This guest post was written by Tom Chernaik, CEO of CMP.LY.
What happened recently to rapper 50 Cent after Tweeting from the floor of a trade show is a classic example of a shrewd entrepreneur using social media to get the word out about something that they believe in; and in this case, have a personal financial stake in. Unfortunately, without knowing it, by virtue of those Tweets, 50 Cent is now in the crosshairs of a great online debate.
The use of social media promotion to raise the share price of a fledgling company is certainly a concern, not necessarily from SEC regulations but, rather, under the FTC Guidelines for Testimonials and Endorsements. The guidelines, updated in late 2009 require endorsers to disclose when they have material connections to the brands and products that they promote. In this example, there certainly seems to be a connection that might come as a surprise to the average reader.
The FTC has been out the forefront of these issues. The Commission issued updated guidelines in late 2009 covering endorsements and testimonials in social media and word of mouth marketing. This applies to advertisers, as well as to their employees, agencies and influencers, who can all potentially be liable for a lack of disclosure in their communications.
Rapper 50 Cent’s recent Tweet from the floor of a trade show, where his “Sleek by 50″ headphones were being shilled, points to the challenges that marketers and regulators encounter daily in a social media context. The impact of the tweets, encouraging his followers to buy stock, is the cause for concern. His followers on Twitter acted on his Tweet. They bought stock in the publicly held company, enough to set off a wave of comment on his behavior and to bring to light that he, in fact, owns a substantial stake in that company.
So far, the FTC has announced two investigations with regard to the Endorsement Guidelines. In the first, Ann Taylor LOFT organized a blogger event using gift cards as incentives for posts without providing disclosure information or instructions to their influencers.
In the second, Reverb Communications was investigated for posting shill reviews for their client’s products in the Apple App Store. No enforcement action was initiated against Ann Taylor LOFT, as the first example. Reverb was not as lucky and their investigation resulted in a settlement and sanctions and restrictions being placed on the agency and the agency’s owner personally.
Compliance with the guidelines in Twitter and other digital platforms does not need to be complex. CMP.LY provides a disclosure framework that is simple to use and easy to understand, allowing users to manage process and regulatory compliance in all forms of social media marketing with documented audit trails. CMP.LY enables users to make clear and conspicuous disclosure statements in relatively few characters with an identifiable URL in a text-based environment such as SMS, Tweet or Facebook status update; or with a visual icon in a web page, blog post or HTML-based environment.
Social Times recently profiled CMP.LY.