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Killing the Viral Marketing Buzz

For the first time, the Federal Trade Commission has tackled the issue of word-of-mouth marketing. On Monday, the agency pulled off the feat of giving critics and marketers something to be happy about by choosing not to regulate the practice more strictly while making it clear that companies that engage in the practice must be up front about what they're doing.

What is word-of-mouth marketing, you ask?

Well, you probably know it better as "buzz," "stealth," "viral" or "guerilla" marketing, which are promotional techniques that can take all sorts of forms from a Ricky Bobby MySpace page to teenagers hyping a new CD to 20 of their closest friends at the behest of a record label.

Commercial Alert, a marketing watchdog group in Portland, Ore., asked the FTC last year to look into word-of-mouth marketing practices as a form of deceptive advertising and issue some guidelines.

The agency staff responded saying new guidelines weren't needed because current guidelines on commercial endorsements applied just fine, thank you.

The commercial endorsement guidelines say if there's a relationship between the seller and the endorser of a product that might affect the credibility of the endorsement, that relationship has to be disclosed. For instance, someone hawking diet pills using a testimonial by a happy customer has to tell you if that happy customer happens to be one of his distributors.

Commercial Alert's Gary Ruskin was not too happy that the FTC staff turned down his request to probe what companies are doing with word-of-mouth marketing or that they declined to issue guidelines, but he was glad to see the agency applying the commercial endorsement rules to this new domain.

The Word of Mouth Marketing Association, which was created to make sure word-of-mouth marketers stay on the up and up, was happy because it saw the FTC decision as an endorsement of its attempts at self-regulation.

As far as WOMMA is concerned, companies only hurt themselves if they're perceived as trying to dupe consumers.

Surveys have shown that most adults are turned off when they find out that someone they know who recently recommended a product to them was shilling for a company. Kids, however, seem to be more forgiving, according to Bob Ahuja, a researcher at Xavier University in Cincinnati who has done focus groups with kids about buzz marketing.

Ahuja found that kids don't mind so much if a friend pushes products to them without telling them they're doing so at the behest of a company, as long as the products are things the kids want. Underlying that laissez-faire attitude about word-of-mouth marketing was general cynicism about advertising, best summed up as "there's a sucker born every minute."

Ahuja found the latter especially disturbing.

In fact, what makes word-of-mouth marketing sinister to its critics is its potential to undermine genuine human relationships and to turn us into a nation of sell-outs. The question remains, however, how effective it really is.

What struck me most about word-of-mouth marketing is how mundane and uncool some of the products are that it is used to promote. Procter & Gamble marketing arm Tremor has employed WOMM to push things such as Dawn dishwashing liquid and milk. The Tremor site for teens offers tips on "how you can reinvent yourself for next school year by drinking Milk."

Milk.

I mean no wonder the buzz marketers were called in.

What do you think the FTC should do about word-of-mouth marketing?

By Annys Shin |  December 12, 2006; 10:30 AM ET Consumer News
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Comments

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My opinion is that childhood is a time of trial and error, and while peers will always have influence, parents who are active and interested in their children's lives will always have more. So the idea of having the government meddling in the realm of peer pressure, even pressure at the behest of corporate interests, bothers me a lot. I really hope this is just one of many ideas to be considered, and not the most likely one.

Posted by: CyanSquirrel | December 12, 2006 1:15 PM

Read the Washington Post! It's the only source of news you'll ever need!

So, when do I get my paycheck?

Posted by: Chris | December 12, 2006 1:38 PM

Word of mouth marketing can never be regulated because it happens all the time. Not in the commercial sense of the word, but it happens.

"I got this new IPOD. I love it. You should get it" .

You can't regulate an opinion. You can regulate the payment to someone who say those words, but in that case do you just regulate part of it or all of it?

If a company offers me a $100 in a promotion to get a friend to sign up for a service I already have, is that considered word-of-mouth marketing and should that be regulated? I mean I would have to market the product to some extent to get them to sign up.

This is a tricky one to answer, Annys. It needs to be looked at further to see how they could even implement such a regulation.

Posted by: Radioactive Sushi | December 12, 2006 2:15 PM

Sushi has some points, but I'm of the mind that I'd rather have my tax money supporting initiatives to crack down/regulate/legislate/monderate/screen the real criminal activites going on around us everyday, ones that do a lot more harm than WOMM does. Blah...

Posted by: CyanSquirrel | December 12, 2006 2:19 PM

It's very simple, I don't know why you all seem confused:

Individuals can say whatever they want whenever they want, whether they get paid or not, as long as it's not inciting to riot or harassing.

Word-of-mouth can still be regulated if the COMPANY is engaging in deceptive practices by paying people and not directing their AGENTS to disclose their affiliation.

How money is spent (especially by a corporation) is NOT a freedom of speech issue, despite what PACs and fat-cat political donors might want you to think.

Posted by: The Cosmic Avenger | December 12, 2006 2:20 PM

The Cosmic Avenger seems to be missing the point here. Think of it like the stock market. If a company plays up it's stock with marketing tactics just to raise the price, is that not price fixing? If companies market with Hollywood stars, and sports figures without some kind of disclosure, is that not a form of price fixing? Or rather merchandising fraud.

It's all about lining the pockets of the company. However this is a free market so they can line their pockets all they wish. Just as long as they don't cross "The Line". The question is "where is the line on word-of-mouth marketing

Posted by: Radioactive Sushi | December 12, 2006 2:33 PM

I want to supplement some comments to the Cosmic Avenger's opinion. The basic assumption of 'word of mouth' is that it is not supposed to be manupulated by others(companies). Thus, the information from 'word of mouth' sounds more credible because the relationship between people, not between people and company, works out in decision making. It is like a 'public relations'. However, it changes to 'advertisement' when people get paid from a company.

As far as it is an advertisement, it should be disclosed clearly. Otherwise, the promotion tactic is decieving people by packaging 'ad' as 'truth'. If someone hears about a product from a friend, and also knows that the friend got money from the producer, then the person would consider 'the word of mouth' is paid advertisement.

In a nutshell, it is up to the marketers to utilize the marketing channel,'word of mouth'. However, if it is paid or the contents are dictated, they should disclose the fact.

Posted by: June | December 13, 2006 1:21 AM

I think it would be helpful to think about what the "free market" means. It doesn't been a free for all! There have long been rules for marketing representations, even when those representations are truthful.

One way to think about this is that if there's disclosure in radio, tv, newspaper, and celebrity endorsement, what about peer-to-peer recommendations is so different that disclosure should not be present?

This is also different than "opinion" of your "friends." That's a naive view of things. Do you really think that advertisers are pouring millions into people just sharing their opinions w/ friends? How do they measure ROI?

There are organized and deliberate efforts to push products in situations where there is no friendship between the WOM user and the target. This is not "I love my Ipod." Often, this is approaching a total stranger and steering the conversation towards a product.

Posted by: Chris Hoofnagle | December 13, 2006 10:08 PM

This whole issue is more complicated than many think. There's a lot of different types of word-of-mouth practices out there, some of them sleezy, some of then innocuous. And at some point, I'd say some that should invite regulation. It will depend on the product, the intended target and the methods used.

I'd strengthen The Cosmic Avenger's comment a bit by saying that if companies actively directed AGAINST their agents to disclose information.

In the end, you'll see a lot of pissed off targeted customers who will resent what they had seen as an innocent conversation with someone in reality be a hidden and deceitful marketing speel.

We recently saw the Edelman/Wal-Mart fiasco with fake blogs. Now, this week, there was another 'flog' exposed on behalf of Sony, called, www.alliwantforxmasisapsp.com. It was poorly developed and executed. It blew up in Sony's face

But that was a very public blow up. What happens to the vulnerable teens that end up buying things or feeling left out because they can't afford something. Or the teen who was participating in the stealth marketing, who, now exposed, is alienated? Has P&G developed a program for kids in that situation?

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Posted by: Ansel | December 31, 2006 4:13 AM

Some WOM has morphed into the worst type of spam you could imagine.

How about this scenario, which is going on right now on sites like MySpace: internet marketer sets up several profiles, each one purporting to be a teenager of a different "type", or someone a kid would think was cool. Using spambot software, the marketer contacts thousands of children on MySpace asking them to become a "friend". The internet marketer sends out mass mails to his/her "friends" using the same cool language that kids use. Then the internet marketer starts spieling on about a really cool new product that is just too awesome for words that his/her new "friend" must have, and basically empties kids' piggy banks. Software programs like BadderAdder and Forum Equaliser have allowed people to take the concept of WOM and uglify and disgrace it beyond belief.

If the FTC won't act, then internet marketers must, for the sake of their own industry, come together to formulate a code of ethics and name and shame those who are blatantly breaching terms of service of the sites they operate on, and who are engaging in such deceitful and dispicable behaviour.

If we don't, the problem will only get worse, and once bodies like the FTC realise the full extent of the problem, we're going to see a repeat of something like the spam laws, which still hurt bona fide businesses much more than they hurt spammers.

Spammers, whether email spammers or site spammers, hurt EVERYONE: their unsuspecting customers, the owners of sites who spend countless hours trying to clean them out, the site members who have to wade through their pointless rubbish to find genuine community, businesses who operate ethically but are tainted by unwanted association. They even hurt themselves, going for short-term gain in an underhanded way, instead of building a sustainable business.

Anyone involved in ethical internet marketing needs to become involved in debate and discussion now, in order to win back trust and respect for the industry.

Posted by: Christine | January 2, 2007 9:03 PM

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