Ellen Goodman on peer advertising

Ellen Goodman, Rutgers-Camden, Peer Promotion and Advertising Law. Advertising Age picked “the consumer” as the Agency of the Year for consumer-generated advertising. There are dramatic decentralizing shifts in the creation and distribution of information, including advertising. This has costs and benefits advertising law is not well-prepared to address.

Peer promotions present for advertising law the same challenges that distributed digital communications have for IP – can regulatory purposes be achieved when authorship is in flux and control is difficult? Marketers seek consumer-produced ads to create buzz around the brand and break through the clutter. Chevy allowed users to create their own promotions for the Tahoe, and some users mocked the Tahoe for its gas consumptions; executives insisted this was the price that had to be paid for engagement. Hoping to get the benefits of buzz and still retain control, marketers this year ran a contest to create amateur Superbowl ads.

Other forms of peer-generated marketing: wikis and blogs about products. People express enthusiasm while having no economic interest in the brand – for example, consumer imaginings of what the iPhone would look like before it was announced. Mixed production also exists, as with the Mentos/Diet Coke video that was peer generated but then advertiser adopted. User testimonials solicited by the advertiser – Volvo will now post both positive and negative comments on its official site. Peer-generated content may even be advertiser sponsored, as with a blog that told the stories of happy and grateful Wal-Mart workers sponsored by “Working Families for Wal-Mart,” which itself is sponsored by Wal-Mart. The author insisted that this was his own authentic, noncommercial speech, and that Wal-Mart funding was no different from being paid by a newspaper.

False peer marketing – advertiser-generated, but looks like peers. For example, a fake blog run on behalf of the Sony PSP. When Sony’s ownership of the domain name was made public, Sony took the blog down. Marketers have been more savvy on MySpace, creating “friends” to try to get buzz.

These developments are extensions of integrated marketing – integration between ads and PR; integration between consumer and brand; integration with branded entertainment; buzz marketing and peer-generated promotions are applications of the theory of total integration. It’s a third stage of marketing innovation, following innovation and then image advertising.

At each stage, law has had to ask how marketing can cause harm and whether regulation is worth the costs it imposes. Informational advertising prompted the development of the FTC and state regulation. The rationale is a search costs one: good information helps consumers and bad information hurts them, so we try to sort. Information theory quickly identified image advertising as beneficial to consumers as well – advertising is expensive, and so it’s a signal to consumers of product quality. But it may create false images, such as the association of Marlboros with masculinity, and may be far more persuasive than informational claims. But the law reflects the conclusion that this kind of harm isn’t within the law’s power to address without a factual claim; it’s too hard to regulate and too dangerous for free speech.

The effort to balance consumer harm and free speech is central to regulating integrated advertising as well. The Supreme Court allows regulation when the noncommercial elements are easily separable from the commercial. Nike rebutted child labor allegations in an integrated campaign that used ads, PR, communications with large-scale buyers, and other formats. Nike got sued, and the California Supreme Court held that false advertising law applied to some of Nike’s communications. This was a fairly faithful application of the mixed-speech case law, even though it’s been much criticized. It’s consistent with courts’ determinations of what’s commercial speech under the Lanham Act.

Doctrinally, applying advertising law seems relatively straightforward. Pure peer promotions are noncommercial speech; the consumer doesn’t stand to benefit from the transaction s/he suggests you enter into. This doesn’t mean there’s no harm – there can be all sorts of material misstatements. But even more than with image advertising, regulation’s costs would outweigh its benefits.

Once the advertiser adopts the peer-generated ad as its own, as with Superbowl ads, this would seem to become the advertiser’s speech, and purely commercial; the original source of the production doesn’t matter. The same can be said for false peer promotion. Far more difficult is peer-generated, but advertiser-sponsored, speech – like the Wal-Mart blog.

Authorship is not clear: if the consumer doesn’t know an advertiser is speaking, is the risk to the consumer greater or less? Is regulation more or less likely to chill speech? The law hasn’t addressed these issues yet. Advertisers assume that peer ads are highly credible, which supports regulation because it indicates that consumers are more likely to be misled. But if consumers are the real authors, then this means regulating noncommercial speech.

Maybe peer advertising is not credible, because consumers don’t believe the source has any special knowledge. In that case, the claims wouldn’t be material and false advertising law wouldn’t apply. Widespread skepticism could undermine the basis for all false advertising law; if nothing is believed, then no ads are materially false and regulation has no purpose.

Goodman believes that the harm of hidden sponsorship is a discourse harm, not a consumer harm. Hidden sponsorship destroys our trust in sincerity. The remedy is widespread sponsorship disclosure, currently embedded as a norm in journalism. The sponsor should disclose a relationship when consumers might not understand that the relationship exists and might be fooled.