Published Articles

January 26th, 2007

Creating Some Buzz, Commercial Alert’s Complaint, FTC’s Guidance

Advertisers are increasingly turning to "buzz marketing" to communicate with today's consumers. These consumers are watching (and posting) videos on YouTube. They belong to social networking sites such as mySpace. They have avatars on Second Life. They have their own blogs. And, the theory goes, they are less susceptible to being influenced by traditional advertising campaigns.

Buzz marketing--also called "word of mouth" marketing--encompasses a wide range of offline and online activities where advertisers encourage consumers to spread the word about their products, making these consumers powerful endorsers of their products to their own network of friends.

Commercial Alert's Complaint

The controversy here isn't about friends who happen to share information about products they like. Instead, organizations such as Commercial Alert say that consumers are being deceived because advertisers are engaging in buzz marketing campaigns, but the consumers do not realize that they are being advertised to. This can happen in many ways. An advertiser may hire someone to pose as a consumer to participate in blogs and other online discussions to promote a product, without disclosing that the consumer is actually a paid endorser.Undisclosed buzz marketing can also take place, for example, when an advertiser distributes videos on the web that look like consumer-generated content, but were really financed by the advertiser.

The Federal Trade Commission (FTC) recently said, in response to a petition from Commercial Alert, that it would not issue specific guidelines governing buzz marketing. Commercial Alert had asked the FTC to require disclosures of sponsor involvement, whenever buzz marketing was occurring. Instead, the FTC said that it would examine buzz marketing campaigns on a case-by-case basis to determine whether a campaign is deceptive and whether to take law enforcement action. The FTC did provide some insight, however, into when disclosure of advertiser involvement may be needed.

FTC's Guidance

The FTC said that when there is a connection between an endorser and a seller of an advertised product that might materially affect the weight or credibility of the endorsement, that connection should generally be disclosed. The types of connections that may need to be disclosed include, for example, when a consumer has been paid to endorse a product or where the endorser is an employee of the advertiser. The FTC said that, "in some word of mouth marketing contexts, it would appear that consumers may reasonably give more weight to statements that sponsored consumers make about their opinions or experiences with a product based on their assumed independence from the marketer."

The FTC explained that if a consumer tells her friends that the speaker on her cell phone has great sound quality, or that a new dishwasher cleans dishes even when they are not pre-rinsed, those opinions will matter to people more, if consumers don't realize that those opinions were paid for. The FTC said that, in those situations, "it would appear that the failure to disclose the relationship between the marketer and the consumer would be deceptive unless the relationship were otherwise clear from the context."

What does this mean, as a practical matter, for advertisers? If you are hiring people to go out and spread the word about your clients' products on the streets or in blogs, they should generally disclose that they have been paid to give their opinions. And if you're planning on creating a video to distribute on the web that looks like it was made by consumers who just love the product, even though it was really created by you using hired actors, you may just need to disclose that the video is really just advertising.

If you don't, the next buzz about the product may be FTC enforcement action.

- Jeffrey A. Greenbaum

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This article was first published in the January 26th, 2007 edition of Shoot magazine.