FTC- Disclosure: Who, What, When, Where and Why?

In Beth Kirsch’s previous entry involving Chicken Little a good debate followed and it sparked me to think about the ramifications of the FTC on marketing- not just affiliate marketing. I also think about these things quite a bit and especially how often rules offline are different online. e.g. Online we want sites to have a privacy policy, but you should have seen the shock and awe when I demanded the DMV clerks to fork over a copy of their privacy policy when I stood in their office. You guessed it- they didn’t know what one was, and confirmed in the years they had worked there I was the first person to ask for a policy on where my personal information was going to end up…all in all I terrified them with my questions. Afterall- customers aren’t supposed to talk back, and most government bodies don’t treat you as a valuable customer.

Sam Harrelson asked a great question, “What is affiliate marketing“? He and I have debated this off the blogging grid quite a bit as of late.

It prompted me to dig up an interview I did back in November of 2000. Yikes- that is over six years ago. Here it is and it captures what I feel is true- affiliate marketing is nothing new.

Let’s talk about affiliate marketing in general. The industry continues to be plagued by merchants going out of business, cheating on both sides of the relationship, poor service, and yet there are also many, many success stories – what’s your take on the future?

Affiliate marketing has been around since the beginning of time. Let’s look at the early cavemen. Grog makes and sells wheels. Looking down the road we find Ogg and Nog who sell axles. Ogg decides to approach Grog one day and offers him 10 clamshells for every customer he sends over from the wheel shop. That sounds good to Grog, since many customers ask him where they can get good axles. Both Grog and Ogg benefit, and the cave-people are happy.

Today we have more sophisticated technological architecture in which to execute these relationships. There is a common misconception that networks like Befree, Linkshare or Commission Junction are the end all, be all of affiliate marketing. This is totally wrong. They are merely convenient systems that allow us to rapidly execute and manage mutually profitable relationships. The technological architecture is only one important aspect of the affiliate marketing formula.

So Sam- what is affiliate marketing? It is a relationship where, in theory, both parties benefit, and one party makes a referral to another for some type of compensation. They could be a “salesperson” who dedicates their time to this activity or a “publisher” or another “merchant” where this is secondary action.

Brian Clark pointed out in the comment thread that certain types of affiliate sites needed to go. I totally agree. The fake or loaded “comparison” or “review” sites are often misleading and harmful. I can recall one in the anti-spyware space where it was clear, at least to several experts in the field, they had a special relationship with the one site that always ranked at the top. There was no clear disclosure of their methodology, only some vague wisps of information on testing. It seemed the “best” where the ones that paid the most.

At CostPerNews Sam goes on to say:

In my opinion, this should be a self-regulating and self-cleaning mechanism built into the world of online marketing. We should have the ability, and the foresight, to see these types of marketing schemes for what they are… manipulation marketing.

I agree. You would hope people would be more skeptical, more discerning and smart enough not to fall for it. The sad truth remains that some are not. Adware is a great example. You would hope you don’t need the FTC against fake ads like “your computer is infected” or dialogue boxes that “mimic Windows”, if anything you would hope humankind would be sensible enough not to deploy or tolerate such tricks- but they do and probably because they work.

The reason I would like to see it self-regulating is I really don’t want the government to get involved with everything we do- people must learn to self-govern and people must be more discerning. The market should punish the fraudsters and the hardcore manipulators and frankly the government has bigger problems I’d like to see them tackle. I don’t even think “government” is bad, I have met many people there with their hearts in the right place, but the systems in place can make any change a massive chore.

Now I can see where some folks would have trouble with Pay Per Post, I browsed their offers and the only one that I even considered was the one on Pay Per Post itself. (Don’t worry people I have not been covertly paid for any of my posts by Dan.). I also checked out the latest review site for blogs that paid you to review a service- and that you must disclose this was paid. There was no pressure for it to be positive or negative or a bunch of linking guidelines- you were encouraged to give an honest review. I was offered a job to review a set of free tools. In the end I rejected the offer, and the entire concept, for several reasons:

a) The money wasn’t enough- they were using Alexa as one of the determining factors of my “influence”.
b) I genuinely thought the tools were excellent, but the business behind them bothered me.
c) What would be the impact of doing it be on my reputation- even knowing I do it as research?

I also hear Matt Cutts of Google saying sites using such paid posts or links could be punished in ranking. Why? I would imagine it messes up the algorithm that has to compensate for such behavior. I am sure a search engine’s algorithm can spot alot of things, actually from studying Google’s I know they can spot alot more than you think. Is that GUID active on your machine you work on freshly packed with info? Personal search on? Using a toolbar? Let’s not forget they are an ICANN registrar…they know that information is THE currency in a virtual world. (I only wonder how they will compensate for say something like, The Mule, that appeared in Asimov’s Foundation Trilogy?)

Before anyone asks, why sign up and even consider these models, because before I go debating and talking about services I think it is important to “get your hands dirty” to actually go out and do the research- to see first hand what is floating around these services. Do I ever use affiliate links in my personal blog? Yes, nor do I disclose them. Here at Revenews? Out of hundreds of posts over the years I think I did once as an experiment- I wondered would anyone notice? Call me on it? I didn’t recommend the service at all, just reported on a feature the site had that was useful. Several hundred read it, no one noticed, no one wrote or seemed to care, and to my shock- some sales came in. I didn’t repeat the experiment, but found it interesting- was it the fact I didn’t recommend the service or that I don’t normally use revenue sharing in my blogs or make recommendations for products?

So this leads me on to many more questions….

1) When I read a novel, and I see a particular medication come up more than once, I begin to suspect it is paid placement. If it is- should this be disclosed? If so where?

2) While watching a movie I see a certain brand of laptop used over and over, or the same soft drink- should I demand this be labeled at the onset of the movie or demand that piece of print in the film flashup and warn me “financial relationship”?

3) What impact would this have on films like The Blair Witch or the one I was involved in, Nothing So Strange? We refused to acknowledge this wasn’t real- that was part of the “game”. Common sense should tell people it wasn’t, that this was all all a form of entertainment, but there are some that can’t reason that far there are others that totally “get it”. The same goes for ARGs. If you tell everyone- this is a game- it dilutes the ARG.

4) If I write a piece of satire, like the old Marty and Joe pieces, do I need to label it as satire so no one is fooled? I did receive written pieces from people up in arms over their behavior and I had to explain it “wasn’t real” but some of the practices going on are real and the piece was meant to illuminate those practices. I also received more fan mail over it than anything I wrote at the time. Should I bring satire back- even though I am a mediocre satirist at best?

5) If I used InteliText (which I did for a brief time as a test) should I disclose these are paid links and what deal structure they take? One person asked me why I used it at all and as I said above- my job is to research and experiment and you don’t do it from your sofa. In the end I received a few complaints and one reader I respected who said they would stop reading my blog. That was enough for me, the links were pulled and I explained to the service why I pulled them. I did find it ironic that in a blogging community about revenue generation there can be such sharp reactions to how revenue is produced- even though we have always kept a hard wall against obvious predatory practices e.g. adware in the banner slots. That is more care than Google or others have taken when I see ads for all kinds of services that are sub-par, borderline, or harmful in the sidebar.

6) If I write about a rumor or leak regarding a new Google service called GDeath- do I need to label this as satire for people because it is obviously not true, not meant to be true, but meant to carry hidden meaning and more thougt stimulation because it isn’t true? I note I am astounded how Google is able to match up genealogy research with an old lady in a banner ad above the piece. (Should I disclose I hold ~ 3.3 shares of Google stock? Should I disclose what mutual funds I hold and what they hold everytime I write?)

A bunch of questions I know. Why not give answers? I don’t have them. But anytime new legislation is introduced, anytime the government is asked to get involved my first thought is “WHO BENEFITS THE MOST” from said legislation. Perhaps I have become jaded from my experience in Washington. So who benefits the most? The common person the government is charged to protect or do others?

To disclose or not to disclose- that is the question or it could be When to disclose and when not to disclose? Or, Where to disclose and where not to disclose…or maybe, if you are really jaded- Who should disclose and who should not have to disclose? They are all valid questions.

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About Wayne Porter

Wayne Porter is one of the original founders of ReveNews.com, and served as the CEO and founder of XBlock Systems a specialized research firm on greynets and malware research before being acquired by unified communications security leader, Factime Security Labs. His work includes serving as a panlist at the Federal Trade Commission to shape legislation on software and the creation of two patent-pending technologies for corporate networks. Wayne is a frequent speaker at e-commerce & business events including CJU, ASW and RSA and frequently cited in the press. He has been designated a Microsoft Security MVP three times and is recognized on Google’s Responsible Security Disclosure page- in addition to receiving the first Summit Legend Award. Wayne currently works as a Security Consultant on Social Media and operates a consultancy on digital worlds. His hobbies include reading science fiction, playing chess, fishing, writing, collecting shiny digital gadgets, playing racquetball and studying memetic engineering. He maintains a personal weblog at WaynePorter.com detailing his explorations in security, web 2.0, and virtual worlds.
You can follow Wayne on Twitter: @wporter.

Website: http://www.wayneporter.com