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Exploring the FTC Guidelines for Social Media

Exploring the FTC Guidelines for Social Media

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Published by: porter_novelli on Sep 12, 2009
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11/20/2010

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Exploring the FTC Guidelines for Social Media
 
Exploring the FTC Guidelines for Social Media2
Historical Overview and Context
Over the past seven months, the Federal rade Commission has been revising guidelines orUse o Endorsements and estimonials in  Advertising. Its latest revision includes specic examples relevant to word-o-mouth, blogging and aliate marketing promotion campaigns.Recent articles such as the New York imes’ “ Approval by a Blogger May Please a Sponsor” on July 12, the Associated Press’ “FC Plans to  Monitor Blogs or Claims, Payments,” published June 21, and the Wall Street Journal’s “Paid to Pitch: Product Reviews by Bloggers Draw   Scrutiny ” on April 23 have ueled the discussion and increased awareness o issues aecting brand advertisers and bloggers. But the currentguidelines have been relevant to disclosure in online advertising or years. Robert Cox, president o the Media Bloggers Association,notes: “Te FC’s guides concerning the use o endorsements and testimonials in advertising are broad guidelines or advertisers o all stripes (V,print, radio, blogs, word-o-mouth marketing). Tere is considerable interest in how the revisions will aect the online world. One thing tokeep in mind is that these guides have not been revised since 1980, and obviously the world o marketing has changed a lot since then.”Tese guidelines are intended to protect consumers rom alse advertising statements and to ensure that celebrity endorsements refect thehonest opinion o the endorser. According toTe Law o Electronic Commerceby Jane K. Winn and Benjamin Wright, “When it comes to
Summary 
Over the past seven months, the Federal rade Commission has been revising guidelines orUse o Endorsements and estimonials in Advertising . Its latest revision includes specic examples relevant to word-o-mouth, blogging and aliate marketing promotioncampaigns. Recent articles such as the New York imes’ “ Approval by a Blogger May Please a Sponsor” on July 12, the Associated Press’FC Plans to Monitor Blogs or Claims, Payments,” published June 21, and the Wall Street Journal’s “Paid to Pitch: Product Reviews  by Bloggers Draw Scrutiny ” on April 23 have ueled the discussion and increased awareness o issues afecting brand advertisersand bloggers. In reporting on this topic, worst practices by unscrupulous bloggers oten surace. At Porter Novelli, we believe brand advertisers should have a basic understanding o not only these “bad apple” examples, but also o the key concepts, industry leadersand current best practices in this ast-paced policy area. Te landscape is shiting rapidly, so this whitepaper is a snapshot rom a particular point in time. It is also the beginning o the exploration o these topics, and there are many parties to the dialogue including brands (and advertisers), agencies, publishers (bloggers), the FC and the community. Since these are proposed guidelines, it is up toall o us to weigh in on where we believe the discussion should go.Regardless o whether these revisions are adopted as proposed, brands and agencies should develop baseline responses to these issuesthat will continue to grow as consumer endorsements by bloggers are used more requently in the marketing mix. We hope this whitepaper gives you some areas or thought as well as some concrete suggestions as to how to proceed.Brands and agencies should be responsible or ensuring that bloggers disclose endorsements in a clear and transparent way, and that the specic statements they make are, as noted in the FC guidelines: “truthul and substantiated. Te advertiser should alsomonitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication o deceptiverepresentations when they are discovered.” Tese new requirements may cost marketers time and money, so the FC proposal encouragescareul consideration o blogger relations tactics used or campaigns. At Porter Novelli, we believe in the long-term sustainability o the “sponsored conversation” in social media and in taking action to experiment with this orm o marketing while being aware o thepotential or the landscape to change.For this paper, we’ve spoken to individuals who have played leadership roles in this community conversation, including ed Murphy rom Izea (a sometimes controversial company that connects advertisers and relevant bloggers, especially via “sponsored conversations”),Robert Cox o the Media Bloggers Association, Elisa Camahort Page o BlogHer (a participatory women’s news and entertainment online community) and Lawrence Dignan, editor o ZDNet/CBS Interactive. Tey’ve helped us understand the consumer protectionand company disclosure policies already in place or available to use. We use this inormation as well as other sources to providedirection and best practices advice. As an additional resource, we’ll be conducting a podcast with top industry leaders on this relevant topic. We’ll also continue this conversation online as the issues change and evolve.
 
Exploring the FTC Guidelines for Social Media3
online ads, the basic principles o advertising law apply: 1. Advertising must be truthul and not misleading; 2. Advertisers must have evidenceto back up their claims (‘Substantiation’) and 3. Advertisements can not be unair.It’s important to note that “the Guides set orth the general principles that the [Federal rade] Commission will apply in examiningendorsements; the question o whether a particular endorsement or testimonial is deceptive will
depend on the specic actual circumstanceso the advertisement at issue
{emphasis added}. (FC Guide, p. 11). As Coxnotes, “Tese are guides and not regulations. With guides, nocivil penalties are assessed. With regulations, there are civil penalties.”Te key here is reputation. Te FC is saying that consumers oten can’t glean the reputation o the people or sites who are endorsing products. Temarketplace or bloggers, aliate systems and sponsored conversations is new, whereas with traditional mainstream media, consumers understandthe cues that indicate an advertisement or endorsement, such as print ads oset in side boxes, or radio or V spots set o by announcements thatsay “and now a word rom our sponsor,” or a black slate between programming and commercials. As there is currently no standard system oronline reputation, disclosure or transparency, regulators are attempting to make a set o guidelines that will protect the end consumer.Key violations o transparency in the past, with companies likeSony or Walmartcreating ake blogs with ake consumers to tout their products or services, have tainted the waters. We believe that bloggers who practice proper disclosure are the ones worth approaching. Brands andagencies who work with sites that have clear reputation, transparency and accountability will be able to lower their risk. Bloggers and bloggingnetworks that have disclosure systems in place and ensure adherence to consumer-protection guidelines will be the ones that rise to the top.
Sponsored Conversation Is Here to Stay 
Sponsored conversations are nothing new. From soap operas to the exaco Star Teater, radio and V have long brought advertiser-sponsoredcontent—oten with host testimonials—into millions o American homes. According to theMuseum o Broadcast Communications, “Te term ‘soap opera’ was coined by the American press in the 1930s to denote theextraordinarily popular genre o serialized domestic radio dramas, which, by 1940, represented some 90 percent o all commercially sponsoreddaytime broadcast hours. Te ‘soap’ in soap opera alluded to sponsorship by manuacturers o household cleaning products.... Tese began asone o the hundreds o new programming orms tried out by commercial radio broadcasters in the late 1920s and early 1930s, as both localstations and the newly ormed networks attempted to marry the needs o advertisers with the listening interests o consumers.”Many o these old radio and V programs had “host endorsements.” A character in the show would step away rom a scene and speak directly to the consumer about the eatures and benets o a product. Even today, radio host Howard Stern uses the host endorsement technique withmany o his sponsors to great eect. When the host talks to his or her audience about an experience with a product, consumers recognize it asan advertisement, paid or and delivered as such. While blogging has been around or only roughly 10 years, the issuesare similar. Just as radio broadcasters tried to nd business modelsthat would connect their advertisers to their listeners, bloggers seek business models to reach their (sometimes very signicant) audiences.Brands and marketers have taken notice, and agencies have startedblogger relations practices. Forrester Research published a brie inMarch 2009, “ Add Sponsored Conversations to Your oolbox,”dening sponsored conversations as “a technique in which marketersprovide nancial or material compensation to bloggers in exchangeor their posting blog content about a brand.” Writer Sean Corcorannotes in the piece, “Marketers already try to infuence bloggersthrough public relations activity. Tey also pay or ads on blogs. Seenin this context, sponsored conversations are an extension o existingactivities. As long as bloggers don’t hide who’s paying them and havereedom to write whatever they want, sponsored conversations will tin well with the other orms o marketing through blogs.”
“Consumers should start from the  premise that you can’t trust what  you read on the Internet, and thenwork toward trusting it,” says Cox.“You can’t just log on and believe it. Whenthe New York imes or ime magazine started, people didn’t just believe it — trust was established over decades. Te idea that the FC would just cause trust to happen? I don’t see how that’s going to work.” 

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