Why (and What) You Need to Know About the FTC’s Endorsement Guides and FAQs

Endorsements are an important tool in the marketing and promotional toolbox used by both companies and individuals. A slightly paraphrased version of the FTC’s definition of an endorsement is a message, such as a statement, demonstration, or other communication, by a party not the manufacturer, provider or advertiser of a product or service which contains that third party’s opinions, beliefs, findings, or experiences regarding that product or service (which may be the same as those of the product/service manufacturer/provider or its advertiser).

LinkedIn profiles are chock full of professional endorsements and recommendations by colleagues, peers and others. Companies rely on endorsements to increase brand awareness, promote marketing communications, and drive sales. Traditionally, a company’s brand awareness or marketing message was spread through “word of mouth” by individuals who had a satisfying experience with that company’s products or services. Think back to the old 80’s Faberge Shampoo commercial with a person saying you’ll love the product and that “you’ll tell two friends, and they’ll tell two friends, and so on, and so on, and so on….” If a family member, good friend, or other trusted individual shares a positive review of or experience with a product or service, the logic is that you’ll be more inclined to learn more about it and/or give it a try based on an endorsement from a “trusted source.” Companies and their advertisers use paid celebrities as another form of trusted source to promote their products and services. More recently, a new category of trusted sources has arisen – bloggers and other online personalities, or “influencers,” who regularly provide their followers with their thoughts and opinions (often positive), including on products and services they use. Additionally, companies may seek to leverage their employees as trusted sources by asking them to re-tweet marketing messages and posts.

An unbiased endorsement based solely on a trusted source’s positive experience with the product or service is the best source of information for potential customers. But would a potential customer put the same stock in an endorsement if they knew that the trusted source providing the endorsement works for, received some tangible or intangible compensation or benefit from, or has some other material connection to the company or its advertiser whose products or services they are endorsing? For the last few years, the FTC has been paying more and more attention to online endorsers and influencers. In April 2017, the FTC sent over 90 letters to various influencers and the marketers of brands endorsed by those influencers, highlighting the requirement to clearly and conspicuously disclose any material connection between the endorser and advertiser. The FTC has also recently added to its guidance regarding online influencers, and in early September 2017 announced their first enforcement action against two individual online influencers for failing to properly disclosure their material connection with the company whose product they were endorsing. This may be just the start of more aggressive enforcement by the FTC against influencers, trusted sources, and others who do not “follow the rules” regarding endorsements.

How can companies/marketers and endorsers/influencers avoid trouble when making endorsements? As with many areas of compliance, consider a “center of the herd” approach. The animals in the center of the herd are not the ones that typically get picked off – it’s the ones out in front (e.g., those most desperate for water or who have another need to be first) and those in the rear (e.g., those not paying attention, who can’t keep up, or just don’t care). The same applies in business – the companies more likely to be fined or penalized are those who are willing to take aggressive risks to be in front of the pack, or the ones bringing up the rear due to a lack of focus on, or disregard for, compliance. The FTC has released a set of guides and FAQs to provide guidance to all parties involved with endorsements. Being familiar with these guides and FAQs, and following best practices such as the ones described at the end of this article, can help ensure both you and your company are in the “center of the herd” when it comes to endorsements.

The FTC Guides Concerning Use of Endorsements and Testimonials in Advertising

The FTC has offered guidance for decades on the issue of biased endorsements in marketing: the FTC’s Guides Concerning Use of Endorsements and Testimonials in Advertising (16 CFR Part 255) (the “Endorsement Guides“), which apply to endorsements by consumers, celebrities, experts, and organizations. The Endorsement Guides were updated in 2009 to remove the “results not typical” safe harbor disclosure in endorsements and testimonials, to address connections between endorsers and companies/marketers, and to address celebrity endorsers. While contained in the Code of Federal Regulations, they are administrative interpretations only; deceptive advertising is governed by the Federal Trade Commission Act and state deceptive trade statutes, as well as other truth-in-advertising laws.

There are four principles at the heart of the Endorsement Guides:

  1. Endorsers should only endorse products they have tried, and should only say they use a product if they were a bona fide user at the time the endorsement was given.
  2. Endorsements must be truthful and not misleading (either expressly or by implication).
  3. Endorsers and companies/marketers should only make claims about a product if they have proof substantiating those claims.
  4. Endorsers and companies/marketers must disclose a material connection between an advertiser and an endorser if the connection may result in a perceived bias in the endorsement. A “material connection” is a connection between the person endorsing the product and the company which is producing or marketing the product which might materially affect the weight or the credibility given to the endorsement by its audience, such as but not limited to a business/family relationship, receipt of a payment, or receipt of a free product.

The guides include dozens of examples of real-world situations and how each situation should be treated under the Endorsement Guides. They are worth a careful read. If you find examples that align with your own current or planned marketing strategies and activities, read them carefully to ensure you understand what behavior the FTC expects in that situation.

The FTC’s FAQ on the Endorsement Guides

Released in 2010 and updated in 2015, the FTC supplemented the Endorsement Guides with a set of frequently-asked-questions titled The FTC’s Endorsement Guides: What People Are Asking (the “Endorsement FAQs“). The Endorsement FAQs collect frequently asked questions from companies, marketers, bloggers and others and provide answers from the FTC to supplement the guidance and examples provided in the Endorsement Guides. The FTC’s answers are extremely important as they provide important insight on how the FTC would likely come down on a particular position.

In September 2017, the FTC updated and modernized the Endorsement FAQs. Some of the key changes were:

  • The FTC made clear that if an individual endorser continues to fail to make required disclosures despite warnings, it may take action against that individual endorser.
  • New FAQs were added regarding donations to charity in return for a product review; family and friends eating for free at a new restaurant; YouTubers receiving free gifts in the hopes of a review; bloggers receiving free travel to a new product launch event; Instagram posts with a tag of the brand of clothing being worn; aspirational endorsements; reciprocal endorsements (“I’ll endorse your product if you endorse mine”); bloggers located outside the US targeting a US audience; where to place disclosures in Instagram posts; whether endorsers can rely on a social media platform’s built-in disclosure functionality; where the disclosure can be placed; disclosures for summary ratings including reviewers who have a material connection; and whether an employee’s like or share of a company’s post requires an endorsement disclosure.

These recent updates, and the FTC’s “shots across the bow” of online influencers in April and September 2017, likely signal the FTC’s intention to more aggressively crack down on online influencers and others in the endorsement ecosystem (especially in the social media space) for endorsements that run afoul of the Endorsement Guides and the Endorsement FAQs or otherwise constitute deceptive advertising or trade practices.

Suggested Best Practices and Closing Thoughts

Here are some key takeaways from the Endorsement Guides and the Endorsement FAQs to keep in mind as you move forward with requesting or providing endorsements:

  • If there’s an actual, potential or perceived material connection, disclose it. If there’s a material connection between an online influencer, trusted source, or other endorser and the owner or marketer of the product/service being endorsed, e.g., an influencer is paid or receives a free product, free service, or other material benefit which may be perceived by a potential customer as biasing the endorsement, the endorsers must ensure the connection is disclosed (unless the connection is clear from the context of the endorsement). If you’re on the fence as to whether a connection is material or not, disclose that too. Remember to look at it from the correct perspective — it’s not whether the endorser thinks the received consideration affects his or her endorsement of the product or service, but whether knowing about the consideration could affect how the audience views the endorsement and/or create a perception of bias.
  • Make disclosures easy to understand (e.g., unambiguous). Disclosures such as “#partner” or “thanks to [company/advertiser]” are not sufficient as while they may disclose there’s some relationship between the endorser and the company/advertiser, they do not specify the nature of that relationship. While an endorser does not need to specify the details of the compensation received, he/she needs to disclose that the post, review or other endorsement is sponsored (as long as you’re not misleading your audience on how much compensation you received), and ensure the identity of the sponsor is clear. The Endorsement FAQs disclosures reference “#ad” or “#sponsored” as hashtags that denote that an ad, post, review, etc. is an advertisement or sponsored by the company/advertiser (don’t use “#sp” as it’s not sufficiently unambiguous). For an influencer who receives free products, saying “Thanks to [company/advertiser] for the free [product received]” may be sufficient. If you are an employee of or consultant to a company whose products or services you are endorsing, “#employee” or “#consultant” is not sufficiently unambiguous – “#ABC-Employee,” “#ABC-Ambassador,” or “#ABC-Consultant” is less ambiguous, where “ABC” is the company or brand name of the product/service you are endorsing. If you’re running an online context, ensure the disclosure clearly states it is part of a sweepstakes or contest, e.g., “#ABC_contest” or “#ABC_sweepstakes” (but not “sweeps”). Think about the hashtag from a consumer’s perspective — could they figure out the connection between the endorser and the company/advertiser within the context of the ad within no more than a second or two?
  • Make disclosures hard to miss (clear and conspicuous). Disclosures must appear clearly and conspicuously so they are hard to miss. Ensure the disclosure appears before the “more” link or button in digital marketing, and “above the fold” in printed marketing – consumers should not have to click anything or take any additional action to see the disclosure, i.e., they should not have to look for it. Make sure the disclosure stands out. Don’t put it in a string of tags/hashtags, as it’s more likely to be missed (i.e., it’s not conspicuous) – ensure it’s separated out, such as at the start of the advertisement, or in bold and separated with a divider (“|”) before the other hashtags at the end. In an image, superimpose the disclosure in a way that’s easy to notice and easy to read in the time a viewer is looking at the image. In videos, ensure the disclosure is on screen long enough to be seen, read, and understood by the viewer; for longer videos, consider repeating the disclosure at appropriate intervals. Don’t combine your name with “ad” in a hashtag as it makes the fact that the post is an advertisement easier to miss. If a social media platform offers a disclosure tool, it’s up to the endorser and the company/advertiser to ensure that the tool provides a clear and conspicuous disclosure of the material connection, otherwise they should use a different disclosure.
  • Companies/advertisers must educate and monitor their influencers, trusted sources, and other endorsers. The FTC has specifically noted that companies and their advertisers have a responsibility to educate their influencers, trusted sources, and other endorsers on the rules and requirements for making endorsements (including disclosing material connections), and for monitoring what those parties are doing from an endorsement perspective. Ensure you have a well-documented enforcement process and that it is being followed. Companies should ensure their social media/brand ambassador policies address posts and other communications by influencers and other endorsers, and provide the policies to their endorsers. Companies that do not currently have such policies should strongly consider putting them in place.
  • Remember the bigger picture – deceptive and unfair trade practices. All parties in the endorsement ecosystem should remember that the Endorsement Guides and the Endorsement FAQs are built on the foundation of the FTC Act and the FTC’s authority to regulate advertising practices, and are designed to help businesses and endorsers avoid endorsement activities that constitute deceptive or unfair advertising prohibited by the FTC Act. The concept of clear, conspicuous, and unambiguous disclosures applies to, but goes far beyond the ecosystem of, endorsements.

Finally, remember that changes to the Endorsement Guides and Endorsement FAQs are far outpaced by change in the world of online marketing. Pay attention to the release date of all FTC documents and guidance, and remember that the FTC’s answers were based on the world as of that date. If an assumption or a fact cited by the FTC in its answer is inaccurate or otherwise out of date, talk with marketing counsel as to the impact on the FTC’s stated position. If you’re looking for guidance on how to apply new technologies or marketing approaches to endorsements in a compliant fashion, think of the Endorsement Guides and Endorsement FAQs as tea leaves which can be read to help you take the temperature of how the FTC is likely to view that new technology or approach. The best thing parties in the endorsement ecosystem can do is to be familiar with the Endorsement Guides and Endorsement FAQs and use them to guide their endorsement strategy and approach to keep them in the middle of the herd from a compliance perspective.

Eric Lambert has spent most of his legal career working in-house as a proactive problem-solver and business partner. He specializes in transactional agreements, technology/software/e-commerce, privacy, marketing and practical risk management. Any opinions in this post are his own. This post does not constitute, nor should it be construed as, legal advice. He is a technophile and Internet evangelist/enthusiast. In his spare time Eric dabbles in voice-over work and implementing and integrating connected home technologies.

7 Tips to Avoid the Pitfalls on the Path to Marketing Success

Marketing in the 21st century encompasses a variety of printed marketing materials, online websites, blogs, case studies, text marketing, digital advertising, social media, and other digital, print and audiovisual materials. Its purpose includes providing information to current and potential customers, investors, and the public about your company, its vision, its goals, and its products/services; demonstrating thought leadership; building goodwill, credibility and trust with your target markets; and driving interest in your company and its offerings. It is a critical channel for generating new customers/clients, new revenue, and new value for investors and shareholders. Companies have a natural propensity to tout themselves and their products in the best possible light in their marketing, accentuating the positive and eliminating the negative. However, there are a number of common mistakes companies make in their marketing that inadvertently land them in hot water.

Think of the execution of your marketing strategies as walking a path on a mountain ridge. To the left are the legal and regulatory pitfalls. These include deceptive, unfair or unlawful advertising practices under federal and state law; native advertising issues; false advertising, trademark, and unfair competition claims by competitors; and the like. To the right are the contractual and customer relationship pitfalls. These include claims for fraudulent inducement to contract or material misrepresentation in your marketing materials, and clients/customers asserting a right to rescind their contract or commence legal proceedings against you, affecting your company’s revenue and reputation.

There are ways to navigate this path safely. Here are 7 key tips to help stay on the path to happy clients/customers and increased revenue.

1) Be transparent, truthful, and clear.

The easiest way for a company to get into trouble over its marketing practices is to be untruthful, unclear and/or misleading. The FTC and state attorneys general rely heavily on federal and state laws prohibiting deceptive and unfair trade practices as their “multi-tool” for cracking down on companies for marketing violations. According to the FTC, an act or practice is considered “deceptive” if it contains a material misrepresentation or an omission of information that is likely to mislead a reasonable customer.

To avoid transparency issues, make sure your marketing collateral and messaging includes all material facts and disclosures that a reasonable person would expect to see. For example, there are disclosures required under federal and state laws around “negative options” such as an auto-renewing subscription offer; there are opt-out and other disclosures needed for certain commercial email messages; if there are dependencies for your call to action (e.g., you must purchase a support package if you purchase a license to your company’s software), disclose them.

To avoid truthfulness issues, verify or qualify any facts or assertions you are using in your marketing. Keep a folder with documentation backing up your marketing facts and assertions. If you don’t have or can’t find the supporting facts, consider adding qualifications to your marketing statement.

To avoid clarity issues, marketing should be well-organized and well-formatted, written in short sentences with simple words and an appropriate level of detail, so that the information you are trying to convey is easily understood. Write from the perspective of the reader – is your marketing message(s) clear to someone who does not know much (if anything) about your company and its products/services?

2) Ensure your marketing meets design and functionality requirements.

One of the biggest mistakes companies make is assuming they know how their target audience will respond to their marketing, or worse, not thinking about it in advance at all. Proactive testing of marketing strategies before launch has parallels to performing user acceptance testing (UAT) in the software world. UAT is the process by which a deliverable is tested by actual or simulated users to validate that the deliverable meets its design and functionality requirements. Just like software UAT, before releasing marketing collateral and messaging it is important to validate that (a) it includes all important details, meets all legal requirements, and contains all legally required disclosures (the “design requirements” equivalent), and (b) it clearly and effectively delivers the marketing message such as a value proposition and/or call to action to its intended audience, and generates the target return on investment (ROI) or return on ad spend (ROAS) (i.e., “functionality requirements” equivalent). Investing time and energy to test your marketing, and incorporating feedback to ensure it meets its design and functionality requirements, will help it deliver the best possible ROI/ROAS.

3) Be careful using images of people or copyrighted works of others.

It’s often easy to grab a picture from Google Images or other online websites for use in marketing and social media. But remember, just because something is available online does not mean it is in the public domain, free to use. Even if you were not the person who originally posted a picture or other copyrighted content online, you could be liable for your use of it. (Even if you have an “innocent infringer” defense, you may still have to prove that in court, costing you and your company time and money.) Consider acquiring images for marketing use from a reputable stock photo company such as Getty Images, and ensure people whose images you capture for marketing use have given you a signed release and right to use the image. In general, you can’t use someone’s name or likeness to state or imply they are endorsing or promoting a product without their permission. Also, remember that images you use should not imply endorsement of your company’s products or services by a person without that person’s consent. Duane Reade, a drugstore chain, learned this lesson the hard way recently when they were sued by Katherine Heigl for $6 million after they used an image of her in a tweet without her permission.

4) Avoid unsubstantiated superlatives and figures.

Companies sometimes fall off the marketing path by using superlatives and figures that they can’t substantiate. One of the bedrocks of FTC policy is the FTC Policy Statement Regarding Advertising Substantiation. Under this policy, objective product/service claims “represent explicitly or by implication that the advertiser has a reasonable basis supporting these claims.” A “reasonable basis” depends on factors including the product which is the subject of the claim, the type of advertising claim, the consequences of a false claim, and the benefits of a truthful claim. Failing to have support for your claims is a deceptive and unfair trade practice under §5 of the FTC Act. Watch out for figures and superlatives such as “the best,” “the quickest,” etc. Make sure you have a reasonable basis for your superlative and data to back up your figures. For superlatives you cannot back up with documented facts (e.g., “a leading” vs. “the leading”), consider whether a comparative would work better (e.g., “easier” vs. “easy”, “more cost-effectively” vs. “cost-effectively,” etc.) As noted earlier, if a specific number is cited, ensure you have documentation for that specific number. If not, qualify it or generalize it (e.g., “approximately X,” “more than Y,” “less than Z,” “A to B”).

5) Avoid quoting quotes.

Just like images, it can be easy to find great quotes, facts and figures through an Internet search. If you are under a deadline or have a limited marketing budget, it might be tempting to find an article which cited the study and then cite to that article. However, beware of “quoting the quoter.” Quotes and cited facts/figures should be substantiated by the source material, not an article quoting the source material. If you quote a quote and not the source material, you run the risk that the author of the quote changed or misquoted the source material in their article. For example, suppose you’re looking for a statistic that at least half of participants in a study believe that the demand for products in your market segment will double in the next two years. You find and quote an online article citing research that 50% of respondents stated exactly that. What you didn’t know is that the number is really 46%, and the author of the article you cited decided to round up to 50%.  This inaccurate quote could cause significant headaches if the inaccuracy proves material to your marketing message or value proposition.

6) Tread carefully when using product endorsers and native advertising.

Native advertising, as defined by the FTC, is “content that bears a similarity to the news, feature articles, product reviews, entertainment and other material that surrounds it online.” For example, a featured article on a website that looks like an objective article, but is in fact an advertisement for a product or service written by or for the product or service provider, is native advertising. Native advertising uses the appearance of authenticity to drive interest in a product or service. This is also its Achilles’ heel. If it is too difficult to distinguish native advertising from surrounding content, it may be considered deceptive; the FTC looks at the “net impression [an] ad conveys to consumers” in determining deceptiveness. If an ad misleads a consumer by stating or implying that it’s not advertising, it’s likely deceptive. Native advertising must be accompanied by clear and prominent disclosures as to the source and/or sponsorship of the advertising to avoid misleading consumers, such as “paid content” or “advertisement” or “sponsored” disclaimers next to native advertising content or links. The FTC’s Native Advertising Guide for Business contains clear guidance on how to avoid running afoul of native advertising traps.

Similar issues have arisen with respect to “product endorsers,” people who endorse a product, brand or company. While paid celebrity endorsements (think Michael Jordan for Nike and Hanes, William Shatner for Priceline) are clearly paid to do so, companies also use employees, and non-employees such as bloggers and online personalities, to promote and drive interest in their products. Companies also run contests and sweepstakes through social media to drive awareness and increase buzz for their products. But content posted by employee brand ambassadors, compensated non-employee endorsers, and participants in a promotion who fail to identify their content as sponsored or paid may be deceptive and misleading in the eyes of the FTC (as Cole Haan discovered when they ran a Pinterest campaign to drive interest in their Wandering Sole product) and state attorneys general. The FTC stated that a “material connection” between a marketer and an endorser must be disclosed “if the relationship is not otherwise apparent from the context of the communication that contains the endorsement.”

7) Avoid statements that are forward-looking or may trigger a Regulation FD disclosure requirement.

Finally, if you work for a public company, SEC laws and regulations impose additional restrictions on what you can and cannot say in your marketing communications. Watch out for “forward-looking statements,” statements of potential or projected future events as expectations or possibilities. Saying “we plan on adding a European office in 2019” or “we expect to double our manufacturing capacity in the next six months” are likely forward-looking statements. Forward looking statements can lead to securities litigation unless accompanied by cautionary language required by the statutory “safe harbor” for forward-looking statements by public companies. Additionally, it’s important to ensure any targeted marketing or social media posts do not inadvertently selectively disclose material, non-public information about your publicly-traded company, which is prohibited by SEC Regulation FD (Fair Disclosure). For example, if an employee posts a picture while on-site at a prospective major new client, and the client’s identity can be determined by a logo in the background the employee did not see, the potential relationship inadvertently disclosed by the social media post may trigger the need for a Regulation FD disclosure.

Eric Lambert is Assistant General Counsel and Privacy Officer at CommerceHub, a leading cloud services provider helping retailers and brands increase sales and delight shoppers by expanding product assortment, promoting and selling products on the channels that perform, and enabling rapid, on-time customer delivery. Any opinions in this post are his own. This post does not constitute, nor should it be construed as, legal advice. Eric works primarily from his home office outside of Minneapolis, Minnesota. He is a technophile and Internet evangelist/enthusiast. In his spare time, Eric dabbles in voice-over work and implementing and integrating connected home technologies.

“Consumer Disclosure Icons” in Mobile and Social Marketing

The advent of mobile and social marketing has created a significant headache for attorneys and marketers alike.  The FTC has stated that consumer disclosure requirements to avoid deception (e.g., ensuring that disclosures are clear and conspicuous, are in close proximity to the statement requiring the disclosure, are sufficiently prominent, are in understandable language, are not hidden behind a non-descriptive hyperlink, etc.) apply to marketers regardless of the medium in which they are delivered.  Whether you’re delivering a marketing communication via email to a desktop computer, via social media, or to a mobile or wearable device, these rules apply.

The result is an understandable tension between attorneys trying to ensure that required disclosures are being made to control risk, and marketers seeking to deliver a compelling message and CTA (call to action) in a limited amount of space.  Attorneys need to partner with their marketing brethren to find creative solutions to achieve both goals.

One idea for common ground here from an industry perspective worth pitching is to develop a set of standard “consumer disclosure icons,” or CDIs, that use a single character to denote a standard marketing disclosure phrase, e.g., “additional purchase required,” “no purchase necessary,” “subscription required,” “terms and conditions apply,” “sponsored promotion,” “paid advertisement,” etc.  These could be something as simple as a set of initials in a box, such as the following for “no purchase necessary”:

NPN

Using these as a single character in a standard browser font would mean each CDI only takes up one character in a text-based communication, freeing up valuable real estate for the communication itself.  Each could be a hyperlink to a page with explanations of the meanings of standard CDIs.  Companies would want to use them consistently, e.g., at the end of each paragraph with claims triggering a disclosure.

CDIs would not work for non-standard disclosures, and companies would need to be careful not to improperly use CDIs where a custom disclosure is required.

Through efforts such as “Operation Full Disclosure” in September 2014, the FTC is looking to the industry to demonstrate their compliance with standard consumer marketing requirements even as the medium in which these messages are delivered continues to evolve (and shrink in size).  Devising a set of consumer disclosure icons for common disclosures in visual mobile and social marketing may be a solution embraceable by marketers, attorneys and regulators alike.

The Pros, Cons, Do’s and Don’ts of Competitor Keyword Bidding

Companies regularly bid on their own keywords, and generic terms related to their business, as part of their overall paid search strategy.  Bidding on competitors’ keywords (company name, brand names, product names, etc.) in paid search advertising is also a common practice. Google has allowed companies to bid on third party trademarked terms since 2008.  Plaintiffs have had an increasingly difficult time in recent years winning trademark infringement cases involving competitor keyword bidding.  Many companies appear to have adopted an “if you can’t beat ’em, join ’em” approach.  So should your company be bidding on competitors’ keywords too?

The answer, as is often the case, is, “maybe.”  There are many pros and cons to bidding on competitors’ keywords, and do’s and don’ts, to keep in mind.

  • PRO:  Bidding on competitors’ keywords targets your company’s market and promotes brand awareness.  Companies can use competitor keyword bidding to advertise to persons looking for similar products and services, helping to ensure your products are reaching the broadest possible market.
  • PRO:  Bidding on competitors’ keywords presents alternatives in the marketplace. Competitor keyword bidding helps ensure your company’s name and brand is presented as an alternative to someone searching for a competitor’s products.  This provides consumers with choices on available products and levels the playing field (especially when your competitors are bigger than you).
  • PRO:  Bidding on competitors’ keywords is often less competitive.  Competitors’ keywords are generally less competitive than generic terms, as fewer companies bid on them.
  • CON:  Bidding on competitors’ keywords could trigger a bidding war.  If your competitor isn’t already bidding on your company’s keywords, it may take an “eye for an eye” approach and start bidding on your company’s keywords, driving up your own paid search listing fees.
  • CON:  Competitors’ keywords generally result in a low click-through rate, which can have consequences.  The click-through rate (CTR) for listings triggerest by a competitor keyword can be low.  For Google, failing to achieve a strong CTR on an ad campaign can affect your company’s AdWords Quality Score (QS), driving up the company’s overall Cost Per Click (CPC) for paid search listings.
  • CON:  While litigation over competitor keyword bidding is unusual these days, it’s not unheard of if you don’t carefully follow the rules.

If you decide that the pros outweigh the cons and want to dive (or wade) into competitor keyword bidding, here are some Do’s and Don’ts to consider:

DO differentiate your company in the ad creative by including a clear offer or unique selling point to draw potential customers away from the company they were looking for.  Find a way to differentiate yourself and present a value proposition in your ad to get a potential competitor customer to look at you instead.

DO always mention your company’s name advertisements served via competitor keyword bidding.

DO check competitors’ keywords for alternate meanings (e.g., through Google Suggest and Google Search).  Other meanings could mean serving ads to persons searching for an alternate meaning, resulting in a low CTR.

DON’T use dynamic keyword insertion for a campaign involving a competitor’s keywords.  Not only is it a violation of Google’s AdWords policy, it can potentially expose you to trademark infringement claims.

DON’T mention a competitor’s name in your own ad copy served through competitor keyword bidding, or use it in a way that could cause a consumer to think you’re somehow associated with or sponsored by your competitor.

DON’T be deceptive, confusing or misleading, or make unsubstantiated claims, in your advertising creative or design (it’s never a good idea to try to trick someone into clicking on your ad).

Finally, DON’T try to outbid your competitors for their keywords.  Try to be #2 or #3 on the search results page to avoid a higher bounce rate and Quality Score impact.  Avoid starting a keyword bidding war — there’s never a winner, and the 1982 movie WarGames said it best (“the only winning move is not to play.”)

AppChoices – Behavioral Advertising Controls Gone Mobile

Online behavioral advertising (also known as “interest-based” advertising and “targeted” advertising) is the use of information collected about an individual’s online behavior (e.g, web browsing history) to serve online advertisements through ad networks tailored to that individual’s interests. Online behavioral advertising is broken into two categories — first party (online ads served on a website based on an individual’s online behavior on that website) and third party (online ads served on a website based on an individual’s online behavior on other websites). Online behavioral advertising is designed to increase the click-through rate by serving ads of greater interest to consumers.  Studies have shown that a majority of consumers prefer targeted online ads over irrelevant ones.  However, behavioral advertising also raises privacy concerns, as to deliver targeted advertising to an individual you need to collect information about that individual (and the scope of collected information could be broad, potentially including sensitive information).

Back in 2009, the FTC released a report on online behavioral advertising recommending industry-self regulation of third party online behavioral advertising (and implying they would step in if industry self-regulation was ineffective).  In response to the FTC’s report, a group of advertising and marketing trade associations including the Direct Marketing Association, Interactive Advertising Bureau, Better Business Bureau, and Network Advertising Initiative formed the Digital Advertising Alliance.  The DAA developed the “AdChoices” program to provide consumers with the ability to control whether data about them can be used for third party online behavioral advertising purposes.

The primary consumer-facing aspects of the AdChoices program are (1) the DAA Icon, an “i” in a triangle, which companies can use to provide more prominent notice of that company’s interest-based advertising practices; and (2) the Consumer Choice page, a web page introduced in 2010 through which consumers can opt out of the collection and use of web viewing data for online behavioral advertising and other applicable uses.  It’s a good idea for companies to include a link to the Consumer Choice page in their privacy policy.

Since 2010, more and more advertising (including behavioral advertising) is served through ad-supported mobile apps. As a result, last week the Digital Advertising Alliance (“DAA”) introduced two enhancements to the AdChoices program to extend it to mobile apps:

  • The AppChoices mobile application, available for Android and Apple devices, that gives consumers the ability to opt out of the collection of app usage data for online behavioral advertising and other applicable uses.  The AppChoices app can be downloaded from major app stores.  The DAA hosts a page with app store links at http://www.aboutads.info/appchoices.
  • The Consumer Choice page for Mobile Web, an updated and mobile-optimized version of the current Consumer Choice page.

The purpose of the DAA is to demonstrate to the FTC that industry self-regulation of behavioral advertising works.  The industry groups forming the DAA know that if they fail in their mission, the FTC will step in to regulate behavioral advertising.  FTC regulations on behavioral advertising would likely be more onerous than the current self-regulatory principles, and may favor privacy protections over the benefits of targeted advertising to consumers and businesses. This is why businesses should be rooting for the DAA to succeed, and should support their efforts. Look for a major push from the DAA and its member groups to drive increased adoption and usage of both current and new self-regulatory tools in the marketplace.  Companies should consider including updating their privacy policies to include information about the AppChoices download page as well as a link to the Consumer Choice page.