A friend or a sales person?

A person you trust writes about a cool new product and recommend that you too try it. You are thrilled and thank your friend for the tip. Later on, you come to know that your friend is an affiliate and receives payments for the product referrals. Now, will that change your opinion?
After all it was recommended by your friend and you trust her. But now you are no longer sure because of the relationship your friend has with the company.

Welcome to the world of social media marketing & affiliate marketing.

Since the dawn of blogging and social media, we have increasingly come across advertisements cleverly masked as opinions of someone we trust. Its not hard to relate. Facebook does it all the time – I am tired of seeing numerous updates of my friends playing Farmville or Mob Wars. I am fine with them playing it on their time, but the irritating part is when you start getting lonely sheeps and cherry trees as “gifts”. The sheep may look cute and the tree may look green but they are anything but “gifts”. Its my friends on overdrive trying to buy their way into the next level in the game. I have lost few friends because I refused to accept their gifts.

You visit an electronics review website to check on a new camera and see expert reviews shepherding you towards some brands. While the reviews may be fair and balanced, will you trust them if you know that they get paid for their referrals?

This kind of sales pitch cloaked in opinions of experts or friends is not new. Amway was so notorious for this that I used to run away whenever a stranger said hello – lest they start making me as another step in their zealous multi-level marketing ladder.

While this may not have immediate security implications, it is only a matter of time before things go out of hand. Social media is a great medium that can improves the quality of online experience. As we connect online with our friends, colleagues, and customers, we are building relationships, reputation and relevancy. However, this kind of ads-as-opinions blurs the lines and weakens the trust and reputation. With no one regulating the deceptive claims, unsuspecting users will become target for scams and frauds.

In light of this, the new FTC guideline regarding endorsements and testimonials that went into effect on 1st Dec is a welcoming move to make social media a safe place. This guideline clearly makes the advertisers and the endorsers responsible for disclosure about their relationship.

Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers. Endorsers also may be liable for statements made in the course of their endorsements.

(source: http://ftc.gov/os/2009/10/091005revisedendorsementguides.pdf)

Now, what is an endorsement? The guideline provides many clear examples. To cite one such:
(i) A consumer who regularly purchases a particular brand of dog food decides one day to purchase a new, more expensive brand made by the same manufacturer. She writes in her personal blog that the change in diet has made her dog’s fur noticeably softer and shinier, and that in her opinion, the new food definitely is worth the extra money. This posting would not be deemed an endorsement under the Guides.

(ii) Assume that rather than purchase the dog food with her own money, the consumer gets it for free because the store routinely tracks her purchases and its computer has generated a coupon for a free trial bag of this new brand. Again, her posting would not be deemed an endorsement under the Guides.

(iii) Assume now that the consumer joins a network marketing program under which she periodically receives various products about which she can write reviews if she wants to do so. If she receives a free bag of the new dog food through this program, her positive review would be considered an endorsement under the Guides.

Clearly, the scenario (iii) is a paid endorsement and should be disclosed while the other two scenarios are uninfluenced customer opinions
This guideline clearly is an attempt to help users to make informed decision. We need to see if the enforcement will be effective but it is in the long term of companies to voluntarily follow this.

As an advertiser, what does this mean to you?

• If you haven’t already done so, clearly define what your affiliates can claim and not claim. 
• Setup a compliance process to ensure that your endorsers/affiliates comply with the guidelines. Ensure that claims made about your product are approved by you. Make it a part of your agreement with them.
• Monitor claims made online by affiliates/endorsers. You cannot control unsolicited customer opinions but your responsibility is to ensure that paid testimonials and endorsements follow your policy.

As an affiliate, blogger or endorser, what does this mean to you?

• If you are endorsing a product, check with the company about what you can claim and not claim
• Ensure that your opinions/endorsements clearly discloses the relationship

Even though this move will create overhead for companies and bloggers, the long-term benefits are clear. It builds safety and trust for your customers/readers.