FTC Gags Stealth Marketing

    December 13, 2006
    WebProNews Staff

If a company wants to try out word-of-mouth marketing, they need to understand that building buzz without disclosing who’s paying for that marketing could cause them a Federal-sized headache.

The Word-Of-Mouth Marketing Association says there is a difference between buzz and stealth marketing. While buzz marketing ultimately can be identified by a consumer, stealth marketing cannot.

That’s why WOMMA has concurred with a Federal Trade Commission opinion that stealth marketers must disclose their relationships with the business supporting the promotion.

The Washington Post noted how the FTC response to an October 2005 report reiterated that marketing relationships need to be transparent.

FTC declined to fully endorse a petition from a watchdog group in Oregon called Commercial Alert, which would have required FTC to take action against word-of-mouth marketers and compose guidelines for that type of marketing.

A number of opinions about the FTC opinion have circulated through the blogosphere today as others offer their thoughts on the topic. Publishing 2.0 blogger Scott Karp opined about its impact:

Markets may be “conversations,” but if you can’t tell who’s carrying on the conversation, that’s now a finable offense. This is also a bucket of cold water on the use of social networks like MySpace and Facebook to engineer “viral” product recommendations and other such word-of-mouth marketing schemes.

Another blogger, Tony Hung writing at Deep Jive Interests, perceived an impact on an entrenched form of online marketing – the affiliate:

One of the biggest examples of affiliate marketing is the Amazon Associates program; like many other affiliate programs, the Amazon pays its affiliates when they refer people to their site, and those people purchase its products. The controversy comes in, as I see it, when enterprising individuals create websites or blogs full of content to rank on a search engine, and then embed them with affiliate links that are not identified as affiliate links.

Stealth marketing or clever adaptation to the realities of the online world? Maybe that depends on whether or not the individual traversing the link derives a benefit at the destination, in this case Amazon.

Perception probably plays a greater role in this than one might realize. Lists as a story concept provides a good example. On popular sharing sites like Digg or Delicious, lists frequently gain a lot of notice from users of those sites.

People may be more or less organized than other folks, but all but the most chaotic crave a little bit of order. That’s my rationale for the appeal of the list. A recent story about a blogger deconstructing a site that submitted a list of weight loss tips to several sharing sites received near-universal acclaim for revealing the site to be host to a variety of affiliate links.

There just seemed to be one problem with the much-lauded accusations. The list of tips provided, while nothing earth-shattering, wasn’t useless either. Despite the list’s presence on a site focused on dental issues, it got a lot of attention and probably earned a few affiliate click-throughs.

Was it stealth marketing? By virtue of non-obvious disclosure of the affiliate relationships, possibly. Was the list junk? Judging by its content, no.

If the FTC makes an example of such affiliate-driven sites by attempting to fine them, a lot of other questions will be raised. Is this a stifling of free speech? If the customer derives a benefit from an affiliation and is not defrauded, has an offense taken place?

Somewhere at some point this will be tested by the FTC, and rebutted by someone’s lawyers. Being forthright and transparent with promotional plans will be a better course of action, though.

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David Utter is a staff writer for WebProNews covering technology and business.