It Pays to Get People Talking. But Is Paying for Talk Ethical? - Ed Keller - MediaBizBlogger

One sure sign that an industry has "arrived" is when debates about ethics, or the need for regulation, become heated. Certain practices in social media and word of mouth are now in the ethical hot seat. Whether "the next big thing in marketing" continues to grow and thrive, or has the brakes applied via government regulation or declining consumer trust, all depends on the practices marketers and the agencies that serve them adopt right now.

I am the former President and currently Treasurer/Board member of the Word of Mouth Marketing Association (WOMMA), which has had an Ethics Code in place since its founding in 2005. (I am writing here as an individual, and not in any official WOMMA capacity.)

At the core of the Code is the issue of transparency and disclosure. A key aspect is "the Honesty ROI":

* Honesty of Relationship: "We require marketers to disclose their relationships with consumers in relation to word of mouth initiatives."

* Honesty of Opinion: "We never tell consumers what to say."

* Honesty of Identity: "Clear disclosure of identity is vital to establishing trust and credibility."

Some of the highest profile gaffes in word of mouth have been those that run afoul of one or more of these principles. For example, the CEO of Whole Foods participated in chat rooms for eight years under a fictional identity, talking about Whole Foods and its competitors. Clearly this ran counter to the principle of "honesty of identity." An FTC and SEC inquiry ensued.

The FTC has recently issued for review revised Guidelines for Endorsements and Testimonials in Advertising, the first time its Guidelines have been updated since 1980. The proposed Guidelines have significant implications for both brands and individuals (especially bloggers) engaged in social media:

* Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose a material connection between themselves and their endorsers. This includes their relationship with bloggers and others who are compensated to promote or review a product.

* Endorsers (again, including bloggers) may also be subject to liability for their statements.

* The communicator of the message must be transparent and honest.

* The FTC will require substantiation, or an appropriate basis for claims being made.

If the Guidelines are implemented, social media, bloggers, and others that facilitate consumer-generated content are subject to government regulation and law enforcement. Brands and individuals engaged in social media need to be fully transparent in terms of their relationships, and are responsible for the efficacy of what they say.

The good news is that marketers who have been practicing sound ethical practices in social media and word of mouth are on the right path. Some fine tuning of practices may be in order, and the need for close communication about ethical practices between brands and the agencies that serve them is critical.

No sooner had the marketing industry begun to absorb the implications of the new FTC Guidelines, when the next hot issue emerged: Whether it's ethical to pay for word of mouth. At the core of effective word of mouth is personal experience with a brand, so the "talker" can speak from experience. Often this comes as a result of everyday experiences – the organic word of mouth a brand enjoys, whether online or offline. But to help stimulate additional conversation, brands often seek ways to amplify word of mouth – including giving away free samples of product for people (including bloggers) to try and then (they hope) talk about with others.

Some take this a step further, and pay a cash fee to bloggers for writing about a product. It's what Forrester has dubbed "Sponsored Conversation." This approach has now been extended to "pay per Tweet." Josh Bernoff of Forrester, co-author of Groundswell, while acknowledging that this is a "very controversial topic," comes down on the side of "sponsored conversations." He feels sponsored conversation fits neatly between PR, where there is a pitch but no guarantee of placement, and advertising, where the commercial message is guaranteed placement but it's in the marketer's voice, not the consumer's.

WOMMA took a different position, revising its Code of Ethics recently to say, "We stand against marketing practices whereby the consumer is paid cash by the manufacturer, supplier, or one of their representatives to make recommendations, reviews, or endorsements." Following a protocol whereby WOMMA members can ask for aspects of the WOMMA Code to be reopened, this clause in the WOMMA code is now reopened for discussion, and there is an active debate on both sides going on via WOMMA's Living Ethics Blog.

The bottom line is this. Social media is coming of age, and a bright light is being shined on ethical best practices. At stake is credibility with consumers, as well as compliance with the law. Transparency and disclosure are paramount. There can be no faking. But can there be "pay for play?" Stay tuned.

Ed Keller, CEO of the Keller Fay Group, has been called "one of the most recognized names in word of mouth." The publication of Keller's book,The Influentials, has been called the "seminal moment in the development of word of mouth." Ed can be contacted at ekeller@kellerfay.com.

Read all Ed’s MediaBizBlogger commentaries at Ed Keller - MediaBizBlogger.