The Digital Vibes

Sponsored Conversations
May 31, 2009, 10:26 am
Filed under: Online presence, Social Media

This is a great, but very lengthy, post by Brian Solis about sponsored conversations in social media marketing – something I truly believe is the way forward in social media marketing, which will ultimately blur the lines between marketing (traditionally paid) and PR (traditionally unpaid).

This is Not a Sponsored Post: Paid Conversations, Credibility & The FTC
by Brian Solis on May 24, 2009

In the eyes of imaginative and opportunistic advertisers and marketers, bloggers and online influencers are the new celebrities and athletes. Brands are showering them with endorsement deals rich with products, cash, trips, exclusive access to information, and VIP treatment each and every day, creating a new genre of star spokespersons.

Many expert and lifestyle “citizen” bloggers and online weblebrities are creating communities around their personas as they freely and actively share personal and identifiable experiences online, in social networks and also in the real world. Those who can successfully connect their stories to others in and around their peer groups earn trust, visibility and authority – limited only by ambition and ingenuity. They’re rewarded for their presence and ability to point their followers in strategic directions.

These new brand ambassadors are almost the perfect instruments for surreptitiously sparking and cultivating a groundswell of desire within desired target markets.

Consumers look to experts and trusted peers for guidance and insight when making decisions.

But who’s to say that the information they’re receiving from their trusted sources is indeed truthful and honest? Many of these followers are blind to the fact that some of these authorities are actually directly or indirectly compensated for their opinions and insights.

Journalists and reporters on the other hand, most of them anyway, are held to strict editorial guidelines and policies that denounce the practice of receiving products, gifts or compensation in exchange for editorial coverage. There’s at least a line that separates ethical press from advertorials —whether it’s crossed, is another story.

But in the new online world of citizen influence, there’s no line on the horizon—at least not yet. Driven only by loosely defined and sporadically practiced methodologies that promote at-will disclosure and transparency, many brands, intentionally or deliberately, are blurring a consumer’s ability to discern the distinction between partisan and genuine experiences.

The New FTC Guidelines: Even Citizen Journalists Must Disclose Paid Endorsements

That’s all about to change. Under new guidelines proposed by the Federal Trade Commission, brands and bloggers both may be held liable should either the FTC or scorned consumers deem that their actions or claims misguided them, or misrepresented the actual performance or efficacy of the product or service in question..

According to the FTC, the ability for a consumer to exercise better judgment and common sense is indefensible when a glaring absence of disclosure is pervasive.

Earlier this year, The FTC published recommendations to update its guidelines concerning the use of endorsements and testimonials in advertising and public relations. A new set of guidelines, enforceable by the FTC Act, is due soon.

The Guides, 16 C.F.R. Part 255, are designed to assist businesses and others in conforming their endorsement and testimonial advertising practices to the requirements of Section 5 of the FTC Act. The Guides interpret laws administered by the Commission and therefore are advisory in nature. However, proceedings to enforce the requirements of law can be brought under the FTC Act. The Commission would have the responsibility of proving that a particular use of an endorsement or testimonial was deceptive.

In its review of the proposed guidelines, BusinessWeek observed, “The world’s more ambitious bloggers like to call themselves ‘citizen journalists.’ The government is trying to make sure these heralds don’t turn into citizen advertisers.”

I disagree with BusinessWeek’s observation and so does the FTC.

In a discussion with Mary Engle, the acting deputy director for the Bureau of Consumer Protection, she articulated to me, “It’s not about preventing citizen journalists from becoming citizen advertisers, that’s just not true. We’re acting to ensure that bloggers don’t create a bias in the consumer decision-making process. Consumers just need to know that what they’re reading is technically an advertisement.”

Whether the post is compensated with cash or with free product or rewards, the FTC views them equally. Engle observed, “The real test is whether or not the consumer’s impression or decision would change if they knew the post was sponsored.”

The FTC Guides advise that an advertisement employing a consumer endorsement on a central or key attribute of a product will be interpreted as representing that the endorser’s experience is representative of what consumers will generally achieve.

It’s about responsibility and credibility.

But honestly, why chance it?

The practice of paying bloggers and influencers or providing them with free products not only clouds their ability to share an impartial story, but also risks the credibility and trust of brands and influencers among the very people they’re trying to inspire and galvanize.

With or without the new FTC guidelines, the practice of disclosure is not an option when the potential for significantly damaging customer relationships in a very public spotlight is at stake. Unfortunately, such disclosure is not at the forefront of most marketing programs.

Free Products are Gifts that Keep on Giving

Ignorance is bliss, until it’s not…

In 2006, Microsoft introduced its Vista operating system to consumers using traditional and new media. In one of the programs, bloggers of varying levels of influence, received Acer Ferrari notebooks to potentially review and share their experiences of the OS and also the notebook. Initially, it wasn’t made clear to these bloggers that disclosure was encouraged. I saw many variations of the packages and letters. Depending on which version a blogger did or didn’t receive, instructions and intentions were also vaguely communicated. What was commonly perceived and understood by other bloggers and ultimately consumers, was that these expensive notebooks were theirs to keep whether or not they shared anything online. To say it created a blogstorm of controversy would be a gross understatement. The lessons learned here served as precedent for those seeking guidance, but didn’t necessarily translate intro industry-wide standards.

Brands view the practice of sending products to bloggers and online influencers as a natural extension of their product PR campaign. In many cases over the years, companies simply didn’t expect to receive product back from reviewers, whether or not they were employed by a publication bound by editorial guidelines against the acceptance of gifts or free products. Bloggers and online influencers, until the recent FTC attention, were viewed no differently.

Sending free products, according to the FTC, is viewed as compensation, which translates into an advertisement or paid endorsement.

Under the FTC guidelines, disclosure is required in any case where the brand is hopeful of obtaining a published review of the product, when its return, either explicitly or implicitly conveyed, is not expected. This attempts to ensure the protection of all parties against liability or legal action.

Sponsored Posts and Conversations

Whether or not disclosure is evident and forthright, the question really is, whether or not the practice of giving gifts to encourage reviews or outright paying for them is ultimately effective and sound for channeling influence, community building and revenue generation for the long-term.

I am now talking about “sponsored conversations”: outright paying for posts and conversations versus simply sending free product or rewarding influencers with various other incentives and hoping for complimentary posts and discussions in exchange.

A recent report published by Forrester Research defines sponsored conversations as, “A marketing technique in which marketers provide financial or material compensation to bloggers in exchange for their posting blog content about a brand.”

In the report, which is available for $749, Forrester recommends adding sponsored conversations to the corporate marketing toolbox, “Sponsored conversation is controversial; many bloggers believe it threatens bloggers’ reputation for independence. But we think this practice is here to stay. Why? Because bloggers want to get paid and marketers want to pay them.”

According to the FTC guidelines, if there were a financial or other relationship between the advertiser and the endorser that would affect the credibility of the endorsement, that relationship would have to be disclosed under Section 255.5. So, as long as the blogger is clear that the post or conversation is “sponsored,” all guidelines are respected and satisfied.

Wait, what about the brand?

Just because bloggers want to get paid and brands want to pay them, doesn’t make this a no-brainer business practice. Or, put another way, does it actually enhance the product/company brand or the personal brand of the blogger in the long run?

Some of the biggest brands in the world are already experimenting with paid posts including, 1-800Flowers, Black&Decker, Cold Stone Creamery, Dell, Disney, MTV, Sears, Sony Pictures, and TiVo. For example, Kmart recently sent several high profile bloggers on $500 shopping sprees in exchange for “sponsored posts” about their experiences.

I suppose, it’s in the way that you use it . . .

So, let’s examine something of deeper impact and consequence. Every community thrives on interaction rooted in respect and defined by credibility and trust—at least that’s the way it’s supposed to work.

For bloggers to risk or leverage their existing, and more importantly, potential credibility in exchange for blogola is either absurd or shortsighted. It might be simply gratifying and motivating for now. Maybe the bigger picture has yet to come into focus for many bloggers and the act of recognition is enough. And, for brands to either take generations of a brand ’s integrity or shape its new and emerging identification on the backs of bloggers who’ll loan their stature and reputation is brilliantly foolish. In the end, it’s the consumer who holds the power to decide his or her degree of affinity and affiliation or mutiny and backlash.

Integrity and Reputation vs. Buzz and Google Juice

The impending FTC guidelines and whether or not bloggers and brands are at risk of legal punishment isn’t the issue. We just have to deal with it. We can choose as consumers whether or not we want to engage with this content.

The real discussion should center on why a company or blogger should even care to participate. The things we do for money are governed by personal boundaries. As individuals, we define those lines and how clearly we wish to view and abide by them.

If we examine Forrester’s case for sponsored conversations, we’re essentially fueling word of mouth by paying for social or topical authorities to share their views about our company or product brand in their domain. This is important. We’re talking about paying people to write about a company or product on their existing, personally-branded content platform associated with it’s already existing, captive audience. This theoretically sparks Webwide buzz that connects a brand to the community of would be customers who rely upon these personalities and voices in the both the blogosphere and statusphere to make informed decisions.

Seems simple enough, except two things are going to prevent this from effectively promoting the sponsoring brand over time — 1) disclosures read like warning signs; 2) Google is downgrading any blog or site that actively publishes paid content.

Let’s walk down this path a bit farther . . .

As a consumer, when’s the last time you read an advertorial and walked away inspired or informed? Other than the Snuggie or ShamWow, when is the last time you actually watched an infomercial, let alone bought a product or shared it with your friends because of what you viewed?

Perhaps this is the wrong audience for a discussion probing the shrewdness of the typical consumer. But, I bet many of you reading this now are responsible for the direction, visibility, and perception of a brand. So as brand managers, your brand is what the market says it is, tethered to the credibility and stature of the people who collectively voice their thoughts about it (paid and unpaid). In the world of pay-per-posts or sponsored conversations, brand association starts to paint a picture of guilt by association, not necessarily the building of strategic brand presence or resonance.

This is a deeper discussion of reputation and trustworthiness versus funding word of mouth buzz and viral marketing. To simply state that “disclosure” alleviates and resolves all risks involved with sponsoring conversations trivializes the discussion.

Brand Ambassadors and Inspired Communities

Whether we like it or not, many new companies are offering brokered services to facilitate “pay to play” campaigns in Social Media. Concurrently, many brands are also running these programs from within.

Clearly a balance scale exists where integrity and paid buzz are on opposite sides. So the real question is, how do you leverage the laws of perception management in your favor? One way to do so is through traditional public relations.

Identify target bloggers and work genuinely with them on developing a meaningful story that helps and informs their community. Bloggers will write about products and brands they really care about. You don’t have to pay them to do that. It comes naturally.

This is not to say that there is no place whatsoever for paid endorsements on the Web. Obviously paid endorsements work when the platform for conveying paid messages is understood and accepted. Celebrities have effectively pushed products in commercials without tarnishing their brand for decades. Essentially, the difference is the forums and networks in which these paid messages appear and the fact that the celebrities are usually aboveboard about the fact that they are endorsements.

Look to the existing business of paid endorsements to build and manage a campaign that effectively reaches and compels potential customers without the negative attributes that cling to pay-per-posts.

Hiring or recruiting influential weblebrities and online experts is not unlike the model for linking real world celebrities to brands through commercials, events, appearances, or other dedicated vehicles to promote the alliance and the story. These campaigns, when conceptualized and executed properly, effectively link the product/company brand to the celebrity’s persona and prestige to convey a relationship that connects to consumers through their affinity to the spokesperson. The idea is to create and host a two-way street that still inspires word of mouth and viral marketing.

For example:

Mozy hired iJustine as an official spokesperson airing content on as well as across multiple social networks including YouTube and iJustine branded properties.

Wal-Mart established Elevenmoms, an expert group of independent bloggers who receive free sample products to review and then freely choose which products to review based entirely on their personal opinion and experience.

Baby-products manufacturer Graco launched the Graco Nation Ambassador Program, a dedicated community of select Graco fans.

Based on the company’s successful foray into influencer relations with its Flex loaner program, Ford is currently trying to spark consumer buzz for its impending launch of the Ford Fiesta by enlisting every day consumers to share their experiences online and in social networks.

In the end, sponsored conversations will continue to receive funding, as brands try to insert themselves into the conversations online. The FTC is simply striving for truth in advertising. The point is that when establishing a paid Social Media campaign, anything that is less than clear, honest, or actively contributing back to the bottom line of the business or to a brand’s resonance is actually taking away from it.


IAB’s Social Media Metrics
May 30, 2009, 5:10 pm
Filed under: Social Media

The Social Media Insider commented on the new metrics here, along with a link to the IAB metrics:

Will the IAB’s Social Media Metrics Definitions Help Crack The Engagement Code?
Catharine P. Taylor, May 06, 2009 03:15 PM
Social media and online advertising wonk that I am, I spent part of the morning looking at the Interactive Advertising Bureau’s just-released social media metrics definitions. Readers of this column may not see anything earthshakingly new here, but I’m encouraged  thinking about how these definitions will help codify and legitimize social media advertising, and help crack the “engagement” code, one of advertising’s great, eternal mysteries. (Maybe we should have gotten Tom Hanks on the case some time ago.)

The great thing about putting these definitions down on paper is that they create a road map for advertisers on how to make social media purposeful, measuring a wide variety of user interactions and monitoring online dialogue, and putting numbers around it that marketers can understand. (I’m not saying here that the words themselves aren’t important, but that quantifying social media is a very important step toward defining its value.)

Below are just a few of the thing the IAB document defines:

  • Application and video installs.
  • The number of relevant actions, including newsfeed items posted, comments posted, uploads, poll votes, and so forth.
  • Conversation size, which measures the number of content relevant sites and content relevant links, and the monthly uniques spread across those conversations.
  • Site relevance, which measures the density with which phrases specific to a client concern are brought up among relevant sites.
  • Author credibility, such as how relevant the author’s content is and how often it is linked to.
  • Content freshness and relevance, which defines how frequently an author posts.
  • The average number of friends among users of a specific application.
  • Number of people currently using an application.

In other words, compared to old-time metrics like reach, frequency and the click-through, these metrics are deep, not only measuring whether people are engaged, but how they are engaging. It’s like being able to measure the temperature with a thermometer rather than opening the front door and declaring it either hot or cold.

As I said above, for those really involved with social media, these definitions probably just put into writing what you already knew. But imagine that you’re an advertiser who sorely needs to understand social media. Then imagine yourself suddenly finding that you can not only monitor discussion around a certain topic near and dear to your brand but that you can also mention the number of people talking about it and their level of passion. Suddenly, social media goes from a huge, indefinable blob of conversations into something that has contours around which you can engage, plan and buy. That’s huge.

I’m sure these definitions aren’t perfect, so I’ll close by asking our vibrant Social Media Insider community what you think about them. Do they go too far, or not far enough? How actionable are they based on the tools we have today? Comment below. I’m sure the IAB will notice.

I still think that sponsored endorsements and sponsored entertainment point the way forward for social media advertising – think soft-selling. Hope IAB captures these metrics in the next report.

Monetisation through Freemium
May 27, 2009, 4:58 pm
Filed under: Web apps

Posted on TechCrunch – Something the Basecamp founders spoke about before, on charging for premium services.

Free To Use. Pay To Play

by MG Siegler on May 23, 2009

470233447_48a7e123edThe tech world is an interesting one when it comes to companies making money. Some at the top like Microsoft, Apple and Google are raking in billions in profits every year. And each of those do it with different models: Microsoft through software, Apple through hardware and Google through advertising. But at the other end of the spectrum, most startups, even the very popular ones, haven’t yet figured out how to make money beyond their costs.

While the advertising-based model is working for a select few, for most, it’s simply not proving to be a very good stand-alone model. Pandora is one of the companies that web-based advertising is actually working pretty well for. But even they’re not expecting to turn a profit until next year — and that’s based on projections. I bring them up because they recently decided to move forward with a freemium model in a serious way for the first time last week. As a large service with a rabid fan-base, this seems like a brilliant move. And I wonder if the time isn’t right for more services to try this?

The freemium model is hardly a new idea. VC Fred Wilson has been talking about it since 2006 — though the name came a little later — but the model was around well before that also. The idea that you have a core set of features that are free to all users, and charge a fee to the smaller subset of users who will want more advanced features, makes a lot of sense. But now it’s easier than it has ever been for startups of all sizes to be able to take payments for such a structure, thanks to a number of companies and new platforms, like app stores. And there are plenty of startups popping up around this space to further help with this, like the soon-to-launch Contenture.

But I think for the freemium model to work in today’s environment, it has be along the lines of the opening paragraph of Wilson’s post in 2006:

Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of your service to your customer base.

Rather than launching a service with a freemium model, I think it’s important to gain a large and passionate user-base first. That’s exactly why I think the model will work very well for Pandora. And that’s the same reason why it would work for Twitter, if it ever decides to go that route. Jason Calacanis has been talking about his desire to pay for premium features on Twitter since 2007. And plenty of others have since brought up the idea.

As part of its bid to make money, Twitter is said to be launching premium tools by the end of this year. But that would apparently be for businesses — I think a lot of personal users would be just as willing to pay at this point. I know I would. And that got me thinking: What services would I pay for?

pay-it-forward-dvdcoverI’ll start with the ones I already pay for:

  • Pandora. An easy choice for me. For $36-a-year, they remove all advertising, give you better quality music and a nice desktop app among other things. I paid for it immediately.
  • Flickr. Another site that was a no-brainer for me. At $24.95-a-year, you get unlimited storage space for all your photos online. I’ve been a happy member for a few years now.
  • Tweetie. An interesting one in that it’s a Twitter client. You have to pay for the iPhone app, but there’s also the new desktop app which offers a free ad-supported version, or a paid ($19.95 one-time fee) version minus the ads. Twitterrific, another Twitter client, has a similar model, but also has a free version of its iPhone app, alongside its paid version.

And here are some ones would I pay for:

  • Twitter. While I’m already paying for some Twitter clients, I would gladly pay something between $25-$50 a year for a more robust version of the actual Twitter site if it included things like power-searching, analytics and filters.
  • Facebook. Unlike the very simple Twitter, I think Facebook is already too complicated, so I wouldn’t really want or need any more features. But if it ever came down to it and Facebook really needed to make money and started shutting off features (which would raise a shitstorm like no other among its users), I would gladly pay to keep some of them intact. Again, probably in the $25-$50 a year range.
  • FriendFeed. I would gladly pay a lesser fee, maybe $10 to $20 a year to use FriendFeed — especially if they gave me something like an iPhone app.
  • Gmail. At some point soon, I likely will be paying to use Gmail, as I’m almost out of my free storage space. 10 GB is $20 a year, a bit high, I think, but I’d pay it.
  • Digg. I’d pay to user Digg particularly if I get could easy ways to view more interesting data that they have, and the ability to sort and filter to see what other “Pro” users do. Digg’s comments are quite often absolutely ridiculous, but I think could actually be useful if I could only see ones by users who care enough to pay for the service, rather than trolls. I’d pay about $10-$15 a year for Digg.
  • YouTube. Same as Digg, I’d pay to use YouTube to see only comments by other “Pro” users. And I’d pay for higher quality, longer uploads and a goddamn nicer player than that cheesy big-button box. I’d probably pay up for $30 a year if I could use YouTube to store long, HD videos.
  • Instapaper. This is the service I use to bookmark nearly everything I want to read on the web. It’s very bare-bones, which is one of the reasons that I like it, but I would certainly pay a fee to add search and some other advanced options. I would probably pay like $10 a year to use this. Interestingly enough, like the Twitter clients, Instapaper does have a free and pay version of an iPhone app.

Those are just the ones I would personally be willing to pay for. I’m sure everyone else will have their own list that they would pay for as well. And that’s why the freemium model is so great — it gives users the options to pay for only the services they use the most. And for certain really popular services, I think this could be huge. Pandora CTO Tom Conrad told me last week that he expects only 3-5% of Pandora’s users to sign up for its premium version, but I wouldn’t be surprised if it goes higher than that — especially if Pandora adds more features to the service over time.

comcast-sucksOne of the keys to this in my mind is the yearly fee. While it might look nice to offer a service for $3-a-month, that recurring charge is ugly. I’d much rather pay a still low $36-a-year and not have to worry about it after that. And let’s add it up. Even if I paid for all of the services I listed above, depending on where the prices fall in the ranges I gave, it’s only $200 – $250 a year. That’s for 10 services, that I love and use every day.

Think about it this way: Before I was able to move away form the colossal rip-off that is Comcast cable, my cable bill was nearly $200 — a month! How people pay companies like Comcast over $2,000 a year for mediocre content and shit service is beyond me. I would rather pay a bunch of hard working start-ups (and yes some bigger services like YouTube — owned by Google — and Flickr — owned by Yahoo) all that money. And I wouldn’t even have to, under the rates I outlined above, I would be paying them just about 10% of that!

The freemium model doesn’t always work. It didn’t for Pownce, for example. But to go back to what I said earlier, getting the users is they key to this. If you can get a ton of them, and get a certain percentage to be very loyal, they’re more than likely going to be willing to pay. And while it may not be enough for every company to only use that model, it at the very least would be a nice compliment to the ad-based model.

And, as I hinted at above, there are other ways to look at this now. With the rise of mobile app stores, it’s becoming a decent business model to have a service that has a pay app. This has worked for the aforementioned Tweetie. An app can be a very simple advanced feature under this freemium model, and extends the possibilities for the model.

But back to the web, just imagine if Facebook has a few percent of its users paying each year. They have over 200 million users, so say just 5% paid. That’s 10 million people paying, let’s say, $30 a year. That’s $300 million — or in other words, nearly its entire projected revenue for this year. If it were able to get 10% to pay, it’s be more than it’s projected revenue. Of course, Facebook isn’t likely to use that model, instead it will focus on micro-transactions and other means of making money — but still, it’s worth thinking about.

There are quite a lot of services out there that I would pay to use, but they won’t let me. Maybe they should.

[photo: flickr/striatic]