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This is Not a Sponsored Post: What You Need to Know About Sponsored Conversations & the FTC

What follows is the unfiltered version of my latest TechCrunch post, “This is Not a Sponsored Post: Paid Conversations, Credibility & The FTC.

Credit: Kevin Dooley

In the eyes of imaginative and opportunistic advertisers and marketers, bloggers and online influencers are the new celebrities and athletes. Brands are showering them with endorsement deals rich with products, cash, trips, exclusive access to information, and VIP treatment each and every day, creating a new genre of star spokespersons.

Many expert and lifestyle “citizen” bloggers and online weblebrities are creating communities around their persona as they freely and actively share personal and identifiable experiences online, in social networks and also in the real world. Those who can successfully connect their stories to others in and around their peer groups earn trust, visibility and authority – limited only by ambition and ingenuity. They’re rewarded for their presence and ability to point their followers in strategic directions.

These new brand ambassadors are almost the perfect instruments for surreptitiously sparking and cultivating groundswell within desired and vital target markets.

Consumers look to experts and trusted peers for guidance and insight when making decisions.

Who’s to say that the information they’re receiving from their trusted sources is indeed truthful and honest, if they’re unaware that these authorities are actually directly or indirectly compensated for their opinions and insights.

Journalists and reporters on the other hand, most of them anyway, are held to strict editorial guidelines and policies that denounce the practice of receiving products, gifts or compensation in exchange for editorial coverage. There’s at least, a line that separates ethical press from advertorials – whether it’s crossed, is another story.

But in the new online world of citizen influence, there’s no line on the horizon – at least not yet. Driven only by loosely defined and sporadically practiced methodologies that promote at-will disclosure and transparency, many brands, intentionally or deliberately, are blurring a consumer’s ability to discern the distinction between partisan and genuine experiences.

But that’s all about to change. Under new guidelines proposed by the Federal Trade Commission, brands and/or bloggers may be held liable should either the FTC or scorned consumers deem that the actions or claims misguided their decision and/or misrepresented actual performance or efficacy.

According to the Federal Trade Commission, the ability for a consumer to exercise better judgment and common sense is indefensible when a glaring absence of disclosure is pervasive.

Earlier this year, The FTC published recommendations to update its guidelines concerning the use of endorsements and testimonials in advertising and public relations. A new set of guidelines, enforceable by the FTC Act, is due soon.

The Guides, 16 C.F.R. Part 255, are designed to assist businesses and others in conforming their endorsement and testimonial advertising practices to the requirements of Section 5 of the FTC Act. The Guides interpret laws administered by the Commission and therefore are advisory in nature. However, proceedings to enforce the requirements of law can be brought under the FTC Act. The Commission would have the responsibility of proving that a particular use of an endorsement or testimonial was deceptive.

In its review of the proposed guidelines, BusinessWeek observed, “The world’s more ambitious bloggers like to call themselves ‘citizen journalists.’ The government is trying to make sure these heralds don’t turn into citizen advertisers.”

I disagree with BusinessWeek’s observation and so does the FTC.

In a discussion with Mary Engle, the acting deputy director for the Bureau of Consumer Protection, she articulated, “It’s not about preventing citizen journalists from becoming citizen advertisers, that’s just not true. We’re acting to ensure that bloggers don’t create a bias in the consumer decision-making process. Consumers just need to know that what they’re reading is technically an advertisement.”

Whether the post is compensated with cash or with free product or rewards, the FTC views them equally. Engle observed, “The real test is whether or not the consumer’s impression or decision would change if they knew the post was sponsored.”

It’s about responsibility and credibility.

But honestly, why chance it?

This is about building credibility and earned relationships through engagement and empowerment for both company/product brands and personal brands.

The FTC Guides advise that an advertisement employing a consumer endorsement on a central or key attribute of a product will be interpreted as representing that the endorser’s experience is representative of what consumers will generally achieve.

Even still, the practice of paying bloggers and influencers or providing them with free products not only clouds their ability to share an impartial story, but also risks credibility and trust of brands and influencers among the very people they’re trying to inspire and galvanize.

With or without the new FTC guidelines, the practice of disclosure is not an option when the potential for significantly damaging customer relationships in a very public spotlight is at stake. Unfortunately, it’s not at the forefront of many of our marketing programs.

Free Products are Gifts that Keep on Giving

Ignorance is bliss, until it’s not…

In 2006, Microsoft introduced its Vista operating system to consumers using traditional and new media. In one of the programs, bloggers of varying levels of influence, received Acer Ferrari notebooks to potentially review and share their experiences of the OS and also the notebook. Initially, it wasn’t made clear to these bloggers that disclosure was encouraged. I saw many variations of the packages and letters. Depending on which version a blogger did or didn’t receive, instructions and intentions were also vaguely communicated. What was commonly perceived and understood by other bloggers and ultimately consumers, was that these expensive notebooks were theirs to keep whether or not they shared anything online. To say it created a blogstorm of controversy would be a gross understatement. The lessons learned here served as precedent for those seeking guidance, but didn’t necessarily translate intro industry-wide standards.

Brands view the practice of sending products to bloggers and online influencers as a natural extension of their product PR campaign. In many cases over the years, companies simply didn’t expect to receive product back from reviewers, whether or not they were employed by a publication bound by editorial guidelines against the acceptance of gifts or free products. Bloggers and online influencers, until the recent FTC attention, were viewed no different.

Sending free products, according to the FTC, is viewed as compensation, which translates into an advertisement or paid endorsement. The FTC pays attention to products of “significant” value.

Under the FTC guidelines, disclosure is required in any case where the brand is hopeful of obtaining a published review of the product, when its return, either explicitly or implicitly conveyed, is not expected. This attempts to ensure the protection of all parties against liability or legal action.

Sponsored Posts and Conversations

Whether or not disclosure is evident and forthright, the question really is, whether or not the practice of giving gifts to encourage reviews or outright paying for them is ultimately effective and sound for channeling influence, community building and revenue generation for the long-term.

We’re now talking about outright paying for posts and conversations versus simply sending free product or rewarding them with various incentives and hoping for complimentary posts and discussions in exchange.

A recent report published by Forrester Research defines sponsored conversations as, “A marketing technique in which marketers provide financial or material compensation to bloggers in exchange for their posting blog content about a brand.”

In the report, which is available for $749, Forrester recommends adding sponsored conversations to the corporate marketing toolbox, “Sponsored conversation is controversial; many bloggers believe it threatens bloggers’ reputation for independence. But we think this practice is here to stay. Why? Because bloggers want to get paid and marketers want to pay them.”

According to the FTC guidelines, if there were a financial or other relationship between the advertiser and the endorser that would affect the credibility of the endorsement, that relationship would have to be disclosed under Section 255.5. So, as long as the blogger is clear that the post or conversation is “sponsored,” all guidelines are respected and satisfied.

Wait, what about the brand?

Just because bloggers want to get paid and brands want to pay them, doesn’t make this a no-brainer business practice does it? Or, better yet, does it actually enhance the product/company brand or the personal brand of the blogger in the long run?

Some of the biggest brands in the world are already experimenting with paid posts including, 1-800Flowers, Black&Decker, Cold Stone Creamery, Dell, Disney, MTV, Sears, Sony Pictures, and TiVo. For example, Kmart recently sent several high profile bloggers on $500 shopping sprees in exchange for “sponsored posts” about their experiences.

I suppose, it’s in the way that you use it…

So, let’s examine something of deeper impact and consequence. Every community thrives on interaction rooted in respect and defined by credibility and trust – at least that’s the way it’s supposed to work.

For bloggers to risk or leverage their existing, and more importantly, potential credibility in exchange for blogola is either absurd or simply gratifying and motivating for now. Maybe the bigger picture has yet to come into focus for many bloggers and the act of recognition is enough. And, for brands to either take generations of brand integrity or shape its new and emerging identification on the backs of bloggers who’ll loan their stature and reputation is either brilliantly forward-looking or foolishly shortsighted. In the end, it’s the consumer who holds the power to decide their degree of affinity and affiliation or mutiny and backlash.

Integrity and Reputation vs. Buzz and Google Juice

The more I write about this subject, the clearer my focus. The impending FTC guidelines and whether or not bloggers and brands are at risk of legal punishment isn’t the issue. We just have to deal with it. We can choose as consumers whether or not we want to engage with this content.

The real discussion should center on why a company or blogger should even care to participate. The things we do for money are governed by personal boundaries. As individuals, we define those lines and how clearly we wish to view and abide by them.

If we examine Forrester’s case for sponsored conversations, we’re essentially fueling word of mouth by paying for authorities to share their views about our company or product brand in their domain. This is important. We’re talking about paying for people to write about a company or product on their existing, personally-branded content platform associated with it’s already existing, captive audience. This theoretically sparks Webwide buzz that connects a brand to the community of would be customers who rely upon these personalities and voices in the blogosphere to make informed decisions.

Seems simple enough, except two things are going to prevent this from effectively promoting the sponsoring brand over time – 1) disclosures read like warning signs; 2) There are reports that claim Google is downgrading the PageRank of select blogs or sites that actively publish paid content and violate Google’s Guidelines.

Google Software Engineer Matt Cutts recently weighed in on the subject again. He commented on Jeremiah Owyang’s blog post on sponsored conversations, “Clear disclosure of sponsorship is critical, and that includes disclosure for search engines. If link in a paid post would affect search engines, that link should not pass PageRank (e.g. by using the nofollow attribute). Google — and other search engines — do take action which can include demoting sites that sell links that pass PageRank, for example.”

In a followup post on Matt’s blog entitled, Paid posts should not affect search engines, he states, “My bottom-line recommendation is simple: paid posts should not pass PageRank. We do take the subject of paid posts seriously and take action on them.”

And, in an interview with Eric Enge, Cutts reminded us that this is about providing disclosure for readers and search engines alike, “Google has made its policies pretty clear on paid posts, about the fact that they should be disclosed not only for humans, but also for machines. Because, it is machine readable disclosure and you are not selling links to past PageRank.”

I bet many of you reading this now are responsible for the direction, visibility, and perception of a brand. So as brand managers, you are what the market says you are, tethered by the credibility and stature of the people who collectively voice their thoughts (paid and unpaid.) In the world of pay-per-posts or sponsored conversations, brand association starts to portray a picture of guilt by association, not necessarily the building of strategic brand presence or resonance.

This is a deeper discussion of reputation and trustworthiness versus funding word of mouth buzz and viral marketing. To simply state that “disclosure” alleviates and resolves all risks involved with sponsoring conversations trivializes the discussion.

Brand Ambassadors and Inspired Communities

Whether we like it or not, many new service providers are offering brokered services to facilitate “pay to play” campaigns in Social Media. Concurrently, many brands are also running these programs from within.

Clearly a balance scale exists where integrity and paid buzz are on opposite sides. So the real question is, how do you leverage the laws of perception management in your favor? One way to do so is through traditional, people and solutions-focused public relations.

Identify target bloggers and work genuinely with them on developing a meaningful story that helps and informs their community. This is a necessary program in of itself and it cannot be underestimated. However, if you must pay for sponsored conversations, then consider shifting away from the pay-per-post model of blogger-hosted advertorials and explore other options.

Obviously paid endorsements work when the platform for conveying paid messages is understood and accepted. Celebrities have effectively pushed products in commercials without tarnishing their brand for decades. Essentially, the difference is the forums and networks in which these paid messages appear.

While the value of having a dedicated paid post about your product directly in the influential domain of your target bloggers, look to the existing business of paid endorsements to build and manage a campaign that effectively reaches and compels potential customers without the negative attributes that cling to per-per-posts.

Essentially, hiring or recruiting influential Weblebrities and online experts is not unlike the model for linking real world celebrities to brands through commercials, events, appearances, or other dedicated vehicles to promote the alliance and the story. These campaigns, when concepted and executed properly, effectively link the product/company brand to the celebrity’s persona and prestige to convey a relationship that connects to consumers through aspirations, affinity and emotions.

So in the emerging and highly influential world of Social Media, it only makes sense to create dedicated campaigns and supporting online residences to showcase these strategic alliances and relationships. Essentially, we’re taking the “sponsored conversation” away from the host blogs and moving the potential for influence into a dedicated domain that naturally appeals to customers in ways that complement the behavior and compliance for viewing, interacting with, and potentially absorbing sponsored messages and endoresement. This levels and equalizes the campaign and the ensuing experience, while protecting, shaping, and promoting brands on both sides.

The idea is to create and host a two-way street that still inspires word of mouth and viral marketing, whether it’s funded by cash, rewards, or simply affiliation and recognition. And it just might also offer the best of both worlds, as the blogger or online personality will most likely share their experiences and involvement in their communities anyway.

For example:

Mozy hired iJustine as an official spokesperson airing content on as well as across multiple social networks including YouTube and iJustine branded properties.

Wal-Mart established Elevenmoms, an expert group of independent bloggers who receive free sample products to review and then freely choose which products to review based entirely on their personal opinion and experience.

Graco launched the Graco Nation Ambassador Program, a dedicated community of select Graco fans.

Based on the company’s successful foray into influencer relations with its Flex loaner program, Ford is currently initiating a consumer groundswell for its impending launch of the Ford Fiesta by enlisting every day consumers to share their experiences online and in social networks.

In the end, sponsored conversations will continue to receive funding, as brands remain tempted by low hanging fruit. That’s the reason why it’s called low hanging fruit after all. Anyone can pick it. So, establish a program that harnesses the reach and influence that is rife throughout the social web and incite a more calculated and valuable response.

The FTC is simply striving for truth in advertising. Perhaps in Social Media, there also needs to be a bit more value, dialogue, sincerity, and empowerment in the relationships we invest in and promote whether they’re subsidized with monetary compensation or recognition and affiliation.

The point is that when establishing a paid Social Media campaign, anything that is less than clear, honest, or actively contributing back to the bottom line of the business and/or brand resonance is actually taking away from it.

Marketing Resources for Brand Managers:
Society of New Communications and Research
Word of Mouth Marketing Association

Helpful Posts on PR 2.0:
Reviving the Traditional Press Release
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The Art and Science of Blogger Relations – Updated eBook
In Social Media, The SEC Protects Investors and Companies by Removing “Relations” from IR
Twitter Flutters into Mainstream Culture: The New Competition for Attention Starts with You
The Social OS, The Battle Between Facebook and Twitter is the New Mac vs. PC
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Can The Statusphere Save Journalism
The Conversation Index
Social Media Influences Buying Decisions
Is Social Media Recession Proof?
The End of the Innocence
The Social Effect and Disruption Theory
Putting the Public Back in Public Relations is Now Available
Twitter and Social Networks Usher in a New Era of Social CRM
The Human Network = The Social Economy
In the Statusphere, ADD Creates Opportunities for Collaboration and Education
Humanizing Social Networks, Revealing the People Powering Social Media
I Like You The Emerging Culture of Micro Acts of Appreciation
The Ties that Bind Us – Visualizing Relationships on Twitter and Social Networks
Make Tweet Love – Top Tips for Building Twitter Relationships
Are Blogs Losing Their Authority to the Statusphere
Twitter Tools for Communication and Community Professionals
Reinventing Crisis Communications for the Social Web

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