Exploring the FTC Guidelines for Social Media


Over the past seven months, the Federal Trade Commission has been revising guidelines for Use of Endorsements and Testimonials in Advertising. Its latest revision includes specific examples relevant to word-of-mouth, blogging and affiliate marketing promotion campaigns. Recent articles such as the New York Times’ “Approval by a Blogger May Please a Sponsor” on July 12, the Associated Press’ “FTC Plans to Monitor Blogs for Claims, Payments,” published June 21, and the Wall Street Journal’s “Paid to Pitch: Product Reviews by Bloggers Draw Scrutiny” on April 23 have fueled the discussion and increased awareness of issues affecting brand advertisers and bloggers. In reporting on this topic, worst practices by unscrupulous bloggers often surface. At Porter Novelli, we believe brand advertisers should have a basic understanding of not only these “bad apple” examples, but also of the key concepts, industry leaders and current best practices in this fast-paced policy area. The landscape is shifting rapidly, so this whitepaper is a snapshot from a particular point in time. It is also the beginning of the exploration of these topics, and there are many parties to the dialogue including brands (and advertisers), agencies, publishers (bloggers), the FTC and the community. Since these are proposed guidelines, it is up to all of us to weigh in on where we believe the discussion should go. Regardless of whether these revisions are adopted as proposed, brands and agencies should develop baseline responses to these issues that will continue to grow as consumer endorsements by bloggers are used more frequently in the marketing mix. We hope this whitepaper gives you some areas for thought as well as some concrete suggestions as to how to proceed. Brands and agencies should be responsible for ensuring that bloggers disclose endorsements in a clear and transparent way, and that the specific statements they make are, as noted in the FTC guidelines: “truthful and substantiated. The advertiser should also monitor bloggers who are being paid to promote its products and take steps necessary to halt the continued publication of deceptive representations when they are discovered.” These new requirements may cost marketers time and money, so the FTC proposal encourages careful consideration of blogger relations tactics used for campaigns. At Porter Novelli, we believe in the long-term sustainability of the “sponsored conversation” in social media and in taking action to experiment with this form of marketing while being aware of the potential for the landscape to change. For this paper, we’ve spoken to individuals who have played leadership roles in this community conversation, including Ted Murphy from Izea (a sometimes controversial company that connects advertisers and relevant bloggers, especially via “sponsored conversations”), Robert Cox of the Media Bloggers Association, Elisa Camahort Page of BlogHer (a participatory women’s news and entertainment online community) and Lawrence Dignan, editor of ZDNet/CBS Interactive. They’ve helped us understand the consumer protection and company disclosure policies already in place or available to use. We use this information as well as other sources to provide direction 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.

Historical Overview and Context
Over the past seven months, the Federal Trade Commission has been revising guidelines for Use of Endorsements and Testimonials in Advertising. Its latest revision includes specific examples relevant to word-of-mouth, blogging and affiliate marketing promotion campaigns. Recent articles such as the New York Times’ “Approval by a Blogger May Please a Sponsor” on July 12, the Associated Press’ “FTC Plans to Monitor Blogs for Claims, Payments,” published June 21, and the Wall Street Journal’s “Paid to Pitch: Product Reviews by Bloggers Draw Scrutiny” on April 23 have fueled the discussion and increased awareness of issues affecting brand advertisers and bloggers. But the current guidelines have been relevant to disclosure in online advertising for years. Robert Cox, president of the Media Bloggers Association, notes: “The FTC’s guides concerning the use of endorsements and testimonials in advertising are broad guidelines for advertisers of all stripes (TV, print, radio, blogs, word-of-mouth marketing). There is considerable interest in how the revisions will affect the online world. One thing to keep in mind is that these guides have not been revised since 1980, and obviously the world of marketing has changed a lot since then.” These guidelines are intended to protect consumers from false advertising statements and to ensure that celebrity endorsements reflect the honest opinion of the endorser. According to The Law of Electronic Commerce by Jane K. Winn and Benjamin Wright, “When it comes to

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online ads, the basic principles of advertising law apply: 1. Advertising must be truthful and not misleading; 2. Advertisers must have evidence to back up their claims (‘Substantiation’) and 3. Advertisements can not be unfair.” It’s important to note that “the Guides set forth the general principles that the [Federal Trade] Commission will apply in examining endorsements; the question of whether a particular endorsement or testimonial is deceptive will depend on the specific factual circumstances of the advertisement at issue {emphasis added}. (FTC Guide, p. 11). As Cox notes, “These are guides and not regulations. With guides, no civil penalties are assessed. With regulations, there are civil penalties.” The key here is reputation. The FTC is saying that consumers often can’t glean the reputation of the people or sites who are endorsing products. The marketplace for bloggers, affiliate systems and sponsored conversations is new, whereas with traditional mainstream media, consumers understand the cues that indicate an advertisement or endorsement, such as print ads offset in side boxes, or radio or TV spots set off by announcements that say “and now a word from our sponsor,” or a black slate between programming and commercials. As there is currently no standard system for online reputation, disclosure or transparency, regulators are attempting to make a set of guidelines that will protect the end consumer. Key violations of transparency in the past, with companies like Sony or Walmart creating fake blogs with fake 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 and agencies who work with sites that have clear reputation, transparency and accountability will be able to lower their risk. Bloggers and blogging networks 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 Texaco Star Theater, radio and TV have long brought advertiser-sponsored content—often with host testimonials—into millions of American homes. According to the Museum of Broadcast Communications, “The term ‘soap opera’ was coined by the American press in the 1930s to denote the extraordinarily popular genre of serialized domestic radio dramas, which, by 1940, represented some 90 percent of all commercially sponsored daytime broadcast hours. The ‘soap’ in soap opera alluded to sponsorship by manufacturers of household cleaning products.... These began as one of the hundreds of new programming forms tried out by commercial radio broadcasters in the late 1920s and early 1930s, as both local stations and the newly formed networks attempted to marry the needs of advertisers with the listening interests of consumers.” Many of these old radio and TV programs had “host endorsements.” A character in the show would step away from a scene and speak directly to the consumer about the features and benefits of a product. Even today, radio host Howard Stern uses the host endorsement technique with many of his sponsors to great effect. When the host talks to his or her audience about an experience with a product, consumers recognize it as an advertisement, paid for and delivered as such.

“Consumers should start from the premise that you can’t trust what you read on the Internet, and then work toward trusting it,” says Cox. “You can’t just log on and believe it. When the New York Times or Time magazine started, people didn’t just believe it — trust was established over decades. The idea that the FTC would just cause trust to happen? I don’t see how that’s going to work.”

While blogging has been around for only roughly 10 years, the issues are similar. Just as radio broadcasters tried to find business models that would connect their advertisers to their listeners, bloggers seek business models to reach their (sometimes very significant) audiences. Brands and marketers have taken notice, and agencies have started blogger relations practices. Forrester Research published a brief in March 2009, “Add Sponsored Conversations to Your Toolbox,” defining sponsored conversations as “a technique in which marketers provide financial or material compensation to bloggers in exchange for their posting blog content about a brand.” Writer Sean Corcoran notes in the piece, “Marketers already try to influence bloggers through public relations activity. They also pay for ads on blogs. Seen in this context, sponsored conversations are an extension of existing activities. As long as bloggers don’t hide who’s paying them and have freedom to write whatever they want, sponsored conversations will fit in well with the other forms of marketing through blogs.”

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State of the Industry
The last part of Corcoran’s statement is probably the most relevant: “As long as bloggers don’t hide who’s paying them and have freedom to write whatever they want.” The controversy around sponsored conversations has most often come when disclosure has been lacking. This issue will encourage regulators to attempt to protect consumers with new policy. The FTC cites examples in its guidelines of a video game reviewer who didn’t disclose receiving a free gaming system, and a commenter on an MP3 player forum who didn’t disclose that he was an employee of a device manufacturer. Under the guidelines, both require clear disclosure. Marketers should take note of this and share it with their blogger relations teams. Blogging networks Izea and BlogHer have very clear policies when it comes to disclosure in product reviews—however, they differ in execution. BlogHer cofounder Lisa Stone describes BlogHer’s approach: “When you see the BlogHer brand or the BlogHer Reviewer brand and disclosure message, you should know exactly what you’re getting. You should know that editorial will be presented separately from sponsored content. You should know that sponsored content will not show up in spaces where you are used to seeing authentic editorial and organic community content. You should know that if a BlogHer blogger was given something, or was hired to write something, she will tell you.” BlogHer cofounder Elisa Camahort Page expands upon that sentiment: “Very early on we realized that advertisers didn’t want ads from conflicting brands on the sponsored content. They also realized that bloggers create authentic conversation with their audiences. Therefore we require bloggers to put sponsored reviews on a different page of their site from the main editorial, or to have a cross-linked review blog. These bloggers doing reviews are being paid to write professional pieces, and they commit to guidelines about disclosure and professional level of review. When BlogHer review programs run, they find bloggers interested in the subject matter, and each work-for-hire review, done in the blogger’s own voice and opinion, is checked by human editors before being posted in the network. We’re a curated network.” Izea’s network of “250,000 bloggers and 25,000 advertisers around the globe” also has specific disclosure policies. In Izea’s Pay Per Post network, reviews are “individual transactions between bloggers and advertisers,” according to founder Ted Murphy. While Izea is pushing for all bloggers to use a disclosure badge that links to very specific disclosure information, it also allows in-text disclosure and site-wide disclosure. This practice has met with some criticism, and Murphy has drawn fire for it. But Izea’s enterprise-level SocialSpark service requires every post to have a disclosure badge, and each participant in SocialSpark has a social-network-like profile—Chris Pirillo’s is an example. On his profile you can see a recent approved SocialSpark post with a disclosure badge that says “Support my sponsor. Sponsored post. 100% real opinion.” The post has Pirillo giving away an “ethical hacking class” to one of the people leaving a comment after his blog post. The post generated over 230 comments (with varying degrees of lucidity), which one assumes was the intent of the paid post. According to Pirillo’s SocialSpark page, it costs $1,000 to engage him in a paid post. According to Robert Cox of Media Bloggers Association, “Our organization’s view is that there’s nothing wrong with things like Pay Per Post, as long as the relationship is disclosed. If it’s a onetime thing, like a blogger is receiving a restaurant meal in order to review it, it should be indicated clearly in the post. If it is an ongoing engagement, such as political consulting or campaign work—since most posts, even disclosure posts, leave the front page of a blog within a week—disclosure should be in a block on the front page. Always err on the side of more disclosure. Focus on a trust relationship between blogger and audience.” There’s more in the Media Bloggers Association’s Statement of Principles. Additional guidelines for marketers from the Social Media Business Council provide very specific blogger relations practices such as honesty and transparency. Its site offers useful checklists and all documents are open source, for anyone to modify or improve. The Word of Mouth Marketing Association’s Code of Ethics is also a good reference.

Twitter search results on “ftc guidelines”

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Professional communications organizations that hire bloggers often have their own codes of ethics and disclosure. Lawrence Dignan, editor in chief of ZDNet (a unit of CBS Interactive) says, “CBS staffers that are bloggers fall under the same ethics policies as journalists. No free products, trips, etc. Should there be any conflicts, we disclose them in the post. Bloggers that are contractors and have day jobs are required to disclose their affiliations, investments and any conflicts. Every blogger has a disclosure statement at the bottom of every post.” Columnist and ZDNet contractor Ed Bott’s disclosure, reads (in part): “Ed’s personal Web site at edbott.com includes advertising.… In addition, Ed allows advertisers to purchase links in a sidebar through Text-Link-Ads. Advertisers receive no special treatment at his personal Web site, at ZDNet or in books. Ed makes a small amount of money selling books (his own, primarily) through an affiliate account at Amazon.com.… Ed does not accept gifts from companies he covers. All hardware products he writes about are purchased with his own funds or are review units covered under formal loan agreements and are returned after the review is complete.” Not all bloggers are created equal, of course. There are basic strategies that will make any blog more appealing to both readers and potential advertisers, marketers or influencers. The first is disclosure. Popular CopyBlogger Brian Clark notes in “How to Turn Affiliate Marketing Disclosure Into a Selling Point”: “Being completely frank with your readers about compensation can be scary, because you think people will think less of you. But in a cynical world where everyone thinks everyone else is on the take already, honesty becomes a selling point.… If you’re delivering value to your audience on a regular basis, they should have no problem with you being compensated for an occasional affiliate review or recommendation.” On the marketer’s side, Forrester’s Corcoran says: “Require that any sponsored content includes disclosure … and that any sponsorship network you work with has similar requirements. Don’t even think about paying without this disclosure because the resulting backlash will obliterate any positives you might hope to achieve.” The Social Media Business Council’s Disclosure Best Practices Guide even includes a checklist for setting formal compensation policies and suggests how to communicate them to bloggers. Corcoran also says that marketers must ensure authenticity. This links directly to BlogHer’s Community Guidelines. Frankly, if bloggers are just shilling for an advertiser or a PR campaign in hopes of pleasing those who provide compensation or giveaways, they’re neglecting the very audience the marketers are trying to reach. Keeping opinions honest ensures the value of the review, even if it’s a negative one. Finally, the Forrester brief notes the value of working with popular and relevant bloggers, and in listening once you’ve started campaigns so that you can develop longer term relationships with your bloggers and customers.

Topic View via Crimson Hexagon

Rise of the Digital Celebrity
In the FTC guidelines, certain examples note celebrities and suggest they be treated differently than general endorsers of products or services. Example 3 (p. 82) cites a tennis player who appears on a talk show to tout her new vision-correction laser surgery. The athlete doesn’t disclose a financial relationship with the clinic that performed her surgery, and the guidelines state: “Consumers would not expect a celebrity discussing a medical procedure in a television interview to be paid for doing so, and knowledge of such payments would likely affect the weight or credibility consumers give to the celebrity’s endorsement. Without a clear and conspicuous disclosure that the athlete has been engaged as a spokesperson for the clinic, this endorsement is likely to be deceptive.” However, today, not all celebrities are those who appear in movies and on television. The Internet has given rise to “microcelebrities,” who may be famous among their group of followers and fans without mainstream media exposure. Take “iJustine,” or Justine Ezarik, whose 116,000 YouTube subscribers have seen her videos more than 2.8 million times. Is she a celebrity? Judson Laipply’s famous “Evolution of Dance” video has been seen more than 122 million times on YouTube alone. Though not apples to apples, it is possible more people have seen Laipply dance than saw the Super Bowl a few years ago. His views certainly outrank the ratings of a cable network evening news show. So who is a celebrity? And must microcelebs disclose their relationships with advertisers differently than bloggers? Or should the FTC be treating everyone, celebrities and bloggers alike, in the same way?

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Best Practices
While Forrester and others have mentioned certain practices, we recommend the following as must-dos. • Marketers must demand that bloggers have clear disclosure practices, either mandated by the networks they work through, or through their own disclosure pages. • Bloggers who don’t have a disclosure policy can easily create one at DisclosurePolicy.org and modify it to fit their own circumstances. (We note that DisclosurePolicy.org was created by Izea to address accusations that its bloggers weren’t clearly disclosing on the Pay Per Post network, but it is a generally useful tool and the most well known right now.) • This lack of clear blogger disclosure policy and labeling creates an opportunity for brands to create their own branded disclosure widgets that bloggers may be required to embed or link to if they participate in a campaign. • Marketers looking for checklists or guidelines for word of mouth or blogger relations campaigns can check the Social Media Business Council site. The Word of Mouth Marketing Association also provides a Code of Ethics clearly influenced by the proposed FTC guidelines. It doesn’t specifically address blogging, but the points are salient and directly relevant. • Bloggers and blog networks should provide ways to confirm disclosure. For example, BlogHer editors check paid reviews before they are published to ensure adherence to guidelines. Izea’s SocialSpark product includes a Disclosure Audit—a report of all posts made on behalf of the advertiser. The audit verifies that a disclosure notice badge is included, and provides the date the badge was last checked. • Bloggers should clearly understand the implications of the FTC guidelines. For example, the “typicality” suggestion: not saying “I lost 50 pounds with this diet drink” when the brand’s guideline for typical results is six pounds. This issue is specifically called out by the FTC and points to potential liability for both the advertiser and the blogger. • “No-Follow” links: This is a technical point. Search engines typically penalize blogs that use a “follow” tag to point to certain links, because spam blogs use the “follow” links to try to game the search engines and artificially increase the number of links to a particular site. Out of respect for the requests by Google and others to use “no-follow,” many blogger networks, including Izea’s SocialSpark, mandate that bloggers use a “no follow” tag when they link to sponsors’ content. There are plug-ins for making this change to links for Wordpress and other blogging engines. • Don’t interfere with bloggers’ authenticity. Don’t mandate what bloggers will write. The entire value of getting a review from a blogger usually revolves around the blogger’s authentic voice. Even if you’re paying for reviews, don’t mandate what’s covered. Of course, regarding typicality guidelines and false-claims issues, you may want to mandate what is not covered (by explaining what a false claim would be for a product). • Work with your own legal department to educate them on blogger relations, disclosure and advertising claims issues that may arise. Provide them with sources of industry information so they can keep you informed about best practices and better understand the sites with which you are working. Remember that the spirit of the FTC guidelines is protection of consumers. That intent aligns perfectly with foundations of Web 2.0 and blogging—authenticity and transparency.

For more information, please contact:
Stephanie Agresta Twitter: @StephAgresta stephanie.agresta@porternovelli.com Phone: 212-601-8000 Stephanie Agresta is EVP, Global Director of Digital Strategy & Social Media at Porter Novelli. She cofounded the TechSet and blogs at InternetGeekGirl.com.

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