FTC Taking Closer Look at Social Media Incentives
Legal issues may not be one of the most exciting topics covered by social media consulting firms but they are among the most important which is why we routinely report on items often ignored by others. Today’s topic falls squarely within that category. Chances are, you won’t encounter this story anywhere else but don’t let that fool you…should this become the new law of the land, it will have profound implications on social media marketing, client testimonials and the future of ad advertising in this nation. A big claim but is it warranted? Keep reading and decide for yourself…we think you will agree, the issue of social media incentives is far from clear but important enough to warrant close scrutiny and advance planning for any business.
The FTC or Federal Trade Commission is responsible for many facets of consumer protection policy throughout the nation. From “Truth in Lending” standards to specific guidelines on what can (and cannot) be said in certain advertising campaigns, the FTC is designed to protect the public from unscrupulous business practices, fraudulent advertising and dangerous schemes designed to part an unsuspecting consumer from their hard earned money. It’s an important component of commerce and the cornerstone of modern advertising. In short, the FTC helps keep advertisers honest…or tries to.
Over the years, the FTC has been forced to change and update pertinent rules and regulations in order to conform to the rapid pace of technology. From magazines to radio, television to the Internet, advertising and marketing tend to make use of every available form of technology available. But what happens when the rapid pace of change outstrips the ability of a single agency to keep up? That is often the case with the FTC and in this instance, the newly evolved technology concerns the rapid rise of social media marketing.
According to the FTC, there may be a problem with all that word of mouth marketing taking place across social media sites. What type of problem? Well, in a nutshell, the question of incentives. To provide an example let’s step back in time during the golden era of television. America was in love with television and using the old adage “seeing is believing”, had a tendency to wholeheartedly adopt everything told or sold on television. Add in a celebrity or two and sales would go through the roof as unsuspecting consumers failed to question the motives of their favorite television celebrity in promoting a product or service. To counter this trend, the FTC required paid speakers to provide a disclaimer in order to notify the public of an advertisement versus pure testimonial.
Today a similar situation is taking place on social media; while the vast majority of client testimonials, friends and fans are unsolicited, there are a few sponsored messages embedded along the way. Strict laws require a disclaimer or other clearly delineated indication when such a relationship transpires. However, that isn’t the focus of the current debate taking place at the FTC…far from it. In fact, the current debate is not only more complex but also potentially more important for business entities of every size.
The heart of the current issue isn’t whether or not a small business owner failed to disclose a business relationship or other affiliation but what constitutes an incentive. For example, if a company pays a client to write a testimonial and post it on their wall, that is a clear violation of FTC standards and subject to fines or penalties. Likewise, if a company provides a free copy of a product in exchange for a review it is somewhat less clear but typically still subject to the same provisions since the complimentary copy of the book or free product could be construed as an incentive for a review. But what about the motivation behind a consumers decision to “like” a company on Facebook or follow via Twitter? Research has repeatedly demonstrated an interest in receiving discounts or other promotional incentives. Does this constitute a regulatory requirement to disclose a business relationship or not? It depends on who you ask.
Consumer Protection versus Promotion
According to the FTC, advertising endorsements that include compensation or other incentives must be disclosed with suggestions ranging from the use of “#paid” hashtags on pertinent Tweets to a standardized disclaimer page on Facebook. The National Consumers League has also come out in strong support of consumer protection initiatives stating that consumers must be protected from “false and deceptive advertising”.
Not surprisingly, social media marketing firms and big advertisers alike are keeping a very close eye on the debate especially since a dollar amount doesn’t seem to matter. For instance, in recent weeks, several promotional campaigns have come under scrutiny including…
- $2 instant music credit for clients that filled in a quick question about their favorite song and shared the link with Facebook friends.
- Free make-up and beauty bag from Target for each new “like”. To date, Target has given out more than 1 million beauty bags!
- $100 drawing for a discount from Mattress Discounters for posting photo’s of their beds complete with comments.
Clearly the opportunity to save $100 may be a clear incentive but does a $2 promotion really constitute a violation of the intended guidelines? The jury is still out but expect to hear more in the not so distant future as guidelines are updated in response to consumer protection concerns and the need for greater specificity in the use of social media marketing promotions and incentives.