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FTC Values Sponsored Posts at $11,000 Apiece

What follows is the unabridged version of my latest post for TechCrunch, “FTC Values Sponsored Conversations at $11,000 Apiece

Source: Shutterstock

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 29 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 eventually 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.

Update: Response from The FTC

When asked if the FTC views bloggers equally and whether or not it recognizes levels of authority on par with traditional media, Mary Engle, Associate Director for Advertising Practices, clarified its position and perspective, “All bloggers aren’t the same and we are not saying that all bloggers are marketers. Most of them are ordinary folks musing or sounding off. The question as we put it in the notice we published today is whether, viewed objectively, the blogger is being sponsored by the advertiser. (We list a number of factors to consider.) Independent product reviewers, whether offline or online, would not be viewed as sponsored by the company whose products they are reviewing.”

Engle further observed the distinction between expert and consumer bloggers, “But if bloggers regularly receive free products from a company, the blog audience might view their reviews differently than if they went out and bought the products on their own. Under those circumstances, bloggers should disclose they got the products from the company. This is consistent with the WOMMA code of ethics. And, companies who use bloggers to generate buzz about their products by sending free merchandise should have a policy that their bloggers should disclose.”

Very true.

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27 COMMENTS ON THIS POST To “FTC Values Sponsored Posts at $11,000 Apiece”

  1. Very very true, Brian. This is a gray area that must be addressed not only by the government (which I think will make the whole thing oh' so difficult) but also by professionals on the field. I remember when Pepsi came out with their newest product (wow, what was its name? so much for effective marketing!) and bloggers everywhere started sending out posts on their views about it. Most of them made it clear how they got a hold of the product, but others inadvertently made it look like they bought it at the grocery store.

    I guess it'll boil down to a commitment not only from the company but also the blogger to make others aware of their intentions, at least for credibility purposes. Yes, the FTC will be there, but oh my', let's see how that goes.

    Keep us updated!

  2. startabuzz says:

    Setting aside the issues I have with pay-for-tweeting (and I give full marks to companies like IZEA, who're trying to find ways to do this ethically), I do think it's important for there to be guidelines in place, as there are, sadly, many who will be less than forthcoming about sponsorship and compensation (no matter what its form). I'm still a little off-put about the FTC's classification of bloggers. True, not all bloggers are the same, but the guidelines and standards should be the same, regardless of readership. More to the point, though, bloggers should be held to standards no different than traditional writers. It's high time that the FTC recognized that this medium as legitimate journalism. That there is any distinction made at all is highly disconcerting to me.

  3. Ed Shahzade says:

    Slightly Off Topic:
    I'm curious if the FTC has an adaptation of these [needed] rules specifically
    for affiliate marketing. With or without a pre-paid or in-kind endorsement,
    I'd be curious if [legitimate, honest] promotion in a post which includes an affiliate
    link and potential for compensation, is a risk if there's not clear enough disclosure.
    And also, which platforms this applies to.

  4. Anytime you use the word government and business in the same breath you are subject to a mixed bag. On the one hand, it is always important to promote ethics and transparency but on the other hand bureaucrats are not necessarily the best arbitrators of benefit vs. cost.

  5. Jenny says:

    $11,000 per tweet? LOL.. That was funny.. But yeah, it is true. It seems that FTC is ripping off the bloggers and most of all the people doing something online. Bloggers with successful blogs are not born overnight. They are created. They get these advertisers to pay them because they have created an audience that listens and trust them. These are real word-of-mouth advertising. A blogger cannot have an advertiser or even a reader if they don’t provide quality content the same as products on the market that have good quality can have as many buyers.

  6. mom101 says:

    Hi Brian, caught your tweet about this post just now – might want to update it to indicate that the $11k number was a rumor. In an online town hall with Mary Engel this week put on by Blog With Integrity (which I'm a part of) she opened by stating that that she had no idea where that information came from, and that the real target of the guidelines are marketers who initiate word of mouth marketing campaign – and not the bloggers themselves.

    Although my guess is, the FTC is figuring this all out as they go along. We're not the only ones confused by the info swirling around out there.

  7. mom101 says:

    Hi Brian, caught your tweet about this post just now – might want to update it to indicate that the $11k number was a rumor. In an online town hall with Mary Engel this week put on by Blog With Integrity (which I'm a part of) she opened by stating that that she had no idea where that information came from, and that the real target of the guidelines are marketers who initiate word of mouth marketing campaign – and not the bloggers themselves.

    Although my guess is, the FTC is figuring this all out as they go along. We're not the only ones confused by the info swirling around out there.

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