Robert Weissman is managing director of the Washington, D.C.-based Commercial Alert.
A core principle of U.S. communications and fair advertising law is that people have a right to know when they are being advertised to.
There's no reason this rule shouldn't apply to the Internet. The rise of blogs, electronic bulletin boards, and social media has created whole new forms of public communication that did not exist just a decade ago. As anyone who has pointed and clicked on the Internet knows, these new media have also created new forums for advertising. What many do not know is that this has also created new opportunities for marketers to advertise covertly.
YouTube videos may contain paid product placements, Internet games may have embedded ads for fast-food outlets, and individuals are paid to blog about a new gizmo. None of these practices are acceptable if people are subjected to marketing messages without knowing it. To address the issue, the Federal Trade Commission is set to update its endorsement guidelines, stipulating, for instance, that paid bloggers disclose their sponsors. This modest suggestion is a good idea. And it sure beats the alternative trumpeted as a success by marketers: self-policing.
I think it strains credulity past the breaking point to suggest that industry self-regulation is working. Even if one were to concede for purposes of argument that all firms paying for blog endorsements have a policy favoring disclosure, it is implausible that this is carried out in practice. The firms claim hundreds of thousands of buzz marketers, many of whom are blogging. Outfits like payperpost.com and Bzzagent and the Word of Mouth Marketing Association say in their voluntary codes of conduct that they support disclosure, but the industry challenges the FTC's most significant disclosure proposal. (The FTC could punish unfair or deceptive marketing practices with fines of up to $10,000, though such penalties are likely only for egregious violations of endorsement rules.)
No one really knows how prevalent paid-endorsement blogs are. What is clear is that the practice is mushrooming.
Payperpost.com pays roughly $11 for every blog post. Bzzagent says it has run more than 600 "buzz marketing" campaigns, involving 600,000 people, in which consumers get gifts, samples, and prizes for talking up a product. And Advertising Age recently reported, "At the BlogHer '09 conference in Chicago, marketers were lining up to woo around 1,500 mommy bloggers with swag, celebrity appearances, shopping sprees, and lavish entertainment of the sort that seems part of a bygone era to most of the marketing world."
To get a sense of how fast this practice may spin out of control—if it hasn't already—consider product placements on television. Nielsen reported that $360 million was spent on product placement in 2003. PQ Media reported $2.9 billion was spent in 2007. Nielsen reported that the top 10 broadcast programs in 2007 featured 25,950 product placements; the top 10 cable programs featured 163,737.
Does all of this really matter? Yes, it does.
Advertisers have long understood the value of paid endorsements made to appear authentic. The pioneers in product placement, Big Tobacco, noted that the value of a product placement comes from viewers not recognizing they are watching paid ads. In 1972, a movie production company president wrote to R. J. Reynolds that all the characters in a movie his company was producing smoked. "Movies are better than any commercial that has been run on television or any magazine," he boasted, "because the audience is totally unaware of any sponsor involvement."
In this light, can anyone really disagree with the idea—rooted in law, rules of fair play, and common sense—that sponsored blog posts should be required to reveal the fact of sponsorship? Somehow, the advertising industry has.
The "good" part of the social media endorsement story is that it simply involves consumers using word of mouth—the most effective form of advertising—to tell friends and colleagues (and blog readers) about things they like. One may raise concerns about the social impact of this commercialization of everyday real and virtual relationships, but so long as there is disclosure of sponsorships, those on the receiving end of endorsement messages are not being deceived or manipulated.
But of course, the reason word of mouth is so effective is that it is understood to be authentic. You tell friends about the great new coffee shop around the corner, and they are keen to try it because they trust the authenticity of your endorsement. You tell friends about how much you like your new computer, and they are interested because they share tastes with you. But if you are paid to tout the coffee or the computer, the value of the endorsement—though not nil—is compromised. And if there's no disclosure of the sponsorship, something deceptive and unethical is going on.
Consider the hypothetical example of a college blogger who writes about video gaming. A manufacturer sends a free copy of a new video game system, and he writes a review. In this case, the FTC reasonably says, the blogger should reveal that he received the game system as a gift. "The readers of his blog are unlikely to expect that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact would likely materially affect the credibility they attach to his endorsement," it says.
Sometimes, in the case of TV, radio, and movies, managing an effective disclosure system may pose difficulties, since disclosures need to be made at the moment of an endorsement or product placement to be effective. But there is no such problem in the case of blogs, where there is no temporal element, nor tight limits on physical space.
Disclosure is about the most mild consumer protection measure there is, and sponsorship disclosure imposes no more than a trivial burden on bloggers. It's hard to see how the argument against disclosure is anything other than an argument for deceiving consumers. We have enough of that already.
Read why the Internet can police itself, from Paul Rand of the Word of Mouth Marketing Association.