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Sponsored Conversations: Controversial and on the FTC's Radar - But Still Lucrative

Sponsored Conversations, a niche player in the Word-of-Mouth category of alternative marketing is expected to reach $56.8 Million this year, according to new PQ Media statistics.  A controversial practice, sponsored conversations refers to a company paying a blogger or other celebrity to discuss a produce or service. It has caught the attention of the Federal Trade Commission, which last year issued regulations requiring the disclosure of any payment to the blogger or endorser.  That, though, did not dampen its use, according to the PQ report - which noted that the regulations have bolstered its growth: it found such campaigns grew 13.9% to $46 million in 2009, despite double-digit declines in traditional advertising spending.

Indeed, social networks, such as YouTube, are beginning to develop partnership programs with brands to allow consumers to generate cash by hosting video blogs about products they purchased, it noted. "For example, sisters Elle and Blair Fowler were highlighted earlier this year on an ABC News segment regarding "haul videos," in which young women were paid to shop and then post videos through the YouTube Partner Program extolling the products they purchased. Some of the female vloggers claimed to generate over a $1,000 a month and the most popular girls were said to have earned more than $100,000 in a year."

Other findings from the report:

  • The value of paid and non-paid social media sponsorships grew at a compound annual rate of 77.6% from 2004 to 2009, accounting for 2.7% of total word-of-mouth marketing spending in 2009, up from only 0.5% in 2004.
  • Cash-sponsored social media, available through sponsored conversation firms, is the fastest-growing social media sponsorship segment, with spending rising 37.3% in 2009 to $10.3 million, driven by brand requirements to reach specific "influentials" such as young females and working mothers.
  • The largest brand categories by spending in 2009 were CPGs, food & beverage, health & beauty, and media & entertainment.

Pitfalls

One of the pitfalls of this tactic, PQ also pointed out, is that brands can't control whether the coverage will be positive or negative. Other challenges include the lack of national scale, as it remains difficult for brands to go to one place to make a national buy. Perhaps the biggest drawback, though, is the visceral distaste in some social media quarters for such arrangements. A report from Forrester that was released last year on Sponsored Conversations - which advised marketers to take advantage of them as way to enter the online conversation - drew many complaints.

Despite the controversy surrounding it - it can be a valuable tool if used ethically, wrote Jeremiah Owyang, a partner at  Altimeter Group, who also contributed to the report.

His main advice? The sponsor-blogger relationship must be completely transparent and the blogger has complete freedom to write in his or her own voice - and to be negative if that is what is called for. Not every brand is doing it right, he said. "I've seen some examples where the disclosure isn’t fully apparent, or is hidden in the language, so bloggers, and blog networks, need to do a better mandating transparency and authenticity. While ethics are certainly at play, by not disclosing, it erodes at the ecosystem, and will make the model unsustainable."

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