Last year, when censors rejected a Super Bowl ad from cannabis brand Acreage Holdings, it was both a sign of cannabis’ mainstream emergence, and also an indication of America’s ongoing complicated relationship with the plant.
Now, the political headwinds around legalization are starting to turn, and the cannabis industry has reached a critical point in terms of its maturation.
States like Washington, Colorado, and California, the latter of which is on the verge of another sweeping year in policy changes, have all gotten a head start on the commercialization of cannabis. Earlier this year, Illinois became the second state in the midwest to allow the recreational sale of cannabis products, and several others like New York, Connecticut, New Jersey, Missouri, and Arizona could all approve adult use sales before the end of 2020.
State-by-state adoption will continue, and while the industry is projected to hit $60 billion by 2025, growth is hindered by numerous roadblocks and obstacles. Similar to other heavily regulated industries (e.g. pharmaceutical, banking, alcohol and tobacco), cannabis is beholden to stringent laws on how and where products can be advertised.
For cannabis brands looking to expand, failure to comply with advertising regulations can result in heavy fines and loss of license. Businesses need to understand the minutiae of these laws and how they fall into their own distinct categories (taxation, zoning, packaging and labeling) and license type (cultivation, dispensary and testing).
So much goes into maintaining compliance, and keeping up manually is nearly impossible. For publishers and brands to confidently run their creative campaigns, they need to integrate insightful tech tools that can help them automate processes and understand changes in real-time.
Here are a few key factors to consider.
Keeping up with ever-changing cannabis laws is a challenge
Cannabis is still a nascent industry, and without any overarching federal frameworks on the horizon, the reality is that creating new laws will continue to be an iterative process. In order to grow, brands and digital publishers must build foundational programs that have an inherent understanding of the regulatory environment, or they will inevitably struggle.
The cannabis industry is hyper local in nature, with varying regulations that fall within the state, county, and municipal levels. It can be difficult to track the constantly changing laws of cannabis advertising; established states are always updating existing laws, and when new states go online, there are potentially several regulatory updates that can occur over the course of a calendar year.
Each state has its own constituents and geographies, and what’s right for one region is different for another. The problem with cannabis is that there are many layers of law (state and local), and these laws change frequently and oftentimes with very little notice. This can be a major headache for companies looking to run compliant digital ad campaigns across multiple jurisdictions.
To build an effective compliance program requires assembling a team that can conduct internal audits, field straightforward compliance questions, and outsource any issues that are open to interpretation. Having internal expertise that can review evolving state-by-state regulations, M&A processes, new international laws, and updated rules on marketing and advertising, will go a long way towards ensuring a business meets each and every compliance requirement.
How changing regulations and sensitivities around cannabis has publishers spooked
Equally challenging is dealing with publishers and their hesitancy when it comes to cannabis advertising. Even across legal markets, there are limited options for what publishers can do, and many in the digital media space continue to be wary of fully jumping in.
One main impediment that has hindered growth is getting publishers to be more comfortable in supporting cannabis advertising. Accessibility to digital inventory is another problem, as advertising’s preeminent duopoly — Google and Facebook — account for nearly 60 percent of digital market share, and both have policies prohibiting cannabis advertising.
As cannabis becomes more mainstream and the social stigma softens, publishers will be able to rely on new tech solutions to help ensure they’re always running compliant campaigns and steering clear of violations.
How technology is helping the industry overcome its fears of non-compliance
There’s never been any predictability in terms of state and federal legalities around cannabis, but new technology built around big data and analytics is emerging to help brands understand the landscape much more clearly. Cannabis companies are now starting to gain access to the same types of growth tools that legacy brands like Coca Cola utilize for user acquisition, audience targeting, and campaign optimization.
The ability to leverage these new technologies to aggregate/analyze vast numbers of data points has numerous benefits. It helps brands stay up-to-date on new regulations in near real-time, while giving them the tools to optimize ad performance and understand the product needs of their customers on a much more informed level.
To have supreme confidence in safely launching creative campaigns, it’s essential that brands and publishers not only invest heavily in human capital, but also in cutting-edge software and technology that enables them to achieve this. This will help them identify applicable rules, track ongoing legal developments, and make informed business decisions to better navigate a volatile and highly regulated environment.
Building a scalable compliance program that sets brands up for long-term success
As the industry matures and more governments make the push for legalization, keeping pace with increasingly nuanced international cannabis laws will become a new challenge. Building a scalable compliance program built around AI, data analytics, and tech should be every brand’s top priority.
In this dynamic and fast-moving space, businesses need to arm themselves with a compliance-first mentality that applies technology-enabled solutions. While it’s critical to have dedicated consultants and human auditors that can understand the complex nature of regulations and establish standard operating procedures, the real panacea for brands is developing programs that employ technology that enables or facilitates creative compliance.
The potential consequences of non-compliance continues to give new business owners cold feet. If brands can create robust internal programs that drive efficiencies and help work with the continuously evolving patchwork of state and local regulations, they will be in a much better position to grow and help the industry realize its true multi-billion dollar potential.