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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.

No, social media doesn't actually sell anything. And no, you can't afford to ignore it.

For all we know, social media services like Facebook and Twitter could change the course of marketing history just like the telephone, the Web and the commemorative plastic drink cup.

For now, however, social media isn't actually selling anything but itself.

A study from research firm Knowledge Networks shows that while 85 percent of people online use social media, less than five percent visit those networks for help making purchase decisions.

Word-of-mouth is still the greatest influence on what people decide to buy. That's followed by TV, a medium of influence that keeps hanging around despite its alleged obsolescence.

"Obviously, a lot of people are using social media, but they are not explicitly turning to it for marketing purposes, or for finding out what products to buy. It's really about connecting with friends, or connecting with other people," Knowledge Networks executive Dave Tice told Marketing VOX. "The influence of social media isn't at the bottom of the list, but it is somewhere in the long tail of marketing - about the same as print ads, or online [display] ads."

Lack of tangible results, however, aren't keeping companies from getting into social media as fast as mass media can hype it.

In a story headlined "Jumping on the Twitter bandwagon," USA Today reports that major banks like Wells Fargo and Bank of America are "establishing presences on social-networking sites to tap into a growing demographic and to control the conversation about their brands. Yet the economic turmoil, some say, makes it even more important to reach out to customers any way they can."

It's overstatement to suggest that collecting Facebook friends and Tweeting free 140-character online messages will give a company the power to control what consumers want to say about them. That's the hype part.

But as one banking company's spokeswoman told USA Today, "Social media is a whole new world, and you cannot afford to not be a part of it."

That's the truth part.
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Also read:  CEOs won't say Twitter and other contraditions about the hottest social media thing since the one before it.

Rhetoric strains forced bond between government and corporate community

The nation's media reports that the corporate world is peeved about what it considers President Obama's devisive anti-corporate rhetoric. As U.S. News and World Report observes, "Another week, another assault on business-as-usual by President Obama. Or is it, as some critics are starting to wonder, an assault on business, as usual?"

Reports Associated Press:

"Relations between President Barack Obama and U.S. corporate leaders have grown tense in recent weeks, with business groups bristling over his sharp rebukes of lenders and multinational companies in particular.

Executives and trade groups that praised Obama's outreach during his post-election transition period say they have felt less welcome since he took office in January. More troubling, they say, are his populist-tinged, sometimes acid critiques of certain sectors, including large companies that keep some profits overseas to reduce their U.S. tax burden."

A U.S. Chamber spokesman called the President's talking points "an oversimplification of the real world." Another trade lobbyist called it the same old cynical, political class warfare.

The White House is throwing out its own doublespeak, explaining that the business community is just freaked out by how shockingly supportive the President really is. Said Commerce Secretary Gary Locke in the U.S. News report:

"President Obama has a very good relationship with the business community. He's working extra hard on creating more jobs and stabilizing the financial crisis.... In many ways, he's perhaps surprised the business community with just how moderate he has been and how much he is willing to work with them."

The posturing between Obama and corporate America has always been convoluted. As a candidate, Obama ran anti-corporate campaign ads criticizing CEO compensation. Yet he still raised enormous sums of money from corporate backers including Goldman Sachs, JP Morgan, Citigroup, Lehman Brothers, National Amusements and Google.

A few months before the election, a Chief Executive poll found that more than 70 percent of all CEOs thought an Obama presidency would be a "disaster."  Yet Business Week reported that corporate leaders gave President Obama "relatively good grades" after his first 100 days. People were still wary on the details, but as the Business Roundtable's president told the magazine: "We're happy with the general outlines of what he's done; things are starting to take hold."

Today's ambivalence between government and business represents tensions that exist within a shotgun marrage unlike anything in history. Taxpayers are now direct stakeholders in the financial and auto industries, and are rapidly becoming the safety net by which the nation's housing, healthcare, energy and even news media industries will be supported while they are transformed. That makes the President of the United States both Commander in Chief and CEO.

We're at the point now, writes Wall Street Journal columnist Gerland Seib, that "it seems almost anachronistic to talk about a divide between government and business."

Perhaps the publicized angst about Obama being anti-business means the honeymoon that never really was is over.  What certain is that corporate PR is going to be more complicated than when all the talk about public-private partnership was mostly just talk.
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Send comments and links to scatterbox@stevensilvers.com

Get on President Obama's email update list

Drop a note to WhiteHouse.Gov and you'll be added to President Obama's email blast list.

The White House is using official letter-looking emails -- like this one about health care reform -- "as a way to directly communicate about important issues and opportunities." 

The email letters include links to other White House web sites designed to educate and build support for various administration initiatives.

You can get on the official Obama email updates list by clicking here.
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KFC free chicken promotion runs around like a PR stunt with its head cut off

It will go down as one of the least thought-out marketing publicity stunts since Sony used a decapitated goat to promote a video game.

The idea seemed simple enough.  Strike a deal to have Oprah to "give away" two pieces of KFC's new grilled chicken to everybody in America.   Tell people to download an Internet coupon and show up at a store.  Publicize madly.   Post a Tweet from Oprah reading, "You're Getting a Chicken! You're Getting a Chicken!" 

But like many good intentions gone bad, this campaign didn't plan for the most obvious potential PR problems:

Contingency:  Not enough Internet.   The servers crashed from so many people trying to get coupons at the same time.  Maybe we understand how the Colorado Rockies weren't ready to sell World Series tickets, but how can one America's largest consumer companies not have the plumbing worked out?

Contingency:  Unprepared stores.   Consumers didn't read the fine print and assumed every KFC was a participating store.  Many stores were overwhelmed. Some locked the doors.  Other taped hand-written "no Internet coupons!" signs to the door.  Police were called.  Managers freaked out, politicians called for action.

Contingency:  Consumers gone wild.   People who didn't get their free chicken behaved like they were being denied the right to vote.  In New York, angry citizens staged a sit-in while the world's news media looked on.  The Internet exploded with smarmy bloggers, angry customers, finger-wagging criticisms and conspiracy theories.  Talk shows had a field day.

Contingency:  Caught in a lie.   Animal rights activists loathe KFC.  But just last year, PETA gave Oprah its "Person of the Year Award" for helping to expose factory farm abuses, including a show titled "How we treat the animals we eat."   A Huffington Post column called it Oprah's "most hypocritical move yet."

Both KFC's and Oprah's PR machines are in full swing.  They'll survive.

But companies with fewer resources for damage control should be paying close attention.
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Why you can't spin global warming to be a better consumer product

The New York Times got hold a draft report by a nonprofit "environmental marketing firm" that recommends using better spin to win people over on this whole global warming thing.  The Times reports:

Instead of grim warnings about global warming, the firm advises, talk about "our deteriorating atmosphere."  Drop discussions of carbon dioxide and bring up "moving away from the dirty fuels of the past."  Don't confuse people with cap and trade; use terms like "cap and cash back" or "pollution reduction refund."...

In fact, the group's surveys and focus groups found, it is time to drop the term "the environment" and talk about "the air we breathe, the water our children drink."

I can hear every good PR expert in the world groaning at this. 

Put aside the fact that this calculated euphemism insults Americans who know what "environment" means.  You're still left with several risks.

One: You're taking a bus to get to the same point.  Instead of referring to global warming, you're saying that, no, the real problem is our deteriorating atmosphere, which is the result of greenhouse gas emissions that in turn cause global warming.  Flack rhetoric makes things less clear, not more.

Two:  You're hurting your cause.  Global warming is a literal concept, proven by literal events and research.  "Our deteriorating atmosphere" is bad packaging, like something out of Hollywood's current preoccupation with end-of-the-world movies.  They're great special effects, but everybody knows they're pretend.

Three: You act like your spin exists in a vacuum.  Huge mistake.  If your research shows that people are uncomfortable with the word environment, then your opposition will find ways to say environmentalists twenty times a minute.  Thirty times a minute if they're Rush Limbaugh.

Four:  If you give up "environment," you'll need even more doublespeak to label what you do. 

What... You're going to start referring to people as Our Deteriorating Atmosphere Solutions Providers?
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The U.S. government buys a marketing publicity stunt

A St. Louis presentation coach who gets hired by lawyers ginned up some ridiculously good publicity for himself by proclaiming April 14 as National Be Kind to Lawyers Day.

Yes, announcing a Something-Something Day is the oldest trick in the book.  But even nonsense has a way of being repeated until somebody takes it seriously.

Sometimes we citizens even pay for it.

Case in point:  The U.S. Census Bureau made Mr. Hughes' National Be Kind to Lawyers Day the subject of its April 13 "Profile America" series, a daily 60-second radio feature that promotes "key events, observances or commemorations." 

Seriously.  Listen to the taxpayer-paid radio spot here.

And now that it's on the official calendar, don't be surprised to see more babble about this made-up commemoration next year.
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News from the Front

Death-defying popularity.
The deceased mayor of a Missouri town won his fourth reelection with 90 percent of the vote.

Eat out tonight? Forkin' A, man.
The Colorado Restaurant Association hopes to stimulate dining out with its "Fork the Recession" advertising campaign.

A good time will be had by all.
North Korea's official news service announced that "Pyongyang, the venue of the 26th April Spring Friendship Art Festival, is seething in a festival mood now."

There wasn't much going on today, anyway.
The Los Angles Times placed a pretend news story on its front page to promote a new NBC police drama

Except they don't use the word solutions in every other sentence.
A New York Times editor in Washington says many of his anonymous sources are like "human press releases."
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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