Issue: The Word of Mouth Marketing Association (WOMMA) cozies up to IZEA – the former PayPerPost
Commentary by: David Vinjamuri

David Gelles reports today in The Financial Times that IZEA, the former PayPerPost will be a sponsor of the upcoming Word of Mouth Marketing Association (WOMMA) event WOMM-U in Miami.  WOMMA is an industry association that has created an ethical code that members abide by.

IZEA is the current incarnation of PayPerPost – service that allows companies to pay bloggers to write favorable reviews (paid advertising, essentially) of their products.  Current IZEA customers include K-Mart, Air New Zealand, Universal Music Group and the resort chain Beaches.

The paid blog posts are very similar to advertorials.  The difference is that these blog posts are not labeled as advertising. This violates WOMMA guidelines and is still roundly condemned by influential bloggers.

The surprise here is that WOMMA would accept IZEA as a sponsor.  As Gelles writes: “This is a bit like if McDonald’s were to sponsor a PETA convention.”

The brand question for WOMMA as well as IZEA customers like K-Mart and Universal Music Group is simple: what is the effect of insincere praise on sincere brands?

While consumers may stumble across these sponsored blogs in search (although Google has downgraded their page ranks), and consumers may make purchase decisions based on these reviews, the practice is built on a foundation of sand.  The moment the underlying motive for the recommendation is revealed – money – the negatives for the brand soar.  Advertising if done well can be effective and word-of-mouth marketing is ideal.  Masquerading advertising as word-of-mouth is worse than unethical, however.  It is a fundamental betrayal of the trust that is the primary driver of the relationship between the brand and the consumer.

And not surprisingly, there’s also the chance for brands using these unethical techniques, like K-Mart and Beaches to get negative PR attention by being outed in places like The Financial Times and this advertising blog.

AN AFTERNOTE:

Ted Murphy of IZEA writes the following in the comments on the FT article (addressed to David Gelles):

1. David,
I am the first person to admit that we made some initial mistakes with PayPerPost at launch. When we created the sponsored conversation industry there were no standards. We have had to make adjustments along the way and have since created the standards by which our properties currently operate.

While we have created our own standards I would actually argue that there are still no Internet-wide standards. WOMMA has done a great job creating guidelines and an ethical code, however that code is interpreted very broadly and the member base is relatively small. There is no universal form of disclosure among word of mouth marketers, not to mention online marketers and affiliate marketers.

We have taken it upon ourselves to create what I believe is the highest standard of disclosure and transparency in online marketing. In addition to operating a completely open marketplace we insist that bloggers abide by our REAL Code of Ethics.

http://socialspark.com/code_of_ethics

No other WOMMA member that I am aware of has standardized, machine readable disclosure. Bloggers cannot submit a post for payment without having our standard disclosure badge included in their post.

I do not deny our fumbles of the past, but I feel it is important to recognize our current state of operation. We have come a long way and we continue to innovate. Look for another announcement around the disclosure topic at WOMMAU next week.

Ted Murphy
Founder / CEO of IZEA
Twitter : @tedmurphy

Our response is as follows:

Ted,

Disclosure, even machine-readable disclosure, is not an acceptable substitute for transparency. Blogs are by nature conversations, and the form has grown and been sustained by original, authentic voices. When consumers read blogs they have the reasonable expectation of reading the honest and unbiased opinion of the blogger. By adapting paid endorsement (i.e. advertising) to the blog format, you are using the form to deceive. A disclaimer at the bottom does not remove your responsibility to the consumer.

The ThirdWay Advertising Blog interviews World Wide Rave and New Rules of Marketing & PR author and social media expert David Meerman Scott:

So what are you doing six stories tall on the side of the NASDAQ building in Times Square in New York?
I was invited by GlobeNewswire as part of my World Wide Rave book launch to open the NASDAQ stock market in the first ever tweetup at a stock market opening. A tweetup is when people who know each other on Twitter meet in the real world.

Thirty people joined me on Monday morning March 30, 2009 at the NASDAQ MarketSite is located in Times Square, New York City. It was covered live on FOX Business News, CNBC, and other networks. I really appreciate everyone who took the time to participate with me. What a special morning.

In 140 characters or less –  Is Twitter actually useful for serious businesspeople?
Twitter is online conversation. Is conversation useful to businesspeople? Of course!

What social media tool do you see on the horizon as the potential Twitter of 2011?

The new social media tools that take off are those that provide a new and valuable way to communicate. LinkedIn, YouTube, Twitter, and Facebook are all examples of new ways for people to interact online. The next popular tool will not be a “me too” – it will be another service that allows us to communicate in a new way.

What are the simplest things that a brand manager can do to make his budget go further during a recession?

Realize that you can create valuable information online that people are eager to share for free. There is no cost to post a YouTube video, to distribute an ebook, to make a Twitter stream, to comment on a blog.

What was the most surprising story you heard while writing “World Wide Rave?”

I love the story of Lisa Genova. She’s the author of Still Alice and her manuscript was rejected by all the New York publishers so she self-published. As a result of her excellent blog and other social media initiatives, her book became a success and was acquired by a major publisher for a huge advance and the new edition debuted on the New York TImes bestseller list has been an international bestseller.

I love it. From rejection to bestseller all because of social media.

Tell us the best piece of marketing advice you’ve gotten from a non-marketer.

My father, a vice president of sales for technology companies, told me that if you are excellent public speaking, then you will always have a job.

If you became CMO of General Motors tomorrow what would you do differently?

I would immediately fire myself and name myself to a new position of “GM evangelist” and spend 100% of my time on social media and the speaking circuit.

What is one of your favorite small brands?

I really like GoPro – it’s a company that makes a camera that I use when I go surfing. http://www.goprocamera.com/

Your best travel tip?

Don’t stress. Relax. Read for pleasure. Chill.

What will the recession change permanently about branding?

There are better ways to get attention than buying it with advertising. You can earn it by creating valuable information that people want to share.

Brand: Amazon
Product: Kindle DX
Target: Students and Newspaper Readers
Rating: ***
Reviewer: David Vinjamuri

Description:
Amazon today launched the Kindle DX, a new eBook reader with a larger screen than the recently introduced Kindle 2.  The screen measures 8.5″ x 11″, the size of a sheet of ordinary notebook paper.  The device retails for $489 and appears initially to be targeted at students and newspaper readers.  Amazon has concluded deals with a number of textbook publishers as well as several universities including Case Western University, Pace, Princeton, Reed, Darden School at the University of Virginia, and Arizona State University.

What Works:
The Kindle DX will undoubtedly be revolutionary for students if textbook prices can be lowered enough to compensate for the cost of the device.  Parents and orthopedists will ultimately thank Amazon as younger children ultimately adopt the device and ditch absurdly heavy backpacks.

The bigger news about the Kindle DX is that it shows that there is still a slim chance that traditional newspapers might avoid extinction if they act quickly and decisively.  The availability of newspaper content for free on the Internet, the defection of classified advertising to Craig Newmark ‘s brainchild craigslist as well as the increasing use of Google News and Google search by consumers to source news have combined to put newspapers in a dangerous state.  A number of smaller papers have closed and even giants like the New York Times show signs of weakness.

Large screen eBook readers like the Kindle DX show a possible path to salvation.  By eliminating the cost of printing and distribution and making the screen large enough to accomodate some advertising, the Kindle DX may persuade readers to subscribe to newspapers again.  Like the Kindle 2, the Kindle DX has a 3G wireless cell chip in it that allows newspapers and books to be downloaded immediately without connection to a computer.  The Kindle DX also has a more substantial web browser – presumably to allow the newspaper advertising to be more funtional for advertisers.

The concept is good.  This reviewer often reads the NY Times on the Kindle 2 long before he ventures to the lobby of his manhattan building to discover which creative new place the delivery company for the Wall Street Journal has deposited the paper.

What Doesn’t:

Amazon is not helping itself with the absurdly high price for the Kindle DX of $489.  This makes the Kindle DX more expensive than most netbook computers which allow readers to wirelessly read newspapers for free, as well as accomplishing other tasks the Kindle DX cannot do.  While this is also true of the Kindle 2, the Kindle 2′s size makes it feel more like the replacement for a paperback book.  Amazon may be able to achieve economies of scale for the Kindle DX simply by pursuing it as a textbook replacement, for which it is better suited at the pricepoint.  But it will not create a breakthrough for newspapers without a minimum 50% price drop.

Amazon also touted newspaper partnerships which would help subsidize the cost of the device with a long-term subscription.  This turns out to have been more wishful thinking than substance, as the New York Times announced these subsidies would only be available for rural readers who could not get home delivery.   This is really a missed opportunity for the newspaper industry which should be supporting these new devices in every way possible (free reader with three year subscription, anyone?).  Instead the New York Times continues on with the stone age marketing techniques that brought us the classic ploy of penetration pricing (offering new subscribers lower prices for a short time), thus assuring that the most loyal readers will be punished with the highest prices.  The Times business managers should peer from the top floor of their new building over to Sony-BMG and the ruins of the rest of the music industry to understand what happens when an industry fails to adapt its revenue model to technology.

Branding Bottom Line:
Amazon introduces an amazing innovation for the citizens of Monaco.