December 20, 2006

FTC Registers Concerns with Deceptive Peer-To-Peer Communications

Link: FTC Moves to Unmask Word-of-Mouth Marketing - washingtonpost.com.

The Federal Trade Commission yesterday said that companies engaging in word-of-mouth marketing, in which people are compensated to promote products to their peers, must disclose those relationships.

In a staff opinion issued yesterday, the consumer protection agency weighed in for the first time on the practice. Though no accurate figures exist on how much money advertisers spend on such marketing, it is quickly becoming a preferred method for reaching consumers who are skeptical of other forms of advertising.

Word-of-mouth marketing can take any form of peer-to-peer communication, such as a post on a Web blog, a MySpace.com page for a movie character, or the comments of a stranger on a bus.

As the practice has taken hold over the past several years, however, some advocacy groups have questioned whether marketers are using such tactics to dupe consumers into believing they are getting unbiased information.

In October 2005, Commercial Alert, an advertising and marketing watchdog group in Portland, Ore., petitioned the FTC to consider taking action against word-of-mouth marketers. The group called for the FTC to issue guidelines requiring paid agents to disclose their relationship to the company whose product they are promoting, including any compensation.

The group cited a 2002 Wall Street Journal article on a marketing campaign by Sony Ericsson Mobile for its T68i mobile phone and digital camera. The initiative, called "Fake Tourist," involved placing 60 actors posing as tourists at attractions in New York and Seattle to demonstrate the camera phone. The actors asked passersby to take their photo, which demonstrated the camera phone's capabilities, but the actors did not identify themselves as representatives for Sony Ericsson.

Commercial Alert also singled out Tremor, a marketing division of Procter & Gamble, which has assembled a volunteer force of 250,000 teenagers to promote the company's products to friends and relatives.

Kudos to Commercial Alert, and its executive director Gary Ruskin, for initiating this FTC inquiry.

Posted by Anupam Chander on December 20, 2006 at 12:33 AM in Digitization | Permalink