FTC moves to require disclosure for paid word of mouth marketing

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The Washington Post published an article on December 12, FTC Moves to Unmask Word-of-Mouth Marketing which states that the Federal Trade Commission made a statement on Dec. 11th regarding word-of-mouth marketing campaigns where people are compensated to promote products to their peers will now have to disclose those relationships.

It’s not known exactly what percentage of marketing is now done through volunteer and paid word of mouth marketing campaigns, but it is clear that it has been increasing yearly. We’re seeing paid ads on web blogs, myspace pages and an increasing amount of on the street word of mouth marketing promotions.

Last June I was given an opportunity to participate in a voluntary word of mouth campaign for Nokia. I was given a Nokia 6682 Multimedia Smartphone by a “Marketing Buzz” creation company, all the accessories I could possibly need for the camera phone, some of which I still haven’t used, and a number of cards with information about the phone listed on them. I was told that the phone was being given to me completely free, but they would like to contact me in a few months in order to get my opinion on the phone and to see if I’d told anyone about the product. The phone was mine to keep with absolutely no obligation. I didn’t even have to answer the survey that they sent me if I didn’t want to, and I certainly didn’t have to promote the product in any way, but If I liked the phone would I please tell people about it?

Naturally I was totally thrilled to have been given a fancy new smartphone! Who wouldn’t be? I figured the phone itself, plus all of the accessories that they gave me was worth more than $500. I was on cloud 9. Of course I told my friends, family and co-workers about the phone and I even brought along some of the promotional cards that I’d been given when I went out to gatherings. I always told people exactly how I got the phone too.

That was my introduction into participating in word of mouth marketing. Would I do it again? Of course I would – particularly if it was a product that I could fit into my lifestyle. Would I tell others about it? Sure, why not – more so if I loved or hated the product.

I really don’t see any problem with marketing done in this manner. I suppose you could say my participation was voluntary, but I was compensated by being give a free cell phone to use and evaluate.

Advocacy groups are beginning to question whether some marketers are using such tactics (ads on web pages, peer to peer word of mouth) to dupe consumers into believing they are getting unbiased information.

They cite campaigns such as:

Sony Ericsson Mobile for its T68i mobile phone and digital camera. The initiative, called “Fake Tourist,” involved placing 60 actors posing as tourists at attractions in New York and Seattle to demonstrate the camera phone. The actors asked passersby to take their photo, which demonstrated the camera phone’s capabilities, but the actors did not identify themselves as representatives for Sony Ericsson.

What the FTC sought to do yesterday in its staff opinion was to note that such marketing could be deceptive if consumers were more likely to trust the product’s endorser “based on their assumed independence from the marketer.”

I suppose you could now say that I’ve embraced the paid form of word of mouth advertising. I write paid ads / paid posts on a few of my blogs. I do not disclose in every single paid post that I write that I’ve been paid to write the post. I have a disclosure policy on each of those sites which explains to my readers that I’ve been compensated to write some of my posts.

Am I being dishonest to my readers?

I don’t believe that I am because I have disclosed on my site, but not on every single paid post – that I am writing posts and being compensated. I also don’t believe that I’m duping my readers. I could never write a post about something that I didn’t believe in. If whatever I happen to be writing about is not a service, product or information that I can personally use I’ll still write about it if I think a large portion of my readers will find the site, product or service useful in their lives.

Just as many bloggers spontaneously write about great websites or products that they’ve recently discovered, I believe that had I discovered some of the services or products that I’ve been paid to write about on my own I still might have written a similar article upon discovery. So it’s a bonus when I get paid for something that I might very well have written about anyway.

It’s my blog. It’s my sites reputation on the line. If I start writing about products that I, or my readers, won’t use or begin to write in a manner that sounds like blatant advertising I’ll lose my readership and as a result lose my blog. I think most of the bloggers that I know that write paid ads feel the same way. They wouldn’t ruin their sites or reputation by writing about things they don’t feel are worthwhile publicizing.

I don’t have a problem with disclosure, but I also feel that If I were required to list every paid post as a paid post that my readers might just skip over those postings and potentially lose out on some information that might be helpful to them somewhere down the line. Besides, I try to tie many of the paid posts that I write about into my own life, so if my readers were to skip the paid posts they’d be missing a portion of “me” and my writing which is what drew them to the site in the first place.

I talk about being paid to blog frequently enough on all of my sites that very few people would ever end up leaving my site feeling duped.

The Washington Post article went on to say:

The FTC said it would investigate cases where there is a relationship between the endorser of a product and the seller that is not disclosed and could affect the endorsement. The FTC staff said it would go after violators on a case-by-case basis. Consequences could include a cease-and-desist order, fines and civil penalties ranging from thousands of dollars to millions of dollars. Engle said the agency had not brought any cases against word-of-mouth marketers.

I guess we’ll have to wait and see how exactly the FTC’s statement and subsequent investigations will affect word of mouth advertising and paid blog posts in particular. I’m not even certain that it would drastically affect paid blogging posts. When I write a paid post I’m not being paid directly by the company who’s product I’m writing about, I’m being paid my a company that they hired to secure my services.

Other forms of word of mouth marketing might be seen as being product promotion used in television series or movies. How many times have you see a TV show and all the computers that make it into your site while watching the show are made by the same company? Of course you’d have to clearly see the logo to know for sure- but of course we are shown the logo. The same for many of the drinks or other products that the characters on our favorite shows or in the movies use. The labels always face outward so that the viewers can see what the product is. Are the shows not being paid by those companies to prominently show their products? Are we the viewer informed that our favorite series is endorsing the product? No.

Do television commercials actually state that they’re a commercial being paid for by such and such a company? No. Do we feel duped? No not really.

If this FTC ruling ends up forcing me to list that I’m being paid by such and such a company to endorse the product of such and such a company – then Television and Radio programs had better start listing what products they are endorsing and who’s paying them to endorse the products as well. Fair is fair.

What do you think of the FTC’s statement and do you think it will affect you in any way?


Apparently the proposal for the FTC to probe into word of mouth practices was rejected as stated In an article on Advertising Age on December, 11th. As I listed above the FTC is still open to probing the practices of word of mouth marketing on a case by case basis. To learn more about how they plan to open investigations read the article.

Deep Jive Interests brings up interesting points about affiliate programs and links that are used within the text of an article or post. On some sites these affiliate links are used multiple times and no where on these sites are there any form of a disclosure statement. Read the article to get his full point of view on the subject.

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