Secretly Paying for Good Reviews Will Cost You Money — In and Out of Court
The Federal Trade Commission (FTC) issued a final order against Machinima, Inc., following complaints that the game company paid reviewers for endorsing its client’s games.
According to the FTC’s complaint, the company paid “influencers” to post YouTube videos endorsing Microsoft’s Xbox One video game system and games.
The influencers failed to disclose that they were being paid to say positive things about the games.
According to the complaint, the influencers were part of a marketing campaign run by Microsoft’s advertising agency, Starcom MediaVest Group. Machinima guaranteed Starcom that the influencers’ videos would be viewed at least 19 million times.
Initially, a small group of influencers got access to pre-release versions of the game consoles and games. Machinima paid them $15,000 to $30,000 each to produce videos touting the games. These videos yielded up to 730,000 views each.
Machinima later promised a larger group of influencers $1 for each 1000 views of videos promoting the games, up to a cap of $25,000.
According to the FAQs for the FTC’s Endorsement Guides,
if there’s a connection between an endorser and the marketer that consumers would not expect and it would affect how consumers evaluate the endorsement, that connection should be disclosed. For example, if an ad features an endorser who’s a relative or employee of the marketer, the ad is misleading unless the connection is made clear. The same is usually true if the endorser has been paid or given something of value to tout the product. The reason is obvious: Knowing about the connection is important information for anyone evaluating the endorsement.
Also, it’s not good enough to hide the payment information behind a button that says “disclosure” or “legal.”
The FTC even has hints on how to show that a tweet was paid for:
The words “Sponsored” and “Promotion” use only 9 characters. “Paid ad” only uses 7 characters. Starting a tweet with “Ad:” or “#ad” — which takes only 3 characters — would likely be effective.
The FTC Order
The FTC order prohibits Machinima from misrepresenting in any influencer campaign that the influencer is an independent user of the product being promoted.
It could have been a lot worse. In 2011, a company selling guitar-lesson DVDs paid $250,000 to settle FTC charges that it promoted its products through paid affiliate marketers who posed as ordinary consumers.
The FTC also investigated Microsoft and Starcom, but took no action against them, in part because the companies took action to require the disclosures once they learned about the payments.
According to Marketing Land, as of 2014 29% of marketers were completely unaware of the FTC’s disclosure rules and only 10% were up-to-speed on the latest FTC guidelines.
If you’re planning to pay influencers to endorse your products or services — or you’re working with a marketing company that arranges such endorsements — it’s a good idea to make sure everyone is aware of the FTC guidelines.