Indium Corporation Blog Reader Survey Results
Social Media Explained

Where’s the Fire? Commercial Alert Sees Smoke Where None Exists

The Federal Trade Commission made a formal announcement that companies participating in word of mouth marketing activities must ask any participants to reveal any compensation they receive. Annys Shin of the Washington Post writes about the announcement in “FTC Moves to Unmask Word-of-Mouth Marketing”.

Nothing new here as this is required under the existing act, see my discussion about the requirements under the act in a previous post, "Blogger Endorses Product Without Revealing Payment", and "The Boston Globe Was Correct."

Except that the FTC received a letter from a consumer watchdog group, Commercial Alert, last year asking for action on the issue of word of mouth marketing. I thought the petition was a good document overall except in one or two areas. I wrote about the Commercial Alert letter to the FTC in the post, "Endorsement Without Disclosure: Commercial Alert FTC Letter Points To P & G and Buzz Marketing," and "Perception is everything in advertising and apparently word of mouth," and "More Perspectives On The Commercial Alert Letter."

Commercial alert had named a few names and criticized Procter and Gamble's Tremor program in their letter. Tremor’s program has thousands of volunteers who recommend products without compensation. I had thought that Commercial Alert's assessment of Tremor’s practices were wrong last year and described that in my previous post.

I’d said:

Perception is everything in advertising and apparently word of mouth.

However, maybe this perspective will change your opinion:

I was thinking the P & G example is a little bit like going to a supermarket where someone asks you to test a product, say a dip or a new type of microwave sandwich. If I ate the product, liked it, bought it and went home and told all my friends. Commercial alert is suggesting the company would ask me to inform everyone I spoke with about the new product that I received a free product at the supermarket. Somehow I don't think that type of product testing and promotion is against the FTC rules.

I had also written to Gary and asked him if he had queried P&G about their program. He told me he had not. And then I had contacted P&G, and Tami Jones from P&G had told me,

“P&G does not compensate any participants, there are no cash payments, some programs for our clients do involve free samples, but that is because people have to see the product to get an opinion about a product."

I asked Tami if P&G provides any training to participants on how to advocate a product. Tami said,

“We don’t provide any training, actually we don’t encourage, or discourage participants to talk about the products. We don’t require participants in the Tremor program to promote or endorse the product. We see the Tremor program as a teen word of mouth advocacy program; participants are informed and not compensated for taking part."

Yesterday, the FTC’s statement was an attempt to clarify the interpretation of the act in connection with word of mouth practices on the web. Here's the quote from Annys Shin of the Washington Post:

"Word-of-mouth advertising is already covered under existing FTC regulations that govern commercial endorsements. 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 petition to us did raise a question about compliance with the FTC act," said Mary K. Engle, FTC associate director for advertising practices. "We wanted to make clear . . . if you're being paid, you should disclose that.""

In the same article, Gary Ruskin, Commercial Alert's executive Director went after P&G again. He apparently told the Washington Post,

"This letter tells marketers like Procter & Gamble that their 'sponsored consumers' must disclose that they are shilling, or they are probably in violation of the prohibition against deceptive advertising. That's big," he said. "It will change practices in the word-of-mouth marketing industry."

As I said last year, Commercial Alert was just plain wrong on their assessment of P&G’s Temor program. I suspect Gary is again attempting to fan the flames of publicity by suggesting they are breaking the law, when P&G is not, the company does not compensate its volunteers. Though they do occasionally give free products away.

I wrote about BzzAgent releasing a white pager on transparency last year. After conducting a study the company came to the conclusion that disclosure helps word or mouth marketing efforts. BzzAgent makes sure all of its members inform any people who received a recommendation from someone in BzzAgent's program that they are involved in a WOM program. The word of mouth marketing association also has guidelines that follow the law for its members.