Foursquare founder Dennis Crowley took a lot of ribbing yesterday for a comment he made to a blogger at an NYU panel discussion. The panel was called “The Case for Media Optimism,” and Crowley stated that he thought referral fees would be the next big thing in social media marketing.
For example, if someone Tweets about a new movie and 500 of his friends follow a link to buy a ticket for the movie, then the original referrer gets a kickback for each ticket. When asked if Foursquare was working on this idea, Crowley said it was on a long list of ideas under consideration.
Here’s where it gets sticky. Jeff Bercovici from Forbes.com asked Crowley how he would get around the FTC ruling that required full disclosure when an endorsement was offered on social media in return for payment of some kind (cash, product or service.)
Crowley was surprised. He hadn’t known that was the case, he said. He made a note to bring up the issue with Foursquare’s legal team, and thanked me for alerting him to a potential complication that could influence their decision about whether to move forward.
Gawker and other outlets picked up on the statement and replied with jeering remarks about Crowley’s intelligence and his ability to run a major company.
But the truth is, the FTC ruling may not apply in Foursquare’s case. Here’s the important section from the FTC’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
The Commission does not believe that all uses of new consumer-generated media to discuss product attributes or consumer experiences should be deemed “endorsements” within the meaning of the Guides.
Rather, in analyzing statements made via these new media, the fundamental question is whether, viewed objectively, the relationship between the advertiser and the speaker is such that the speaker’s statement can be considered “sponsored” by the advertiser and therefore an “advertising message.”
In other words, in disseminating positive statements about a product or service, is the speaker: (1) acting solely independently, in which case there is no endorsement, or (2) acting on behalf of the advertiser or its agent, such that the speaker’s statement is an “endorsement” that is part of an overall marketing campaign?
The way I read that, a person who decides to talk about a movie to their friends, then after the fact, gets a $15 Fandango gift certificate as a thank you, doesn’t constitute an endorsement and thus isn’t covered by the rule.
If Foursquare says to a member, we’ll give you a Fandango gift certificate if you checkin from your local theater and give a glowing report of the movie — that’s an endorsement and has to have a disclaimer.
Offering social media kickbacks for positive results is not a contract between the company and the user. It’s not a paid endorsement. Giving me a DVD for free in return for a review on my blog, is an endorsement.
So anyone who plans on poking fun at Crowley for not having the right answer to the question should think about this. He founded a multi-million dollar social media company that grew to 4 million users in just over a year. What have you done lately?