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A business primer on the new FTC transparency rules

Representing its most sweeping action in 30 years, the Federal Trade Commission’s new rules governing endorsements and testimonials will change how marketing is done.

Here’s what the Guides Concerning the Use of Endorsements and Testimonials in Advertising say:

ACCOUNTABLE FOR BLOGS AND SOCIAL MEDIA.

The FTC already directs online reviewers to disclose if they’re being paid by advertisers. Under the new rules, however, every blogger, Twitter user or social network member must disclose any “material connection” with a company, product or service.

Taken literally, this connection could result in fines for bloggers who fail to disclose anything from getting a sample can of chili in the mail to having a spouse who owns company stock. While consumer advocates support the guidelines, some prominent bloggers argue that the rules in effect force them to disclose every business relationship they’ve ever had.

Enforcement is another matter. The FTC says it will primarily go after the advertisers rather than individual bloggers, though it will take into account how companies encourage transparency in their paid reviews and freebies. Beyond that, the agency will decide matters on a case-by-case basis – which basically means they’ll know deceptive advertising when they see it. What makes things even more convoluted is that the agency doesn’t say by what means it will handle these situations.

Given that the new transparency standards for bloggers are higher than what’s required of commercial news media and politicians, the FTC rules are generating considerable debate among marketers and social media proponents alike. Stay tuned.

ACCOUNTABLE FOR TYPICAL RESULTS.

Ads that feature individual consumer experiences with a product will have to state clearly what kind of results everybody else can expect. Soon to be history are those ubiquitous ads that whisper “results not typical” while showing some guy who lost 300 pounds drinking vitamin shakes.

ACCOUNTABLE FOR EMPLOYEES.

Employees that promote their company or its products online must “clearly and conspicuously” disclose who they work for.

The FTC urges that companies have social media policies as one way to avoid fines or other actions when employees pretend to be someone else – say, a happy customer or invigorated shareholder.

Keep in mind, however, that a recent Deloitte study found that a third of all employees don’t even consider what their boss might think before posting something online.

ACCOUNTABLE FOR CELEBRITIES AND RESEARCH.

A warning to every company that uses movie stars, retired quarterbacks and 70’s sitcom actors for promotional tours. Under the new FTC guidelines, both advertisers and their celebrity spokespeople can be held liable for making false claims as part of a commercial endorsement.

The ramifications are huge. Celebrities making the rounds of late-night talk shows, state fairs and Twitter feeds must disclose their business relationship with any company or agency that’s paying them to pump movies, books, products or even charities.

Companies that quote research must also disclose if they paid for the studies, or if they have any business relationship with the organization that did the research.

These standards go way beyond front groups and hidden clients. From now on, any failure to disclose corporate affiliations could be considered deceptive advertising. That’s going to hit a lot of marketing PR campaigns.
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Download a PDF of the revised FTC rules here.

CEOs won't say Twitter and other contradictions about the hottest social media thing since the one before it

What a time.

Four years ago, a BusinessWeek cover story said blogs will change your business and influence the course of civilization just like the invention of the printing press did more than five hundred years ago.

Now a Time Magazine cover story announces that Twitter will change the way we live .

At this rate we should expect another planet-altering social media tool by Labor Day.

That is, unless you don't think a free online short-message service rastes with our generation’s revolutionary information technologies: voice mail, cell phones, the Web.

You’re the people who think Twitter is the Internet-era version of the CB radio fad. 

And you don’t believe that hot hype will take precedent over the cold realities of the marketplace.

In "Ten ways Twitter will change American business,"  Time’s writer predicts that the ability to send and selectively receive 140-character Tweets will give business, politicians, media, investors and other interests the ability to “engage” people like never before. For example:

“Twitter … will increasingly become a place where companies build brands, do research, send information to customers, conduct e-commerce, and create communities for their users. Some industries, like local retail, could be transformed by Twitter… having the opportunity to tell customers about attractive sales and new products can be done at remarkably low cost while providing for greater geographic accuracy.”

The problem with this vision is that it assumes consumers will do four things:

… One, that they'll stay fixed on reading and writing Tweets all day long, day after day.

… Two, that they’ll want to receive product announcements, promotions, surveys, celebrity restaurant orders, contests and other sponsored messages, at every turn of their day.

… Three, that they’ll overlook the intrusive advertising and spam that will increasingly pollute their legitimate news and conversation stream.

… And four, that they won’t mind how Twitter reserves all rights to sell any information it has on them so others can identify, locate or contact users.

Consumers don’t behave this way.  They won’t for Twitter.

Twitter’s problem is that the Internet has no walls.  There are no beachheads to dissipate the relentless waves of marketing and campaigning.  We hear anecdotes like how a suitcase company responded to a customer who Tweeted about his broken handle.  But take that scenario a few years from now – if that long – and that same customer will be inundated by followers, followees and interlopers Tweeting everything from luggage deals and discount travel to political fundraisers and pleas to help some secret princess transfer money. 

Nobody says Twitter doesn’t have huge potential for mass communication.  It does. The Iranian election aftermath shows how microblogging can facilitate real-time citizen-journalism.  But the same holds true for misinformation and propaganda.  The bad guys know how to use Twitter too. 

That's one reason corporate America isn’t exactly clamoring to get on board. And Twitter's goofy dot-commish name itself alienates the service from thousands of CEOs already averse to social media.

In fact, big brands see less value and more risk in associating with any Internet free-for-alls.

Consider YouTube. Time Magazine reports that despite drawing 99.7 million viewers watching 5.9 billion videos, YouTube's content is overall so bad that marketers have become reluctant to embed their messages within it. 

After paying $1.65 billion to own it, Google told investors that YouTube is "not material,” making the Web’s third-most popular destination also one of the ten biggest technology failures of the last decade.

It's a stretch to think Twitter will do better.  It doesn’t even own the micro-blogging concept, and several competitors already offer more features and open-sourcing.  RSS inventor Dave Winer, who PC World calls the father of modern-day content distribution, went so far as to predict that Twitter is the next Netscape.

As for the 29 million users, new research also suggests that Twittermania may have already peaked:

• 90 percent of all Tweets come from only 10 percent of all Twitter users. (Harvard University study of randomly selected sample of 300,000 Twitter users)
  
  
• Though 99 percent of Generation Y -- age 18 to 24 -- use social media, only 22 percent of them use Twitter.  (Pace University study for Participatory Marketing Network)
  
  
• 55 percent of Twitter account holders have never posted a Tweet and 56 percent aren’t following anyone.  53 percent have no followers. (HubSpot analysis of 4.5 million Twitter accounts over nine-month period)
  
  
• 60 percent of Twitter users quit after the first month.  (Tracking from Nielsen Online)
  
  
• Twitter’s growth came to a screeching stop in May, growing by only 1.5 percent.  (Tracking by Mashable)

Then there’s the Oprah factor.

Well over a million people signed up for Twitter in the first 72 hours after Oprah featured the service on her show.  But as Silicon Valley Insider reported, Oprah is already bored with it.  Despite having 1.56 million followers, Oprah herself follows only 14 people and Tweeted just four times in June. 

So what are we to make of all this?  I agree with InternetNews columnist Mike Elgan, who thinks Twitter is simply leveling out to what it really is minus the hype. 

“It’s no longer a new frontier, an elite club or a culture-transforming medium,” he writes. “It's just a service for sending messages.”

And you can get mine at Twitter.com/StevenSilvers.  Or at least until I move on to the next big thing.
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Also read:  No, social media doesn't actually sell anything. And no, you can't afford to ignore it.

Why InDenverTimes failed

Investors have pulled out of InDenverTimes, the online news site started by former reporters and staffers of the defunct Rocky Mountain News.

I would have yanked out my money also. 

One, there are too many people hanging around hoping to get paychecks.   Start-ups have skeleton staffs, not departments. 

Second -- and most of all -- InDenverTimes is simply a bad product.  Today's home page is dominated by a story about how the Rocky Mountain News would have been 150 years old today, and how InDenverTimes is made up of people who used to work for the Rocky Mountain News, and how it wants to pick up on the rich history of the Rocky Mountain News.  

Most of the rest of the home page consists of appeals for subscribers, promising that they'll get better content and the chance to talk to editors and reporters.

There are many accomplished journalists at InDenverTimes.   But good intentions and a dead newspaper are not a business model. 
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• Westword  | Only 3,000 subscribers signed up for InDenverTimes
• Scatterbox  |  Rocky road for online news site
  

America's pundit problem

In the aftermath of Wall Street's collapse, experts are pointing to the negative impact of experts.

An Emery University study, for example, asked students to consider making several personal finance decisions.  When those students were given advice from a recognized expert, the decision-making and calculating parts of their brains simply simply shut down.

What makes this really scary is how experts are so often wrong.

New York Times columnist Nicholas D. Kristof recalls how professor Philip Tetlok spent 20 years tracking 82,000 predictions from 284 experts.  Tetlok found that the pundits were only slightly more correct than random guesses.  It didn't matter if they were doctors, politicians, economists or financial advisers.

"Indeed, the only consistent predictor was fame - and it was an inverse relationship," Kristof writes.   "The more famous experts did worse than unknown ones.  That had to do with a fault in the media.  Talent bookers for television shows and reporters tended to call up experts who provided strong, coherent points of view, who saw things in blacks and whites.  People who shouted - like, yes, Jim Cramer!"

Will past mistakes mean fewer experts?  Hardly.

Pundits are to mass media what baseballs are to the major league.  They're cheaper than staff researchers or reporters.  They compete for exposure by being available and quotable.

Most importantly, subject-matter authorities are rarely held accountable by the industry that relies on them for content.  Sometimes they're even celebrated for being so wrong.  A few years ago, the Rocky Mountain News profiled a "controversial" aviation consultant who had become an international media darling by giving "colorful" sound bites insisting that Denver International Airport would go bankrupt.  DIA hasn't lost money since it opened in 1995.

The public brain-freeze over pundits is what makes John Stewart's skewering of Mad Money's Jim Cramer so telling.  Mainstream media is full of experts laying blame for the financial crisis.  But it took a comedy show host to publicly chastise one of Wall Street's biggest media celebrities for his part in it.

Indeed, there are partisan watchdogs like the conservative Business & Media Institute and the liberal Media Matters, which recently launched a new website targeting financial news and opinion.  But these groups are politically biased in their criticisms and don't reach nearly an audience like The Daily Show with John Stewart.

But they're among the closest things we have to Consumer Reports Guide to Pundits.  And right now we need all the critical reviews we can get.

At least, that's my expert opinion.
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Photo courtesy Associated Press

An official blog management process

If you're wondering what to include in your organization's social media strategy, take a look at the pragmatic evaluation-and-response approach outlined in this U.S. Air Force Blog Assessment Chart:

Click here for a PDF version of this chart.

Repeating an ugly negative to save the brand

A crisis in your industry can become a PR problem for your company too.

This is particularly true in food-borne illness situations.  Media coverage of government warnings and companies pulling products of grocery shelves all add to the public's fears about what they eat.  Every product in a category becomes suspect, if not guilty by association.

When the FDA recalled deadly spinach from one area of California, consumers stopped using the vegetable almost completely.  That followed with a virtual boycott in 2008's tomatoes scare, though the government never proved a link.  The investigation later fingered cilantro and peppers.

The salmonella outbreak and food recall caused by Peanut Corporation of America has generated similar panic.  Though the company's production is only a small percentage of an $800 million industry, national sales of peanut butter have dropped 25 percent.

In response, big brands like Jif and Peter Pan are taking the typically unthinkable position of repeating a very nasty negative.  They're using newspaper ads, media publicity, coupons, web sites -- anything to convince consumers that they're the good guys.

Search "peanut butter" and you might see this astonishing banner ad:

Forget wholesomeness and great taste.  Today's marketing message is that our product won't turn your insides into a festering cesspool.

With 1,000 tainted peanut products already identified, this crisis could set a recall record for human foods.

And for some companies, that makes the ugly hard sell necessary to keep their innocent brands from being seriously maimed.
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Best of Scatterbox - 2009 Edition

Based on comments, links and other highly unscientific measurements, here are the top ten Scatterbox posts from the last year:

Five things you didn't realize you learned from Obama's victory

Good intentions aren't good crisis management

Best worst excuse to avoid jury duty: Your studly hotness

Big brand doody from the toilet paper wars

What's missing from your communications plan

The low risk, high rise of phony grassroots groups

Hate mail and other comments from our readers

Blah Blah Nation: PR people promote the value of blogging by boring readers to death

John Edwards scandal shows conflicting truths about mainstream media

How the PR business is changed forever (And why you might not be in it)

... Have an idea or link to suggest? Send to scatterbox(@)stevensilvers.com.

Ten big-picture predictions for 2009

Welcome back from the holidays. Here are 10 predictions that might influence what you'll be communicating about in 2009. Or not:

1.  A dean of Russia's foreign ministry academy predicts that the United States will explode in civil war in 2010, leading to the nation's collapse and disintegration. (Colorado will be part of a new Canadian-controlled republic. But we're not playing Kanuck football. That's where we draw the line.)

2.  James Carville says the Republican Party will be confronted with a "near catastrophic ideological rift."

3.  "America's #1 Psychic" Sylvia Brown predicts that trained psychologists will start offering hypnotic past-life regression, which will be common practice by 2011. (She doesn't predict what the insurance co-pay will be, however.)

4.  Business Week thinks Chrysler will merge into General Motors. They also think Americans will start buying a lot of boxed wine.

5.  Wired.com's senior editor says we'll see hundreds of new on-line magazine start-ups as entrepreneurs take advantage of low competitive barriers and journalists willing to work cheap.

6.  Technology industry guru Mark Anderson predicts China will be rocked by huge and deadly riots, causing its GDP to plummet as the West recognizes the country as a "polluted place, rife with economic turmoil and starving people."

7.  Personal finance columnist Jeffery Strain says the credit crisis will cause many beloved small, locally owned businesses to disappear forever. (This will also include many small advertising and PR businesses.)

8.  Industry analyst Yankee Group is confident that free microblogging service Twitter is the new Facebook. (Except for the minor fact that it generates zero revenue and limits messages to 140 characters. Hype on, Internet phenom.).

9.  WSJ columnist Evan Newmark predicts Wall Street will cut jobs, people and bonuses by another 25 percent -- forcing many Masters of the Universe to seek their fortunes in consulting. Or government jobs.

10.  A former Mafia boss says top-level tennis matches will be a prime target for gambling corruption.

Send any other predictions worth noting to scatterbox(@)stevensilvers.com.

Go get 'um, my friends.
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A really, really short media honeymoon for President-elect Obama

With the Dow Jones industrials dropping an astonishing ten percent in a single day, Associated Press did not hesitate to call it like Wall Street sees it:

"The high degree of market volatility that characterized the financial meltdown in September and October has returned, and the economic picture as grown bleaker, with both the holiday shopping season and the new administration of President-elect Barack Obama approaching."

Hopefully the chattering class of talk radio hosts and political pundits will not lose their focus on the challenges ahead by arguing over whether or not the press should have made statements like this before the election.

We can hope.
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Hype & Hoopla

Kudos to Bob the Journalist  |  Bob Schieffer's job in running the third presidential debate won back much of the credibility that CBS lost during the Dan Rather meltdown. Mr. Rather is suing his former employer for $70 million while complaining that presidential debates have become worthless.

Material flackery  |  Should investors get excited because your company just hired a PR agency? Some companies think so.

Prospering during economic downturns  |  When the going gets tough, the tough get more publicity.

Worth bookmarking  |  PR industry pundit Paul Holmes has returned to blogging at The Holmes Report.

Gotta serve somebody  |  A district judge threw out a Nebraska legislator's lawsuit against God, writing in his ruling that "Given that this court finds that there can never be service effectuated on the named defendant, this action will be dismissed with prejudice."

(Photo: Bob the Journalist, courtesy CBS)

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