An Open Letter to Online Ad Networks

Jul 28th

by Jonah Stein and Jonathan Hochman

The FTC recently announced guidelines for bloggers that requires that they disclose financial interests, freebies and paid reviews.  This decision is seen as a shot across the bow of pay per post networks and bloggers who are monetizing through affiliate programs.    The FTC has decided that compensation is the reason bloggers choose to write about a particular topic and that readers deserve to be informed about the financial relationship.    The FTC logic is simple, “As much as those bloggers who receive these gifts would like to claim this isn't the case, freebies like free laptops, trips, or gift cards are likely to influence a writer's opinion of a product.”  

On its face, the policy is defensible.   As crusaders against Virtual Blight, we applaud the intent of this decision.  Anything that raises the barrier to online scams, fraud and abuse even a little bit is a good thing. The FTC provides guidelines for responsible bloggers and theoretically eliminates a couple of the perks for bloggers, but it does virtually nothing to protect against fraud. 

Going after bloggers’ compensation to fight online fraud is reminiscent of the RIAA attacks on individual file sharers and is just as likely to succeed. The absurdity of the power and inertia of a government bureaucracy combating individual bloggers is only matched by the ludicrous assumption the government could ever move fast enough to keep up with professional scammers who jump from domain to domain, host to host and country to country with a few mouse clicks.  Prosecution could only be effective against mainstream bloggers with an established brand that are stationary targets, but these bloggers are not the right target.

Getting a proverbial free lunch in exchange for a presumably positive review may create the appearance that some bloggers are shills who lend their prestige and celebrity to their sponsors.  That perception is not unreasonable, but the same charge could be made against almost every athlete, actor, musician or American Idol runner-up who profits from our celebrity culture. 

Giving items to celebrities or other tastemakers in return for public exposure is a practice older than the printing press.   If the FTC really wants to send a message about compensated endorsements and freebies, the answer is not to go after the mommy bloggers who get a free 42-pack of diapers.  If the FTC were serious, they would begin arresting every actress wearing a designer gown to the Academy Awards and then round up the studio and network executives who rake in cash for product placements in movies and television shows.

Focus On Fraud

The statistics for online fraud are both staggering and predictable.  Instead of being distracted by the sizzling, sensational charges of payola that re-appear every generation, the industry needs to focus on the billions of dollars of online fraud committed each year.  According to the Center for American Progress, Internet-related consumer complaints are among the top ten in consumer complaints in 2008 and the number one complaint in four states.  These complaints run from auction fraud and non-delivery of ecommerce items to reverse billing scams.

By any definition, the perpetrators of online fraud are not bloggers.  If a review constitutes fraud because the reviewer was provided a free product or had some undisclosed relationship with the company who produced the product, then every journalist with a 401k full of mutual funds needs to hire a good lawyer.  Indeed, if bloggers are guilty of anything it is tabloid journalism -- writing low quality content with sensational headlines designed to attract visitors to their site in order to collect advertising revenue.  This may not live up to the highest journalistic standards, but the only crimes are against facts and the English language.

Criminals are the people and companies who create pyramid schemes, networks of spam blogs to sell diet products like Hoodia and Acai Berry cleanse, Google money trees and the myriad so called “free” offers that create recurring charges on your cell phone or credit card.

Criminals are the people who target kids’ sites to distribute Trojans, spyware and adware that infects our computers and tricks people into buying phony anti-virus products.  Most of us have either experienced malware nightmares ourselves or heard a friend’s sad story.  When online fraud is so prevalent, predatory and destructive, why are government resources being committed to pursue advertorial content?

Ad Networks Are the Key

The biggest thing these criminals have in common is that they perpetrate their scams by buying advertising through ad networks.  These networks have achieved the scale that makes it efficient for legitimate advertisers to reach millions of consumers and that makes them an ideal vector for scams, abuse and deception. 

In an unregulated auction-based advertising market place, fraudulent offers can often pay the highest bids for keywords. In FTC Going After Bloggers – Epic Fail, Aaron observes that ad networks that syndicate ads based on “maximizing yield efficiency“ are well suited to syndicate fraud. Advertisers of scams can afford to pay top dollar for ads because their profit margins are nearly 100%.

Ad networks are morally responsible as collaborators in interstate and international frauds perpetrated upon hundreds of thousands of victims each year.  Google, Yahoo, AOL, Microsoft and many others are far more culpable in consumers being defrauded than any blogger or network of bloggers.

In False and Deceptive Pay-Per-Click Ads, Harvard’s Ben Edelman estimated that as much as 70% of the revenue generated by some online scams actually wind up in the hands of the search engines.   He estimated in 2006 that Google and Yahoo were making over $200,000 a month from advertisements for screensaver software which contained spyware.  As of July 15, 2009, the top paid search results on Google for “screensaver” contain “add-on features” which include spyware, change your default browser settings, ad toolbars and otherwise aim to monetize by deceiving users.  Adding insult to injury, Edelman observes that many of these adware tools monetize by sending traffic through AdSense and DoubleClick, making Google a silent partner for adware companies like WhenU and Smiley Central.

Fight the Problems that Be

Scams and fraud not only harm the consumer, they foster the perception that the internet is not a safe place, hindering the growth of online business and delaying the transfer of marketing dollars from old media.  Instead of waiting for government agencies to step in and create regulations aimed at yesterday’s scams, as an industry we need to become proactive and develop a cooperative framework for mutual self-defense, a neighborhood watch designed to keep consumers safer while helping law enforcement focus resources on the most serious trouble makers.

The war on online fraud is going to be a huge struggle and one we are unlikely to ever declare victory.  The issues are complex, but the industry could significantly reduce the problem by creating a transparent mechanism to collect user feedback about advertisers.  Search engines and ad networks are quick to endorse behavioral targeting and social recommendations to boost earning per exposure.   For some mysterious reason, they have not applied these innovations to getting user feedback about advertisers.  

If the Internet is the cesspool that Eric Schmidt, CEO of Google says it is, one way to start cleaning it up would be to create a public reputation system for advertisers.  This would simultaneously reward honest companies while helping consumers protect themselves against the bad guys.   eBay created public reputations for buyers and sellers many years ago.  Why are advertisers free to operate without scrutiny? 

It seems straightforward to build an advertiser rating system to share relevant statistics and user feedback.  Why not provide the tenure of the advertiser, normalized click volume, the percentage of users giving feedback and a ratio of clicks to complaints along with a link to detailed reviews that could surface fraud, misleading advertising and scams?  If comparison shopping engines can do it, why can’t ad networks?

We don’t claim to have all the answers, but we see the problem and its sources. Government agencies need to ask the ad networks why they accept money for promoting fraud.  Ad networks need to grow up and behave like responsible businesses. 

Published: July 28, 2009

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Comments

July 28, 2009 - 7:29pm

Messrs. Stein and Hochman are correct that most crusades against Virtual Blight are good ones. Unfortunately, they miss the point of the government going after the Harpers and Steins and Hochmans.

Prosecutors don't like cases they might lose.

Prosecution might be effective against a mainstream blogger but the simple fact remains that established brands usually have established defense teams and the wherewithal to beat down a government attack. Likewise, spammers have proven adept at dodging litigious shelling.

Rack those up as prosecutorial losses.

The Harpers and the Steins and the Hochmans of the Blogosphere have fewer resources than the real life Castroneves or the O.J. Simpsons so we are much more appealing targets.

That sounds like a prosecutorial win.

Ouch.

July 28, 2009 - 8:14pm

Dick

I am not sure if the FTC is reluctant to go after targets with resources or simply clueless about how to find the culprits. I am willing to give them the benefit of the doubt, although I am not sure which would be more depressing.

For the record, however, I have never received any diapers for any blog post nor have I been given a free Audi to drive for a few months.

July 28, 2009 - 8:55pm

wow, it's almost as if the search engines have a vested interest in the FTC going after bloggers selling ads, (links), and they have lobbyists or something paying off lawmakers to alter the perception of the public into believing it has nothing to do with those who are making millions of dollars a minute but rather it's those nasty scammers that have complete control over the engines and there is nothing the engine can do about it except keep taking their money.

Does any one of us really think the FTC and/or government is so stupid as to not see whose pockets the money ends up in? Ok, OK, MAYBE the government is that stupid but if that is the case, why pay lobbyists?

The whole thing is little more than a comedy of errors that just ain't that funny.

It's not that different than fining all the jewish people for allowing themselves to be sent to camps, while telling the Nazis, they can keep all the property of the people they send to the gas merry-go-rounds as long as they make it LOOK like somehow it's the jewish people's fault.

Ugh, that analogy turned my own stomach. Please, someone explain to me how this situation is better or different or even smarter!

bob " how blind can we be?" massa

July 29, 2009 - 5:14am

So perhaps in a few months every blog will have a standard disclaimer, "promotional consider provided by ..." in the footer, and we can make this misdirected guideline go away.

The lines between editorial and advertorial have been blurred in in-person interactions forever. If you recommend Olinda Ridge Olive Oil* to a stranger at the store, because it's wonderful and also because a friend of yours owns the company and you want to support it, are you violating the guidelines? What if you do the same thing in a tweet? Is that fraud? Should it be against the law?

I'm with you: focus on the actual crimes. Leave the disclosure-impaired bloggers alone.

[*promotional consideration received](just kidding :)

regards from Berkeley, CA,

Gradiva Couzin

July 29, 2009 - 7:01am

Hi Gradiva. My wife and I are from Oakland. We often eat at Flavors of India just over in Berkeley :)

July 30, 2009 - 4:37am

Aaron, I agree with almost all of this post. You're right on target except for hanging blame on the ad networks, actors, or whoever. The fault for this recent governmental move lies with the people placing the ad. The buck stops with me.

If we as the Internet marketing community point fingers at someone else, that won't shift where the legislation falls. The government doesn't understand our problem and doesn't want to. They can't. They don't stop boulders from rolling down a hill.

They see a problem, drop over-legislation on it until they feel enough has been done. The government doesn't operate with using wisdom to understand problems. Probably because we don't have people (ugh... lobbyists, which I generally dislike as well) to help them understand.

The only real answer is for each marketer to man up and tell the truth. I'm 100% sure the floggers instigated this w/ epic levels of deception marketing cpa rebills. That many complaints & it was bound to happen.

Solution? Since there is no common moral decision on what is truth, people will keep pushing their own interests. It's inevitable.

I do hope we find a solution and the IM community starts policing itself even if only by peer pressure. Currently in most circles, it's "never 'out' someone else's stuff because I won't want it coming back on me". Hey, I understand the speck in the eye vs the beam in mine, but even that concept has it's limitations.

Maybe I should have some professional acquaintances that will keep me accountable. I'm sure your team has that since you're pretty high profile, but most of us has sites - full-blown businesses that generate serious revenue, but nobody knows about.

How many people in my neighborhood have businesses nobody knows about because they're worried about it getting knocked down. That shouldn't say much for my business model, but that's at least where many of us are at. That lack of transparency sets the stage for leaving the door wide open for the government to force us to be decent human beings.

Anyway - hope we find a solution & you guys are totally on point about the hypocrisy of the recent FTC decisions. Hopefully those who instigated this will find a teachable moment in this. Not likely, but trying to stay positive about it. Most quality bloggers will have enough rep w/ their audience where this won't matter much. Hopefully my businesses will withstand that test as well.

July 30, 2009 - 6:27am

You can't rely on anonymous sources and sources from countries in other parts of the world to abide by the law (especially by foreign laws).

Thus if you want to clean up the problems you MUST start with the well known, public ad networks that distribute the ads on consumers.

Google is pushing its own interests by trying to have the government legislate to enhance its own business model while ignoring the slimy stuff they do themselves.

July 30, 2009 - 6:11pm

Google's my main advertising network since they keep out the "One Rule" and the "Whiter Teeth" ads. I know that they're bottom feeding (aren't paying a good eCPM) and they hurt the brand image of my sites.

I'm busy enough creating sites and promoting them that I don't need to waste more time policing ads.

July 31, 2009 - 3:19am

It's sad they haven't touched click fraud amongst the big names in the industry. Take Yahoo for instance. We ran a rather large test on some competitive terms. We had multiple .info domains that were registered in the previous month sending 10 times the traffic Yahoo.com was sending. 30% of the traffic was outside our specified continent. If we are able to pick up on this fraud, I'm certain a team of intelligent engineers and statisticians at Yahoo can. But they turn a blind eye to it and cash in off the fraud.

I'd much rather see the focus go toward those making tens of millions off fraud instead of a blogger being paid $30 to make a post about something and not labeling it properly.

July 31, 2009 - 5:25am

We had multiple .info domains that were registered in the previous month sending 10 times the traffic Yahoo.com was sending. 30% of the traffic was outside our specified continent.

Sounds like a Looksmart test I ran a few years back.

A big reason that Yahoo! lost ground in search is the combination of...

  1. they bought short term top line growth by paying out a huge percent to spammers of every stripe
  2. they never allowed advertisers to opt out of their crappy syndication partners (and just buy Yahoo! Search)
  3. they never monitor traffic quality (and do not care unless advertisers complain loud + often)

Those 3 killed Yahoo! bid prices in many competitive verticals because advertisers like your company and my company got sick of buying Yahoo! and feeling like they were eating the Looksmart robotic audience.

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