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Bloggers Be Warned: FTC May Monitor What You Say

Thinking about letting a big-name blogger test-drive your new hybrid in the hope he'll post a glowing review about it, or maybe sending some beverage products to an influencer, hoping she'll spread the word? You might have to think twice, if the Federal Trade Commission follows through with its proposed plan to start regulating viral marketing and blogs.

[Estimated timeframe:2009-2011]

As part of its review of its advertising guidelines, the FTC is proposing that word-of-mouth marketers and bloggers, as well as people on social-media sites such as Facebook, be held liable for any false statements they make about a product they're promoting, along with the product's marketer. This could present a significant issue for marketers, including the likes of Microsoft, Ford and Pepsi, who spend billions on word-of-mouth and social media. PQ Media projects that marketers will spend $3.7 billion on word-of-mouth marketing in 2011.

Rich Cleland, assistant director of the FTC's advertising-practices division, said the commission is updating the guidelines to stay in step with evolving marketing practices. "The commission is attempting to update guidelines that are 30 years old so that they address current marketing techniques," he said, "and in particular to address the issue of whether or not the safe harbor that's currently allowed for 'result not typical'-type disclaimers is still warranted."

The FTC guidelines apply only to bloggers and others compensated to promote or review a product. Roberta Jacobs-Meadway, a partner at Eckert Seamans Cherin & Mellott, a Pittsburgh law firm, said: "The FTC is ... putting out guidelines to make it clear to people who are involved in social media and viral marketing that the same rules apply in this context as they do in the more formal context of paid advertising and infomercials." There are no legal implications for social-media sites such as Facebook or marketer sites such as Amazon, where consumers often post product reviews. However, Ms. Jacobs-Meadway said, paid endorsers who post on those sites can be held liable if they do not identify themselves as such.

Before FTC commissioners vote on the revisions this summer, they will review all the public comments, which so far include those from the American Association of Advertising Agencies and the Personal Care Products Council.

In its comment, the 4A's said while it and the American Advertising Federation want to ensure nondeceptive endorsements and testimonials, it "strongly urges the commission to reconsider the proposed, overly stringent amendments that will likely result in advertisers abandoning longstanding legitimate advertising techniques, such as consumer testimonials, and rejecting new media forms, such as blogs and viral marketing." In an e-mail to Ad Age, Adonis Hoffman, 4A's senior VP and legal counsel, said, "This does not have to put a chilling effect on the new methods of advertising, but it does put a responsibility on the advertisers and agencies to understand that the rules apply and to explain that to the bloggers, promoters and other viral supporters."

Paul Rand, president-elect of the Word of Mouth Marketing Association, said his group's members will be fine so long as they continue to adhere to WOMMA's guidelines. But he said the FTC's revisions should be clarified. "There are some pretty big perceived implications to this," Mr. Rand said. "And if the FTC goes a little bit further on some of these revisions, then everyone is going to have to look at retooling their approach."

Pepsi, a longtime practitioner of tapping online and offline influencers to promote its products, said it will continue with its "transparent" tack. Bart Casabona, spokesman for Pepsi-Cola North America, said in an e-mail: "Our relationships with digital influencers are completely transparent, and subsequent blog posts tend to be very straightforward."

Some fear that if the revisions are approved, marketers could be scared away from new-media marketing efforts. "It's possible there will be a hangover period, but it will self-correct," said Joe Chernov, VP-communications at BzzAgent. "People get nervous when the government gets involved, and it's possible the blogosphere will influence the trajectory of how brands respond."

But not everyone thinks the revised guidelines will hurt marketers. Jim Nail, chief marketing officer of TNS Media Intelligence and a WOMMA board member, said the revisions will bring more credibility to word-of-mouth and social-media marketing. "The thing that makes word-of-mouth marketing powerful is people believing they are getting truthful and honest opinions from real users," Mr. Nail said. "If people start disbelieving word-of-mouth marketing as much as they disbelieve advertising, we are in deep trouble."

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EU Takes Action Over UK Internet Privacy Violations

The European Union started legal action against Britain on Tuesday for not properly implementing EU privacy rules to protect personal electronic data. The EU also warned that it could force social networking sites like Facebook or MySpace to hide minors' profiles from search engines.

[Estimated timeframe:2009-]

The European Commission -- the executive branch of the EU -- said Britain should outlaw Internet traffic interception and monitoring unless users give explicit consent that their behavior can be tracked and analyzed.

The commission said the use of a technology known as "Phorm" by U.K. Internet-service companies to monitor web-surfing and deliver targeted advertising violates some data-privacy rules. The commission said the U.K. hadn't required operators to gain the consent of users before gathering their personal data.

"Such a technology in the view of the European Commission and European data protection law can only be used with the prior consent of the user," said EU spokesman Martin Selmayr.

On Tuesday, regulators sent a first legal warning to Britain asking it to explain or change the way it interprets EU rules, because it currently allows Internet traffic interception when it is unintentional, or when a tracker has 'reasonable grounds' to believe that consent was given.

Britain has two months to respond. The European Commission can issue more warnings before taking a government to an EU court, where it may be ordered to change national law or face daily fines.

BT sought consent from users when it tried out Phorm from October to December 2008 in an invitation-only trial. The company says on its website that the trial didn't keep or pass on information that could identify users and what they did. It gave no comment on the EU statement Tuesday.

Internet companies, privacy advocates and regulators disagree on what kind of traffic data is personal -- such as IP addresses that give a location -- and whether storing information on a crowd of people might evade strict privacy rules because they can't be identified individually.

Phorm plans to work with three Internet operators reaching 70% of Britain's broadband market -- BT Group PLC, Virgin Media Inc. and Carphone Warehouse Group PLC's TalkTalk. Virgin said it would like to try out the technology but would do so only with users' consent.

A message left with the London office of Phorm Inc. wasn't immediately returned. Britain's Information Commissioner's Office, which is charged with protecting personal information in the country, said it couldn't comment on the EU move.

Separately, EU Media Commissioner Viviane Reding said that social networking sites needed to move fast to step up default privacy settings, especially for younger users – and that she would table new EU rules if sites didn't act.

"Is every social networker really aware that technically, all pictures and information uploaded on social networking profiles can be accessed and used by anyone on the web?" she asked in a video message. "Do we not cross the border of the acceptable when, for example, the pictures of the Winnenden school shooting victims in Germany are used by commercial publications just to increase sales?"

Ms. Reding also warned about radio frequency identification, or RFID, tags that can be used as an electronic label on clothing or food to pass on information such as expiry dates or prices to a store cashier or stock checker.

"No European should carry a chip in one of their possessions without being informed precisely what they are used for, with the choice to remove or switch it off at any time," she said.

Stores and other smart-tag users complain that some of the requirements to inform customers or switch off the tags could be burdensome and unnecessary, and might prevent them from investing in the new technology.

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Making 'Old' Media New Again

It's make-or-break time for many newspapers. Denver and Seattle recently lost dailies, the Chicago Tribune and Sun-Times are both in bankruptcy, and owners of the Boston Globe and San Francisco Chronicle threaten closure. One reader mourned the loss of her local newspaper in Connecticut by lamenting that she had gone from living in a city to living off just another exit on Interstate 95. As comedian Stephen Colbert put it last week, "The impending death of the newspaper industry: Where will they print the obituary?"

[Estimated timeframe:2009-2012]

Creative destruction is blowing hard through the news industry, as digital technology gives readers access to endless sources of news but undermines the ability of publishers to support news departments. City newspapers are no longer the dominant way people get news or the main way advertisers reach consumers. The recession is accelerating these trends, with advertising so soft even Web-only news operations, which don't have the legacy costs of print, are now struggling to support journalism.

As the remaining city newspapers rethink themselves, editors and publishers might consult a road map for how newspapers can live alongside new media that was drawn up more than 50 years ago by Bernard Kilgore, outlined in a new biography by former Journal executive Richard Tofel, "Restless Genius: Barney Kilgore, The Wall Street Journal and the Invention of Modern Journalism."

Kilgore had remarkable judgment early about the journalistic issue of our day: how readers use old media, new media and both. When Kilgore became managing editor of the Journal in 1941, he inherited a business model that technology had undermined. Founded in 1889 to provide market news and stock prices to individual investors, the Journal lost half its circulation as this basic information became widely available.

Kilgore observed that then new media such as radio meant market news was available in real time. Some cities had a dozen newspapers that had gained the Journal's once-valuable ability to report share prices.

The Journal had to change. Technology increasingly meant readers would know the basic facts of news as it happened. He announced, "It doesn't have to have happened yesterday to be news," and said that people were more interested in what would happen tomorrow. He crafted the front page "What's News -- " column to summarize what had happened, but focused on explaining what the news meant.

On the morning after Pearl Harbor, other newspapers recounted the facts already known to all the day before through radio. The Journal's page-one story instead began, "War with Japan means industrial revolution in the United States." It outlined the implications for the economy, industry and commodity and financial markets.

Kilgore led the Journal's circulation to one million by the 1960s from 33,000 in the 1940s by adapting the newspaper to a role reflecting how people used different media for news. His rallying cry was, "The easiest thing in the world for a reader to do is to stop reading."

Business and financial news is different from the general news focus of city newspapers, but in 1958 the owners of the New York Herald Tribune approached Kilgore for help. Mr. Tofel uncovered a five-page memo Kilgore wrote them on how to keep city newspapers essential to readers. The Herald Tribune, he wrote, is "too much a newspaper that might be published in Philadelphia, Washington or Chicago just as readily as in metropolitan New York." Kilgore urged the "compact model newspaper." Readers valued their time, so the newspaper should have just one section, with larger editions on Sunday when people had more time to read.

His advice was clearly ahead of its time. The owners didn't heed it, and the Herald Tribune went out of business in 1967. But his observations on what readers want from city newspapers may be even more true in today's online world. Readers increasingly know yesterday what happened yesterday through Web sites, television and news alerts.

"Kilgore's first critical finding," Mr. Tofel wrote, was "that readers seek insight into tomorrow even more than an account of yesterday." This "may only now be getting through to many editors and publishers." Indeed, at a time when print readership is declining, The Economist, with its weekly focus on interpretation, is gaining circulation. The Journal continues to focus on what readers need, growing the number of individuals paying for the newspaper and the Web site.

If readers would prefer more-compact city newspapers, a less-is-more approach could help cut newsprint, printing, distribution and other costs that don't add to the journalism. Newspaper editors could craft a new, forward-looking role for print, alongside the what's-happening-right-now focus of digital news.

There's a lot of experimentation by editors around the country to find out what people want from their print and online news. For city newspapers on the brink, the Barney Kilgore approach might deliver some badly needed good news.

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Sorrell predicts rosy prospects for branded entertainment and product placement

WPP chief Martin Sorrell came to the MIPTV Festival in Cannes and displayed an interest in product placement and branded entertainment. Sorrel mentioned that the recession may have a great effect on production, and content producers will have to trim expenses and come up with creative ways to finance their programs.

[Estimated timeframe:2009-onward]

“Production models are too expensive and will have to change,” said Sorrel. He believes that partnerships between ad agencies, talent, and content producers will be an emerging trend.

“This is actually a big opportunity for content producers, who those who control talent and for the agencies,” he said. “These groups have to work together to try and develop content that is attractive for the new platforms, particularly the growth platforms of mobile and the Internet.”

The recession has highlighted the fact that branded entertainment is a good alternative to traditional advertising. Not only is the approach just as effective, it is also much cheaper. If you consider the ratio of revenue generated to resources spent, branded content is more profitable than traditional ads.

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Home entertainment goes 3D

Media analyst Screen Digest’s ( latest research examines the emerging market for 3D home entertainment. As more 3D movies are released in the cinema, technology is arriving that will allow viewers to enjoy the same experience from the comfort of their own sofa. At present the most reliable technology will require consumers to invest in a new TV and wear special 3D glasses, but Screen Digest believes that autostereoscopic technology will eventually become most popular as it has one major advantage: no glasses.

[Estimated timeframe:2009-2012]

The report’s forecasts underline that this is a market in its infancy and that mass uptake is a long way off. Screen Digest has identified two scenarios for the evolution of the market. Should a unifying standard emerge that works across all technologies, the percentage of TVs sold with 3D capability would exceed 10 per cent worldwide in only three years (2011) and by 2015 would account for 16 per cent of TV sales, with just over 2.8bn units sold worldwide. Without a standard, this figure drops to only three per cent by 2015 or 500m units.

As 3D requires twice the broadcast bandwidth of today’s two-dimensional viewing experience, Screen Digest expects Blu-ray Disc to provide the main method of distribution, as its hi-def content capacity bypasses the bandwidth issue altogether. With Screen Digest analysis revealing a significant premium of up to 50 per cent on cinema tickets for 3D films, the Hollywood Studios have a vested interest in getting 3D entertainment into homes. Keen to avoid a costly replay of the hi-def disc format war, industry associations are already working together to establish a viable roadmap to make that happen. But due to higher bandwidth and incremental production costs, when it does come to the small screen, 3D TV programming will be the reserve of paying customers only.

What’s on 3D?
3D movie production has increased rapidly. In 2008, there were seven films; in 2009 there will be 17 and a further 28 are due to be released in 2010. Compared with live action, animated films are much easier to adapt to 3D and Disney and DreamWorks Animation have been quick to grasp the opportunity. Together they account for more than half of the 3D film release slate. It is more challenging to produce 3D TV programming on broadcasting budgets, yet nonetheless several broadcasters have launched trials around sporting events.

Screen Digest believes that ultimately it may be 3D games and not movies or TV that arrives in the home first. Gaming is an early adopter market, consoles and software could be upgraded relatively painlessly and gamers are more willing to adopt peripherals such as glasses, all of which make it an ideal home entry point for 3D technology.

Marie Bloomfield, Analyst at Screen Digest says “What 3D offers the Studios and pay TV operators is an opportunity to charge a premium for content – perhaps even more so than high definition. But as it is emerging in the middle of a recession, the home 3D market is in a Catch 22 situation. Consumers will not be persuaded to invest in new equipment to experience 3D until there is enough content; and content production will not ramp up until there is a significant audience. 3D in the home will therefore be a slow burn, remaining a niche business for the foreseeable future.”

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Source: Screen Digest
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