December 16, 2006
FTC Cracks Down on Corporate Attempts to Emulate Viral Marketing without Disclosure

On Monday, the Federal Trade Commission announced that it would be creating new regulations that any company engaging in viral marketing can no longer try to pass that interaction off as a form of grassroots--a type of action that has been called "astroturf" marketing--without making the official relationship with the company transparent.

There had not been a previous ruling from the FTC on this issue, although it has sparked a growing amount of controversy from online users after a series of situations in which companies were found to be behind a variety of what appeared to be advocacy sites promoting brands from independent fans.

According to Anny Shin with the Washington Post, "Word-of-mouth marketing can take any form of peer-to-peer communication, such as a post on a Web log, a page for a movie character, or the comments of a stranger on a bus."

The question that has arisen is to the fairness of conversations of this sort in which one side is not making explicit their commercial incentive for advocating a brand. Testimonials have long been a part of more traditional advertising, but there is little question as to the relationship between speaker and product when the advocates are speaking as part of a 30-second spot. Advocacy group Commercial Alert had been petitioning the FTC for some time for more than a year regarding the issue.

Shin wrote, "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.'"

The FTC says that it's planning to enforce these rules not just with cease-and-desist orders but potentially fines and civil penalties as well, on a case-by-case basis.

Shin focuses on the efforts of the Word of Mouth Marketing Association to help the industry "to police itself." The organization boasts a roster of more than 300 companies, has a code of ethics regarding viral marketing, and is currently "reviewing the membership status of the Edelman public relations firm after Wal-Mart, one of the firm's clients, reportedly gave positive comments to bloggers who then posted the comments without mentioning the source. Edelman later admitted that some of its employees had written the blogs."

Jonathan Cherry, who runs the South African Web magazine Cherryflava, points out that, since most of these companies are eventually discovered and discredited by consumers, the incentive should already be there not to make these types of marketing decisions. While conventional logic would indicate the risks are too high, it hasn't stopped plenty of people from trying these types of promotions, leading us to wonder how many times they may have gotten away with passing off company-produced shilling for grassroots expressions. Cherry writes that the legal restrictions would ensure that "now deceiving brands will have to think twice before luring us into their dark den of lies and deceit."

Of course, gaming bloggers, like Colin McInnes, are drawing plenty of correlations between the FTC decisions and the Sony-PSP fake fan site debacle I wrote about Thursday. You know the one that was just "too funky fresh," as does Nate Anderson at Ars Technica and David Jenkins at Gamasutra.

The moral of the story? Consumers don't like being tricked (caveat below), and there is a difference between playful interaction with commercial or branded material and what we are declaring as fraud. What draws the line between viral marketing in public places by performers, the paid word-of-mouth advocates, and things like this? Are there some types of marketing people don't mind that this forced disclosure will kill the spirit of? How will the FTC enforce these sanctions, anyway, since it's set to be on a case-by-case basis?

The moral of the story, however, is that things like the Edelman/Wal-Mart fraud is clearly what people consider over the line. And the last thing marketers want is a response as adamant as some of the people on the Wired Game/Life blog, such as Ben Friesen, who writes about fake tourists who are actually paid marketers, "Not only is this morally reprehensible, but it breaks down the bond we have with our common man." Perhaps a bit of hyperbole, but I think his quote does demonstrate the passionate and angered response these types of moves create in a public that does not like being deceived unless they are in on it.

But, now, for my caveat: When I say that consumers don't like being tricked, that's not completely true. People love magic shows. We spent plenty of time in one of my classes this semester talking about carnival and the art of trickery that people enjoyed with P.T. Barnum, who someone said (and I'm paraphrasing) could "cheat you out of 5 dollars and you'd pay him another dollar to tell you how he did it." And the appeal of pro wrestling probably falls in this category as well. It's just when interaction leaves this playful realm and into what people feel is corporate deception that people start to get this angry. But where is that line? And how can marketers distinguish it?



or it's that customers love/hate realizing/discovering they're being misdirected

a chance to find out how ignorant advertisers know they are, where finding that out proves how smart they really are. o, 'the public,' always thinking you've got advertising all figured out...


I am really fascinated with this line in American culture being being duped and admiring a con and the corresponding dialogue of authenticity.