| Summary: | The Federal Trade Commission stated that any kind of endorsement or promotion on Instagram should be clearly and conspicuously disclosed in order to avoid users' deceptions. Albeit the compulsoriness of this measure is still unclear, Instagram has introduced a branded content tool for paid sponsorship disclosure that clearly states the presence of a material connection between the brand and the publisher or influencer. With an online experiment we examine the effects of this disclosure on ad recognition and the resulting attitude toward the advertised brand, attitude toward the advertising publisher, publisher credibility and intention to spread electronic word-of-mouth (eWOM). Findings from a sample of 231 participants show that exposure to a post with advertising disclosure through the Instagram disclosure tool leads to higher ad recognition compared to a post with no disclosure. However, ad recognition negatively affects attitude toward the brand, publisher credibility and intention to spread eWOM.
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