What follows is the unabridged version of my latest post for TechCrunch, "FTC Values Sponsored Conversations at $11,000 Apiece"
In May, I reviewed the proposed Federal Trade Commission guidelines that would ultimately affect and change how brands employ endorsements into their marketing, advertising, and communications programs.
Today, the Federal Trade Commission made good on its threat promise by releasing its final revisions to the guidance it gives advertisers on how to keep their endorsement and testimonial ads in line with the FTC Act. This amendment marks 27 years since The Guides were last updated in 1980.
In the 1980 version of the Guides, advertisers were allowed to describe unusual results in a testimonial as long as they included a disclaimer such as "results not typical." Long overdue, the revised Guides no longer allow this form of safe harbor.
But for those of us contributing to the new media landscape, there is a dire warning that we must heed.
While The Guides mostly define the rules of engagement for advertising, it now contains clear language and consequences associated with the use of paid testimonial in blogs and celebrity endorsements.
As a result of the evolving level of influence inherent in the social Web, and web in general, the notice incorporates several amendments to the FTC's Guides Concerning the Use of endorsements and testimonials in advertising and blogging, which address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of important connections between advertisers and endorsers. Fines for violating the new rule will run up to $11,000 per incident.
Even though the FTC Guides refer to blogging, advertising, and celebrity endorsement specifically, Twitter and other Social Networks will not be overlooked. Pay-per-Tweet services such as Ad.ly, Izea, and Twittad are providing networks for brands to engage with the audiences of real celebrities as well as the communities of people who follow the Internet famous. Disclosure is also required in these new mediums. It should also be noted that Ted Murphy, founder of Izea, is collaborating with the FTC to help create a fair set of standards around disclosure and James Eliason, founder of Twittad, has submitted a technology framework to Twitter to effectively disclose sponsored Tweets.
However, in the eyes of the FTC, a paid endorsement is no longer limited to monetary compensation and this is why things will get interesting moving forward.
The revised Guides feature new examples that illustrate the long-standing principle that "material connections" between advertisers and endorsers - connections that consumers would not expect - must be disclosed. This is true whether its a payment or free products that change hands.
The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.
The revised Guides specify that while decisions will be reached on a case-by-case basis, but to be clear a blog post (or Tweet) in exchange for cash or in-kind payment to review a product is considered an endorsement.
The examples address what constitutes an endorsement when the message is conveyed by "bloggers or other word-of-mouth marketers."
While I agree with the need for disclosure in sponsored posts and tweets, the FTC's inability to see blogging as a bona fide publishing channel comprised of expert writers and pundits in addition to those consumers willing to exchange content for compensation, is incredibly hazardous.
For instance, traditional reporters and journalists have long received products and services to review. In the ethical world, brands entrusted the resulting experience with the reviewer and used corporate collateral and not monetary pressure to help sway positive exposure. In some cases those reviewers either kept products or received services, without paying for them, whether or not they ever published an unbiased review. Why are professional bloggers viewed differently?
Since the FTC is reviewing incidents on a case-by-case basis, perhaps they will evenutally realize the clear division between editorial and advertorial regardless of platform. The difference between endorsement and individual experience is discernible in the intent of the arrangement between brand and writer.
In the meantime, brands and bloggers can only benefit from disclosing the nature of endorsements. In the realm of new media, transparency and ethics speak louder than the value proposition of the product itself.
The FTC could not be reached for comment at this time in reference to the delineation between consumer bloggers and subject matter authorities who blog. We will update this post once we receive a response.
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