. First, disclosures present extra information, which is not what
Instagram users usually look for on a platform on which image sharing is a main priority. Second,
consumers’ judgement of influencers’ trustworthiness and expertise requires a high level of elaboration
(Homer and Kahle, 1990; Yang et al. 2006). Consequently, consumers may need more information to
judge social media influencers’ expertise or trustworthiness. Thus, providing a disclosure hashtag or
disclosure statement may not be sufficient to make such judgement.

6.2. Source Credibility

The study suggested attractiveness, trustworthiness and expertise of a social media influencer have a
positive influence on purchase intention in social media contexts. As expected, when consumers perceived
social media influencers as credible, they were more likely to intend to buy the product, perhaps because
consumers form an overall evaluation of an influencer’s credibility in order to evaluate the value of the
product endorsement during their decision-making process. This process can include whether influencers
can be trusted to communicate valuable and accurate information and whether they are expected to have
appropriate experience with a product or general expertise. When influencers are perceived as credible, a
product endorsement is likely to have a higher value to consumer, which increases purchase intention.
These results fully or partially contradict Ohanian’s (1991), Hakmi et al.’s (2011), and Wang and
Scheinbaum’s (2018) results. For instance, Ohanian (1991) found attractiveness and trustworthiness did
not increase purchase intention. However, Ohanian (1991) and most other studies only examined
traditional media and traditional celebrities. Traditional media tend to choose highly attractive celebrities
for their advertisements and pay celebrities then large amounts of money. As there are few differences in
these two factors between traditional celebrities on traditional media, consumers may not think of
attractiveness or trustworthiness as determining factors for purchase intention (Ohanian, 1991).

However, this study supports previous research undertaken by Lee and Watkins (2016) and Djafarova and
Rushworth (2017) that investigated social media influencers on different social media platforms and
suggested attractiveness and trustworthiness positively influenced purchase intention. The reason for this
may be the difference between traditional media and social media, as well as the difference between
traditional celebrities and social media influencers. Social media influencers come from different
backgrounds and are used for advertisements in different industries that are unrelated to a general
attractiveness (Lee, 2018). Consequently, they may differ more in attractiveness and trustworthiness in

15
contrast to traditional celebrities. Moreover, social media provides an environment in which consumers
can interact with their favourite social media influencers, which can make trustworthiness more relevant
for consumers’ purchase intentions (Labrecque, 2014).

6.3. The Number of Followers

This study confirmed the number of followers has a positive influence on source attractiveness and source
trustworthiness. Further, extending our knowledge on influencer endorsements on social media, the study
also found the number of followers positively influenced consumers’ purchase intention. If social media
influencers have a large number of followers, consumers perceive them as more attractive and trustworthy,
which increases purchase intention, perhaps because the number of followers is a sign of popularity and
consumers are more influenced by popular influencers. The findings on source credibility support earlier
research by Jin and Phua (2014) and De Veirman et al. (2017). However, the impact on purchase intention
adds new knowledge, as there is no prior research has examined the impact the number of followers has
on consumers’ purchase intention on Instagram.

7. Implications

With the growing use of influencer marketing on social networking sites and public concerns on consumer
protection, there is an increasing obligation for brands to use advertising disclosure statements (FTC,
2015). Previous studies focused on the effect different advertising disclosures had on consumer purchase
intention mediated by advertising recognition (Evans et al., 2017). However, we suggested source
credibility plays a vital role in the purchase decision making process and can be influenced by disclosure
conditions. Thus, the study’s contribution is threefold. First, the study confirmed the impact different
disclosure conditions had on consumer purchase intention mediated by source credibility. Second, the
study confirmed the positive impact source credibility had on purchase intention in a non-traditional
advertisement environment (Instagram) using non-traditional celebrities (social media influencers). Third,
the study showed the impact of the number of followers needs to be taken into account when investigating
disclosures in product endorsements on social media. These contributions suggest some managerial
implications.

As the use of a disclosure statement does not reduce purchase intentions, managers should use the
disclosure statement feature offered by Instagram (Instagram, 2018). Indeed, upon getting tagged by an
influencer through a disclosure statement, a tagged brand gets access to Instagram’s engagement data,

16
which can improve the value of sponsored posts. For brands that are heavily engaged in Instagram and
influencer marketing there is great potential for an adjustment of ad disclosure strategy from no disclosure
or a disclosure hashtag to a disclosure statement. Brands that have not legally implemented ad disclosures
in their contracts with influencers should do so, as making disclosure statements on Instagram should be
seen as an essential part of any influencer marketing strategy. Such disclosure statements enhance
influencers’ credibility, improve purchase intention and strengthen consumers’ views about the ethical
environment. Transparency in Instagram influencer posts will not only create an ethical marketing
environment (AANA, 2017), but also establish a new standardised way for brands to manage their social
media influencers. Brands will achieve synergy by taking a standardised approach and using a consistent
disclosure statement in all of their influencers’ posts (Fill, 2013; Kliatchko, 2005). When all influencers
are communicating as a consistent ‘voice’ for the brand by using such a disclosure statement, the brand
can obtain a consistent, ethical and socially responsible image (Green and Peloza, 2011). Switching to a
disclosure statement by using the dedicated Instagram function will take only a minor additional effort
and has no additional cost, but can potentially improve purchase intention and sales.

Based on the effect source credibility has on consumer purchase intention, brands are encouraged to make
use of the “massive” amount of data social networking sites and influencer agencies provide to choose the
appropriate social media influencers for their campaigns. On one hand, there are many different
advertising agencies that provide suitable influencers and give information on their expertise and personal
traits (IMH, 2019). On the other hand, the results suggest an approach that makes consumers part of the
influencer search. A transparent process that gets consumers involved, can provide brands with valuable
information, such as consumers’ opinions about influencer credibility. This is very relevant to social media
influencers, as there is less information available about such influencers than about traditional celebrities.

Bazaarvoice (2018) found 47% of customers were tired of inauthentic content published by influencers.
Thus, it is important to make content authentic and get more information about how consumers perceive
influencers. For example, brands could pre-select a range of influencers and set up a competition on
Instagram that gets consumers involved in finding the right influencers, which would provide useful
information about how different influencers are perceived. In addition, consumers will perceive
themselves more in control and might feel advertisements from an influencer chosen by the brand
community are more appropriate. Indeed, Nespresso (2018) did ask Nespresso club members who they
thought could be brand ambassadors to promote the Nespresso brand. This is a typical example of value
co-creation, which affects purchase intention, electronic word-of-mouth and trust on social networking
sites (See-To and Ho, 2014). Value co-creation might be a useful approach for brands wishing to acquire

17
knowledge about the perceived credibility of influencers and might increase transparency by inviting
consumers to be part of their influencer marketing strategy.

Given the effect the number of followers has on source credibility and purchase intention, marketing
managers should focus on social media influencers who have a large number of followers, as this will
increase perceived influencer credibility and purchase intention. Many marketing managers claim the
number of followers does not indicate engagement and that a recent shift in influencer marketing practice
has resulted in brands turning away from influencers with a large number of followers to influencers with
fewer followers (Hosie, 2019). However, our study suggests a large number of followers can enhance
influencer credibility and, potentially, the sale of products through product endorsements. Thus,
particularly in the German market, marketers should select influencers with more followers.

8. Limitations and Further Research

To conclude, we discuss some limitations of this study that provide guidance for future research. First,
this study focused on 18 to 34-year-old Instagram users, as they are the largest users of Instagram (Statista,
2019a). However, the effects of advertising disclosure and source credibility may differ among younger
and older audiences. Hence, future research should investigate whether results differ depending on age.
Second, Instagram is one of the most popular social networks worldwide (1 billion active users) (Statista,
2019b) and currently the most-used social networking site for collaborations between brands and social
media influencers (WFA, 2016). However, as this study only used Instagram posts, the applicability of
the results to other social networking sites is limited. Thus, it would be useful for researchers to examine
these relationships on other social networking sites. Third, although we believe the constructs in the model
are important to our understanding of the effectiveness of advertising disclosure and source credibility in
influencer endorsements, we recognise other factors could be relevant. Consequently, future research
should examine such factors (e.g. advertising literacy and e-lifestyle) (Malmelin, 2010; Koshksaraya,
Franklin, and Hanzaee, 2015) and include attitude constructs in the model (e.g. attitude towards the ad or
attitude towards the brand) (Pascal et al., 2002).

18
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Tables
Table 1. Construct Reliability and Validity

Constructs Factor a Composite Average Variance

Loading Reliability Explained
Purchase Intention .94 .96 .90
I can imagine buying (product) .92
from this company.
The next time I buy (product), .96
I will take this company into
consideration.
I am very interested in buying .95
(product) from this company.
Source Attractiveness .93 .95 .78
Unattractive - Attractive .89
Not Classy - Classy .87
Ugly - Beautiful .90
Plain - Elegant .87
Not Sexy - Sexy .90
Source Expertise .92 .94 .76
Not Expert - Expert .85
Inexperienced - Experienced .86
Unknowledgeable - .90
Knowledgeable
Unqualified – Qualified .91
Unskilled - Skilled .86
Source Trustworthiness .95 .96 .84
Untrustworthy - Trustworthy .90
Undependable - Dependable .92
Dishonest - Honest .91
Unreliable - Reliable .93
Not Sexy - Sexy .91

Table 2. Discriminant Validity (HTMT Ratio)

1 2 3
1. Purchase Intention
2. Source Attractiveness .38
3. Source Expertise .38 .50
4. Source Trustworthiness .43 .51 .63

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Table 3. Tests of Hypotheses

Relationships
Path t-statistic Note
Coefficient
Hypotheses
H1a Disclosure Statement ® Source Attractiveness .23 4.00*** Supported
H1b Disclosure Hashtag ® Source Attractiveness -.19 3.64*** Supported
H2a Disclosure Statement ® Source Trustworthiness .06 .99ns
H2b Disclosure Hashtag ® Source Trustworthiness -.05 .86ns
H3a Disclosure Statement ® Source Expertise -.01 .11ns
H3b Disclosure Hashtag ® Source Expertise -.05 .88ns
H4 Source Attractiveness ® Purchase Intention .16 2.24* Supported
H5 Source Trustworthiness ® Purchase Intention .22 3.08** Supported
H6 Source Expertise ® Purchase Intention .16 2.30* Supported
Covariate
Follower number ® Source Attractiveness .14 2.64**
Follower number ® Source Trustworthiness .13 2.26*
Follower number ® Source Expertise .01 .11ns
Follower number ® Purchase Intention .19 3.60***
Variance Explained R2 Q2
Purchase Intention .25 .20
Source Attractiveness .14 .10
Source Trustworthiness .02 .02
Source Expertise .00 .00
Note: ***p< .001; **p< .01; *p< .05; ns Not Significant.

Table 4. Mediated Effects

Relationship Indirect Bias Corrected Direct

Effect Bootstrap 95% Effect
Confidence Level
Lower Upper
Disclosure Statement à Source Attractiveness .04 .015 .081 .03ns
à Purchase Intention
Disclosure Statement à Source .01 -.006 .040 .03ns
Trustworthiness à Purchase Intention
Disclosure Statement à Source Expertise à -.01 -.021 .016 .03ns
Purchase Intention
Disclosure Hashtag à Source Attractiveness -.03 -.069 -.012 .10*
à Purchase Intention
Disclosure Hashtag à Source Trustworthiness -.01 -.038 .008 .10*
à Purchase Intention
Disclosure Hashtag à Source Expertise à -.00 -.028 .004 .10*
Purchase Intention
Note: ns Not Significant; * p<.05.

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Figures
Figure 1. Conceptual Model

29