In an Ethically Muddled Environment, Transparency

“I have no confidence in recommending an individual stock to somebody,” said Jim Hartman, a financial adviser who has worked for Legg Mason for nine years. “It isn’t because of what I know. It’s because of what I don’t know.”

I’ll bet no one who read that quote in a New York Times article earlier this week was particularly surprised. These days, people’s dealings with businesses — especially big businesses — are surrounded by a sense of fear. Fear not about the known, but about the unknown.

That’s something marketers — especially online marketers
— need to consider. The impersonal, high-tech nature of the Internet is off-putting enough. It’s important marketers go the extra mile to establish trusting relationships with customers.

I’m not talking about illegal practices. Heck, even that modern scourge, spam, isn’t illegal… yet. I’m talking about situations in which marketers tiptoe along that fine line between ethical and unethical courses of action. (I’ll get into what’s ethical in just a moment.) Passing more laws could encourage even more ethically questionable behavior.

A Question of Propriety

Two law professors, David Skeel and William Stuntz, in “Another Attempt to Legislate Corporate Honesty” made that point in The New York Times last week. They wrote:

We’ve turned what used to be moral questions into legal technicalities. In today’s world, executives are more likely to ask what they can get away with legally than to worry about what’s fair and honest.

When there’s a question of propriety, marketers must do what’s right for the sake of the brand. Especially now. More important, they need to be open about what they do. What more is brand than the customer’s perception of the product or service? If your brand and its manifestations across the Internet — your site, your ads — are perceived to be hiding something or worse, deceiving users, you’re sunk.

Exhibit A is the Federal Trade Commission’s (FTC’s) recent letter to publishers and search engines. It asked the recipients, named in a complaint to the FTC by consumer advocacy group Commercial Alert, to more clearly disclose that some search results are paid listings or paid placements.

In her response to Commercial Alert, Heather Hippsley, acting associate director of the FTC’s division of advertising practices wrote:

While many search engine companies do attempt some disclosure of paid placement, their current disclosures may not be sufficiently clear. The staff also believes that, depending on the nature of the paid inclusion program, there should be clearer disclosure of the use of paid inclusion, including more conspicuous descriptions of how any such program operates and its impact on search results.

Impact on a Publisher’s Brand

Let’s put aside the legal issue for a moment. Consider the impact on a publisher’s brand should a user suddenly discover the top listings are coming up because someone paid for placement — not because of relevance, as the user thought. Maybe she wouldn’t care, but a recent survey conducted for Consumer WebWatch (a project of Consumers Union) found four in five users (80 percent) say “being able to trust the information on a site is very important to them as they decide to visit a Web site…. Only four percent say it is not too important or not important at all.”

The second example that’s popped up in the news is the Gator Corporation suit. Several prominent publishers, including The Wall Street Journal, New York Times, and Washington Post, have won a preliminary injunction to stop Gator from serving its own pop-up ads while people are on their sites. The suit says Gator’s practices infringe on trademarks and copyrights and represent unfair competition and unjust enrichment. Ironically, in light of the search engine relevancy issue, Gator has defended its practices in the past by saying the ads it serves are more targeted to users’ behavior and, therefore, more relevant than ads on the publishers’ own sites.

At the heart of the issue is the idea Gator doesn’t adequately inform users about what they’re getting into when installing its software. The publishers say Gator fails to adequately disclose to users that Gator, not the publisher, is the source of pop-up ads that appear when the user visits publishers’ sites. Given many Internet users find these pop-ups annoying, a lack of disclosure could hurt publishers’ brands. (Search engine Google felt so strongly about the issue, it placed a notice on its sparse home page, informing visitors it doesn’t serve pop-ups.)

I’m not saying any of these practices are illegal. Given the youth of our industry, it’s not surprising we’re feeling our way through what’s right and wrong, what works and what doesn’t. As we experiment, it’s important to keep consumers informed. The FTC’s concerns largely stem from the fact search engines historically returned results based solely on relevance, leading to consumer expectation of purely editorial results.

Honest Practices and Ethical Guidelines

Consumers are aware publishers, marketers, and everyone else trying to build an online business need to make money. They only want to know what’s marketing (as opposed to what’s content) and where it comes from. In the Consumer WebWatch survey, more than two-thirds of users (68 percent) said “being able to identify the sources of information on a site is very important.” We can make it up as we go along, let’s just be as open and honest about our practices as possible.

As an addendum, here are some documents on ethical guidelines:

• The FTC’s “Dot Com Disclosures“
• The FTC’s “Advertising and Marketing on the Internet: Rules of the Road“
• The American Marketing Association’s Code of Ethics