Are the New FTC Rules the Death of Internet Marketing?
A couple of months ago I wrote a couple of blogs post about the FTC investigations that could have implications on Internet Marketers; see You May Be at Risk, Don’t Let the FTC Shut You Down, Part 1 and You May Also Be at Risk for This, Don’t Let the FTC Shut You Down, Part 2.
I promised to follow up when there was more information.
On October 5, 2009, the U.S. Federal Trade Commission (FTC) approved finals revisions to some guidelines that will have an impact on Internet, and other, marketers; guidelines that haven’t changed since 1980 – almost 30 years ago!
The changes can have a SERIOUS affect on marketers who use testimonials; at least those who use specific types of testimonials, a well as those who get/do reviews and endorsements; with hefty fines involved.
The World As We Knew It
So many people use testimonials from customers that say they got good, specific results from one of your products. Maybe it was:
- I earned $13,284 in just 4 weeks using …
- I lost 53 in 10 weeks following …
- My son raised his grade point average 1.6 points after getting …
- I got 38,912 new Twitter followers just by …
- etc.
Sounds familiar?
I know you’ve seen them and, if you’ve been marketing for any time at all you’ve used them because they attract people and they improve your conversion rates.
Under the old guidelines just including a “results not typical” statement was enough to protect you; it was something that was called the “safe harbor”.
Well, my friends, there is no more safe harbor.
A Brave New World
The new FTC guidelines now say that a safe harbor does not protect you.
They say, “advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect.”
Before you say that you never say those are typical let me tell you that first, you’re halfway fooling yourself (truthfully, don’t you want the prospect to think that the results are typical and you only use the “results not typical” because you had to not because you wanted to).
Second, the FTC doesn’t care.
If you use any specific information from a “consumer”, it will be presumed to be conveyed as typical; guilty without presumption of innocence.
What you need to say is what typical results might be, for example:
- I earned $13,284 in just 4 weeks using … Of course, the average person doesn’t even look at the product and just wastes their $997.
- I lost 53 in 10 weeks following … Paula’s results were the best we ever heard of and most people actually gain 10 pounds as they sit around eating high fat, high calorie foods while skimming through our products
- My son raised his grade point average 1.6 points after getting … Bobby is so rare that we don’t even believe it and anyway, that was just for one quarter and now his GPA is below what it was.
- I got 38,912 new Twitter followers in 1 month just by … Great job Shelly, too bad you got banned. Fortunately, most people don’t get banned getting their 6 new followers in a month.
While it’s obvious I’m being facetious in those examples the truth of the matter is that you’ll need to specifically say what a typical consumer can expect.
This means 2 things:
- You actually need to know that information
- You need to be honest and brave enough to show the real results
Otherwise, you’re going to be paying a 5-figure fine per violation.
What Can You Do?
There are several things you can do, each with advantages and disadvantages.
Say “Let ‘em Find Me”
Just keep using the testimonials and let the FTC find your ads and then find you.
Advantages are that you’ll continue to reap the benefits and it actually may be hard to find and prosecute you.
Disadvantages are that, well… they’ll find and prosecute you and shut down your business and strip you of all your worldly possessions.
Not the option I’d choose.
Keep Using the Testimonials and Comply
If you can show consistently good “typical” results this is a great option.
It can still be a powerful conversion technique to be able to say something like “John earned that $13,284 in 4 weeks but, to be honest, most people don’t do that well. The average person earns $2,533.79 in 4 weeks but imagine how you’d feel doing that (and, who knows, maybe you’ll be the next John!)”
Advantages are that you still have a great tool in your sales tool box and the honesty may actually get you more sales.
Disadvantages seem to me to be that you may lose sales and that, over time, the FTC may require you to keep that “typical results” updated; I really don’t know if they will but it makes sense they would or the guidelines don’t really have much meaning and would be easy to get around.
Definitely an option I’ll use where applicable,
Stop Using Those Testimonials
You can stop using those types of testimonials.
The guidelines don’t have a problem with general testimonials “I’m very happy with mu purchase” or other general comments about your product or you.
They can be powerful, particularly when used strategically and some people don’t think those specific testimonials are that helpful anymore in our more jaded society.
Advantages are you don’t have to worry about these new guidelines.
Disadvantages is that if specific testimonials were a key part of your sales pitch you’ll lost sales or need to rewrite your sales copy (hmm, that may not be a negative).
I’ve always used general testimonials and certainly will continue using them.
Figure Out How to Get Around the Guidelines
I am sure there are loopholes that could be exploited.
You and your lawyers could figure out what they are and use them.
Advantages are you’d still get the benefits, at least until the loopholes are available.
Disadvantages are that you’re wasting time trying to scam the system rather that marketing and you may spend a lot of time and money in court even if you win.
To me this is foolish, like all those people who spend time fighting progress instead of using it to propel them forward.
Use Testimonials as Icing Not Cake
Ultimately, as Gary Halbert said, it is the offer that is the most important thing.
Make sure your offer is so good that you don’t even need testimonials.
Over deliver on the value and while testimonials might help a little the percentage will be small and you won’t need to violate the guidelines.
Advantages are that ultimately you’ll make more money in the long run and build a stronger business.
Disadvantages are that it will take more work on your part to create and maintain a high value offer.
I love this option because it is what I have been doing and preaching.
Quit Marketing
Yeah, this is a weird option but one that some people will take.
Fortunately, most of those people weren’t honest, ethical marketers just people muddying the waters so having them gone will benefit people like you and I who are out to try to screw people around.
Advantages are … umm … hmmm … they don’t have the hassle of picking one of the other options (sorry that was the best I could come up with 
Disadvantages include the loss of business and income.
I am NOT quitting but will be taking advantage of this opportunity to improve what I do.
That Isn’t All
The guidelines also made changes to another common method marketers use: the paid or celebrity testimonials.
While a “material connection” between a endorser and an advertiser had to be disclosed, although it wasn’t always, particularly with Internet Marketing, it is now more explicit so that even bloggers who write reviews, or make other endorsements, for some kind of payment (cash or “in-kind” payment) must explicitly say that there was “payment” for the review.
So, if you write a review/endorsement for a friends product and they write a review/endorsement for yours or if you give someone a free product to review or endorse then that must be disclosed.
Don’t disclose and you’re liable.
The FTC also made clear that “celebrity” endorsements must be particularly careful to disclose any “material connection”, even if they just mention your product in a blog post or Squidoo Lens or even a Twitter Post.
Beware if you use this type of connection between colleagues and friends.
Questions, Questions and More Questions
Some questions you might ask yourself are, what if you comply but some (or even one of) your affiliates don’t, are you liable?
What if you are an affiliate? There is an indirect material connection in that you get paid for your, essentially tacit, recommendation but only if a sale results.
Does that apply in this case?
What if the offender is not in the U.S., will you be held liable even though the FTC can “get” the other person?
What if you are not U.S. based, should you comply anyway?
Or, if you are U.S. based, does it put you at a disadvantage to competitors that are not U.S. based since they may be able to continue to use specific testimonials that could lead people astray whereas you can’t?
Will the prospects buy the “made $13,284” instead of the “made $13,284 but…”?
I don’t know any of the answers to these and other questions but you should be thinking about them and finding out your own answers.
Conclusion
The unanimous approval by the FTC on these issues means they’re pretty serious about them and you’d be wise to be sure you comply; particularly if you are a successful direct marketer; you can read the FTC press release here.
Either don’t use specific testimonials or back them up with actual data.
And be careful to disclose any “material connection” when you review a product or explicitly or implicitly endorse one.
The FTC is serious and the fines can quickly add up.
So is it the “death of Internet Marketing?” Despite some of the hype it isn’t, in fact, it should make it easier for honest and ethical marketers.
How does this impact affiliate marketing?
How does this balance the scales between U.S. and non-U.S. based people?
How does this impact you?
What changes will you make?
Did the FTC mess up?
Leave me a comment and let me know.
Talk soon,
David
The “Shameless” (but “Ethical”) Marketer
http://www.Twitter.com/DavidHusnian
http://www.8-8-8Sale.com
http://www.MusicForInternetMarketers.com
http://www.SecretsOfGoogleAdwords.com
http://www.MadMondaySale.com
http://www.2ForTuesdaySale.com
.
Hmmnn,,, Thanks heaps for this, great to know someone is on the ball!
I do worry if I give a freind a “rave review” without his knowledge, am I doing
him a diservice. This would not be fair, I mean, if I wanted to put someone out of business,
then this would be a weopon would it not?
I think I can only be responsible for what I put on my site.
If you dont have control of something, how can you be held culpable?
Shaz
Shaz,
Excellent point and the FTC says they’ll look at each on a case-by-case basis.
I think the unsolicited review wouldn’t be applicable, only ones where there was some material connection (meaning they were “paying” you in some way, cash, favor, etc.)
Of course, if you are an affiliate it remains to be seen how that will be viewed. I agree the reasonable view would be you can’t control your affiliates so you shouldn’t be liable.
But, I think we all know that laws aren’t always reasonable and fair so who knows
Thanks,
David
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Good thorough post, David. The FTC are doing … their JOB! Protecting consumers from unscrupulous con artists, and those who may be fairly decent, but are still taking too much license in their advertising.
I like that they’re doing their job, because as well being an IM’er, I’m also very often a consumer myself.
The fact is, and I think your post does a wonderful job of making this point, if you are honest in your marketing, you have little to fear. Still, we all should go back and take a good look over all our pages to make sure that we aren’t inadvertently out of compliance.
This is going to ultimately HELP our industry, not hurt it.
Phil
Phil,
I couldn’t have said it better myself; in fact, I didn’t
Thanks,
David
Very enlightening and timely. I have already gotten tired of these promises any way
and recognise the value in your suggestions as keeping everyone legal.
The change is a good one. If U.S. buyers comply and the others don’t, well bad on them I know who I will shop from. Honesty begets honesty.
How true.
And trust and honesty is a critical component of converting leads into subscribers/sales/etc.
David
I don’t know why this would be a surprise to anybody. I feel that it is about time that, what can only be called “false advertising”, the false hope testimonials stop. What happened to ethics in business? Those who purchase ready-made websites, that come with the product as a package, are asking for trouble. They have no idea, whatsoever, that the testimonials are real, made-up, or not able to be proven with actual fact. It is also contributing to the IM industry’s “black eye” of being a source of scam artists, people who are barely making enough to survive, let alone claim “5 figure” income days or weeks. Sure, there are those who have been very successful and accolades to them, but their results are far from the real world of the typical person seeking a living online. 8pt or grey colored text at the bottom of the page – the so-called “safe harbor” – is usually quite a bit below the BUY NOW button/link.
I just figured something out … personal ethics has kept me from becoming the next Internet Marketing Millionaire!
Of course our governments are no ones to talk by advertising heavily the multi-million dollar lottery winners and relegating the 1 in 10 million (or higher) odds of winning a lottery. They are worse at creating false hope that the IM industry ever could be.
We, the IM industry, need to clean up our act and, heaven forbid, act ethically!
I am all for the FTC’s new rules and regulations. It’s time that the scammers and con men are exposed for what they really are.
Remember, if any internet marketer has a problem with the new rules and regulations, you can be sure that these marketers are shady and unethical. Those who spend time and money trying to find loopholes in the rules and regulations instead of on their businesses are fools, and deserve to go out of business.
Besides, what can possibly be wrong in being up front with your customers instead of hiding behind shady practices and flim flamming the customers. There has to be something intrinsically wrong when being sneaky and using unethical methods to make money is considered SOP.
It’s just plain wrong, period.
Hopefully, honest and ethical internet marketers can now start making money now that the con men are out of business.
steve
After being asked for my advice on this topic by several of my members, I think I will just send them over to this post Davd, fantastic!
In fact you answered a lot of questions I had myself, so I appreciate that.
Ultimately I believe it will clean up the IM arena somewhat, and really single out the scammers.
Hi David,
Well presented posts and pretty thorough too – well done. My take on this (as a Brit and therefore not DIRECTLY impacted by this move):
1. The FTC is absolutely doing the right thing to monitor, review and institute appropriate guidelines/legislation on this to protect US consumers
2. They are however simply “peeing in the wind” if they institute such legislation unilaterally and in isolation
3. What power (other than abuse of power) do the FTC have to prosecute a non-US entity (not breaking any of their own region’s legislation) for such breaches?
4. How will the FTC police such issues? How can they protect US consumers from foreign breaches? The FTC has no remit or authority outside the US (Note: As I already stated the foreign entity may not be breaking ANY of their OWN legislation)
5. What would prevent a US citizen owning and operating a foreign company (i.e. a separate legal entity) that continued to operate such deprecated practices?
6. How would the FTC prosecute such a situation? Illegally, presumably, by prosecuting the company owner (i.e a US citizen) for practices undertaken by that completely separate and FOREIGN legal entity (the company)! This would break with all commonly held international practise where only the jurisdiction in which the offending party resides can apply the (local) rules of law against that party unless that jurisdiction has a relevant (and usually bilateral) extradition treaty with the offended legislature. This then begs the question though … how does one extradite a company (i.e. the legal entity actually accused of breaching the relevant rules/legislation)?
Here’s the problem (as if everyone reading this didn’t already realise!) – the web is global and although the US represents currently (probably) the largest single demographic area purchasing on-line products, China, Japan, Russia, India, the EU, South Africa and Australia are ALL now (or will be in the near future) consuming and delivering such products (both digital & tangible) in similar percentage and/or even greater absolute volume than the US!
The 150-plus million US consumer population approx (as opposed to total population) is but a small part of the global web-user population we have already. UNLESS the FTC (and the US legislature especially) starts to engage fully on an international level and gain consensus between both national and international guidelines and legislation in the major countries of the world, US consumers (and others!) will NEVER be protected properly or fully from such activity.
Personally, I hope the FTC achieves their goal by the use of strong guidelines rather than specific legislation. I also hope they achieve SOME measure of communication and consensus with the EU, China, Japan, India & Russia in particular, but I suspect THAT might just be wishful thinking on my part.
Really though, the bottom line OUGHT to be that old adage “Caveat Emptor” and perhaps also “If it seems too good to be true … it probably is!” Maybe the problem is NOT so much the people who use such devious & questionable marketing tactics but rather those numbties who believe everything they see in (electro-)print. (Numbties – pronounced num-tees = Brit polite slang for dumb-asses, derived I suspect from numb-nuts; nuts = both the ones atop their bodies AND the others (male) further down their anatomy)
I mean to say, the ONLY reason that spam is STILL a major issue is that IT PAYS because of those idiots who keep buying from the spammers and NOT because of, or despite, any legislation like the Can-spam act (have YOU seen any improvement (reduction) in spam as a result of THAT? Hmmm – interesting eh?
It will be interesting to see just what transpires.
Best regards.
Hi David,
I live in Australia and I am an internet marketer among other things.
Personally I hate testimonials and know they are not worth the space they take up on the site/page/wherever.
People also assume that everybody WANTS to be earning thousands of dollars, even though the more intelligent people know it is not possible without a lot of effort of either time/money or both.
To me this sounds like it will just make people become more honest and I think it is about time!
Thanks,
Laurence
In reply to Laurence and David
I also live in Australia and am tired of the US effectively forcing legislation on us, even though we are not in any way obliged to follow it, but for online operators, a majority of our customers tend to be in the states. Imagine if US businesses online suddenly had to comply with all of Australia, Europe and Asia’s laws regarding advertising in order to continue doing business – would they?
Having said that, I cannot stand testimonials either, scroll over them and tend not to believe them. In fact, the more I see, the less inclined I am to buy, but I already know I am not a typical buyer and respond very differently to most advertising in all media formats.
I’ve been in Internet Marketing for over a decade and have never used testimonials and don’t intend to start. As it was mentioned, if the product is good enough, testimonials are not really necessary anyway.
As with all laws, those that want to get around them will find a way; they always do. So it won’t really stop the practice, just send it in a brand new direction honest marketers would never come up with in a million years, because scammers if nothing else, are quite original thinkers.
James,
While the FTC guidelines aren’t about false testimonials but about real but highly untypical testimonials that doesn’t negate your points at all.
There are many people who abuse testimonials and use the safe harbor to protect themselves.
It certainly isn’t confined to us IM people or even Infomercial or back of the magazine people. I became aware of that when, some years ago, I was involved in a major marketing campaign by one of the world’s largest electronics companies who had hired one of the world’s largest ad agencies for one of their major launches — for a product that is still one of their most popular products.
We’re in this meeting one day and we’re talking about one aspect of the marketing campaign and testimonials come up and I’m thinking, “new product, no testimonials but there are ways to deal with that” when the lead ad guy says something like “okay, we’ll need to write testimonials about…” and the senior VP says “yes, but …”
I’m floored and thinking “that’s lying, that’s false advertising” but all I could do was get out a “what?!!???” before they moved on.
They did it though and it worked.
Oh yeah, I moved on.
David
I am still in the process of designing my website so I do not have an active link to list.
You mention that this will effect bloggers and affiliate marketer ads on a website, but what if a consumer signs up for your newletter and you promote an affiliate in the context your newsletter. Do you still have to state that you are getting a commission of some sort?
Deena
Bob,
Great perspective and questions.
I think you’re essentially right that the FTC can’t do anything about non-U.S. entities without some explicit agreement between countries although it is possible there are existing agreements that this would fall under giving it more weight in the world.
Of course, as you say, buyers should always beware not matter what laws and guidelines exist.
We’ll see what, if anything happens, but it probably will help some marketers who either didn’t think about what they were doing or who this “scares into submission” to be more overtly honest and better marketers by not relying as heavily on the specific testimonials and endorsements that are being addressed.
Thanks,
David
Rebecca,
You’re wise enough to understand that you aren’t selling to yourself and that these type of specific testimonials work very well.
All testimonials work to some extent and improve conversions so not using them at all seems counter productive to a marketers goals.
A good testimonial positioned properly in the sales copy does help most people feel more comfortable and marketing really isn’t much more than providing a great offer and convincing the prospects that you and the offer are genuine and they aren’t risking much if anything.
The “cake” (offer) is needs to be really good but it also doesn’t hurt to have some icing (the other stuff like testimonials)!
I agree completely that people will try to get around the new guidelines (and will succeed) and I certainly agree that the scammers can be highly creative original thinkers.
They can be a source of great ideas because much of what they do can be turned into useful, ethical techniques with just a little more creative thinking.
Hmm, does that mean they aren’t creative enough to take those extra steps?
Anyway, thanks for your perspective and thoughts.
David
Deena,
I’d say that’s an excellent question and one I hadn’t thought of but should have because I do some of that myself
Unfortunately, I don’t know. I don’t know if anyone knows how the guidelines impact your situation but a lawyer specializing in these types of matters can probably give you an opinion which would be hugely more valuable than any opinion I could give.
I will say that I don’t usually hide the fact that I get a commission on affiliate sales, although I don’t think I always explicitly state it either.
I have gone as far as saying something like “I’m going to make some money from this and if that bothers you I still think it is important enough for you to look at so here is a direct link”.
I even did a test “prove me wrong” once where I asked people on my list to show that most people aren’t greedy and don’t mind helping someone else get a little bit out of something that helps them.
It was a campaign where I said that and then provided 2 links, one an affiliate link and one a direct link, and I am happy to say I wasn’t proven wrong. Most people who clicked used the affiliate link although some people used the direct link (which, I will admit, saddened me).
Well, I’m rambling now, but you need to talk to a lawyer or just be open about getting a commission so it doesn’t become an issue; you will lose some sales though because of it (I couldn’t tell you why because I am very happy to have someone else who helps me get something out of it).
David
[...] Are the New FTC Rules the Death of Internet Marketing? [...]
David and Phil Morgan,
I appreciate your efforts to present the facts and to express your truea opinion on the possibilities. Phil has expressed my opinion better than I could have. I am glad to see this acion by the FTC.
At the same time, I am saddened by the very necessity of such sanctioning action in our industry. Honest has always been the best policy and will always be the best. These things get out of hand when one person starts stretching the truth, becomes a visably successful “guru” and begins teaching other marketers these unethical practices. Dishonesty begets more more dishonesty, etc, etc. We will all need to review our own ethics and make adjustments, as may be suggested by our own honest appraisal of our ethics.
My own appraisal of the use of Testimonials has been they are predictable, frequently unbelievable and for me, a total waste of time to read through. When I am the consumer, I just page down until those things are out of the way, so I can make my own assessment of the product or service offered. If I am the only one skipping them, I would be totally shocked to learn that.
Thanks again to you and to all who have added their comments,
*Jerry
Jerry,
Thanks for your comments.
I agree honesty is the best policy and reviewing ones ethics is a valuable thing.
Testimonials still work really well even if some of us ignore them.
For most people, testimonials still help them feel more comfortable with purchasing and every internal/psychological barrier you can remove the better you conversion rates will be.
Of course, everyone needs to do things the way they see fit but testimonials are one of a number of valuable tools in the toolbox of a copywriter and it seems a shame to neglect a tool just because some people use it badly.
David
David,
I’ve done a lot of reading of peoples’ statements & opinions about the new FTC rules…I have to say this is THE BEST explanation of the new guidelines I’ve seen!! Big Brother is now on the Laptop/Desktop whether we like it or not. Personally, as a product buyer, I’ve never used testimonials as a key element of my decision making process b/c I knew they are mostly hype and in many cases are…uhhh, well…blindly fabricated quid pro quo statements.
Thanks again…
Ross
Ross,
Thanks for the kind words.
I’ve read some things myself since I’ve written it and found some useful information as well as some people who didn’t seem to have read the guidelines press release at all
Sales copy is like that “death of a 1,000 cuts” thing, it takes a lot of little things to convince the prospect and testimonials are just one part of that. They do tend to work better outside the IM niche nowadays as we’re all so jaded.
Me, I believe Gary Halbert and Dan Kennedy and the like that ultimately the offer is the most important thing; although I still want testimonials to get that extra few percent.
David
hi there everyone
Well, my solution is to remain in the UK and keep my head down !!
However to be honest I have always tried to be honest with the sales speil on my websites, and the few testimonials which I do have on my sites are real genuine testimonials which I can verify should the need ever arise.
I have become increasing bored over the last few Years especially with all of those “Guru” Testimonial which are so fake its unreal !! This may make some of those so called “Gurus” be a little more responsible and honest about the products they sell and recommend to others.
So if any of you Guys want to do a partnership with me on a site that escapes the rules because it will be UK Hosted and Managed….just let me Know LOL…I,ll even arrange for a few testimonials.. LOL
geoff Lord
http://www.hyper-advertiser.com
Hey Geoff,
Thanks for commenting.
It should make people more honest and, as we’ve seen already, had an impact.
To make sure it’s clear about testimonials in the U.S., it doesn’t matter if the testimonials are real (frequently they are although frequently they aren’t) you still MUST say explicitly what are typical results if you have any testimonials that make specific results in it.
Even if you have 100 people on video with signed and notarized statements attesting to the validity of the results they quote, if those 100 aren’t representative of typical/average results then you must say what those typical/average results are; technically even if typical results are better
Don’t mean to beat that into the ground but I want to make sure that is clear.
Anyway, for those of you who don’t know, Geoff is one of the silent but very successful Internet Marketers. Super knowledgeable and a great person too whom I’d had the pleasure and honor to work with in the past and hope to do so again in the future.
He does seem to take one month vacations all over the world every couple of months though!
Thanks again Geoff.
David
[...] Don’t Fall for the Scare Tactics Brought On By the New FTC Guidelines Posted by David on Oct 18, 2009 in Other Stuff | Subscribe Hello there! If you are new here, you might want to subscribe to the RSS feed for updates on this topic.I didn’t plan on going into this anymore after my last blog post until there were new things to say but I continue to see a lot of hype that I think needs to be balanced out. [...]
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