E-Cigarettes Staining the Entertainment Industry?

Electronic dance music superstar Avicii recently became the latest celebrity to endorse electronic cigarettes. The NJoy ad set to his hit "Hey, Brother" features a squirrel mascot, a wedding reception, and the message that "friends don't let friends smoke." With the ad and a Facebook post promoting it, Avicii joins celebrity e-cig endorsers including NJoy investor/pop icon Bruno Mars, and actors Stephen Dorff and Jenny McCarthy, both of whom endorse Blu, the brand owned by Lorillard .

There's no question that e-cigs are big business, with sales last year of more than $1 billion. Reynolds American debuted Vuse and Altria launched the MarkTen to get in on the growing market. The real question is whether the celebs who endorse them are burning their own brands.

Vaping basics
If you're not familiar with e-cigarettes and "vaping," the gist is that e-cigs are smoke-free plastic tubes made to look like cigarettes. They hold a mixture of water, nicotine, and artificial flavors (bubblegum cig, anyone?) that delivers a nicotine fix without the mess and expense of tobacco cigarettes. Based on the lack of tar, smoke, and stench, e-cigarettes look at first glance like a good alternative to smoking tobacco.

But the jury is still out on the health benefits and risks of vaping, and the FDA has already warned several e-cig makers to stop saying their products can help smokers quit, unless they get FDA approval. As with tobacco products, e-cigarettes are prohibited from making health claims in their ads, although actress and vaping fan Katherine Heigl has publicly asserted that "you're not harming yourself" by using them. She's not a doctor, but she did play one on TV.

Marketing limits
For those of us old enough to remember cigarette ads in magazines and student smoking areas on high school campuses, the new wave of celebrity endorsements for e-cigarettes creates a sense of deja vu. The marketing rules are looser now for e-cigs than for traditional smokes, but stricter regulation of e-cigarettes is inevitable.

New FDA rules for sales and advertising are expected soon. New York City recently banned vaping wherever smoking is prohibited. The University of California system and the states of New Jersey, North Dakota, and Utah have similar bans in place.

Expect e-cig rules to get tougher and more common if the current trend of kids and teens vaping continues to grow. While many high-profile vapers like Dorff pitch e-cigs as a hassle-free alternative for current tobacco smokers, the CDC reported last fall that electronic cigarette use doubled among kids in middle and high schools in 2012. Nearly 9% of those underage vapers started without smoking tobacco first, suggesting that the perceived cool factor is pulling in kids who might not otherwise pick up a cigarette habit.

Evaporating credibility
When the new FDA rules come down, and after more health research is done, the public perception of e-cigarettes could shift from safe smoking alternative to just another nicotine-delivery device and a way to get kids on the cigarette bandwagon. If that happens, the celebrities who happily endorse e-cigs, may take an image hit among fans.

They may also have problems with other business partners who don't want to be associated, however loosely, with cigarettes. Bruno Mars, for example, endorses Filipino clothing brand Bench, while Avicii has high-profile deals with Polo Ralph Lauren and Sony. McCarthy, a controversial figure for her vehement insistence on the link between vaccines and autism, and NJoy spokeswoman/post-grunge rocker Courtney Love probably have less to lose by a connection to e-cigarettes because many advertisers were already hesitant to turn to them.

Maybe e-cigarettes will prove to be a healthier alternative to smoking and gain wide acceptance, but it seems unlikely. Until we know which way the wind is blowing, endorsing e-cigs looks like a risky move.

The next step
Want to figure out how to profit on business analysis like this? The key is to learn how to turn business insights into portfolio gold by taking your first steps as an investor. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you what you need to get started, and even gives you access to some stocks to buy first. Click here to get your copy today -- it's absolutely free.

The article E-Cigarettes Staining the Entertainment Industry? originally appeared on Fool.com.

Fool contributor Casey Kelly-Barton has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.