Brands should take note of the development because integrity issues can challenge not only publishers but also marketers who depend on high-quality content to attract readers and provide opportunities for advertising. The industry has been struggling with a variety of issues for years, such as advertising fraud and programmatic technology that has resulted in advertisements appearing alongside inappropriate content.
More recently, however, criticism the digital marketing industry is struggling with questions over Russia’s online actions to influence the presidential election. Even though that issue has recently been a focal point of concern for industry observers, another unrelated but significant concern has surfaced—product reviewers’ objectivity is being tarnished by affiliate compensation.
Integrity, of course, is crucial for the growth of any industry, which underscores the need for sensible regulations. Proponents of regulation frequently point to the mutual fund industry, which has grown dramatically. It has traditionally been highly-regulated and, for the most part, free of scandals, which has allowed mutual funds to become widely embraced by most Americans.
That scandal-free nature of the industry was tarnished by the market timing issue that surfaced in 2003. The scandal involved allowing hedge funds and other investors to illegally exploit mutual fund share prices that didn’t accurately reflect the value of the underlying portfolios. Despite that controversy, the long-term track record of the industry and thorough regulations have allowed mutual funds to grow substantially over the years.
In the digital world, technology has outpaced regulation. Political campaigning is just one example. Regulations on paying for television and print media political advertising typically don’t apply to online content and a lack of transparency allowed Russia to meddle with the 2016 presidential election. Russia's operatives not only arranged for political advertisements, they also posted fake news to undermine the Democratic process.
Last week, executives from Twitter, Facebook and Google testified before Congress on the matter. Facebook, for its part, has provided Congress with more than 3,000 ads that were bought by Russian trolls during the 2016 election, reports The Hill. A handful of Congressmen, meanwhile, have proposed the Honest Ad Act, which would extend regulations on political advertising for TV and radio to social media, reports CNET.
While Russia’s election interference is substantial, the industry is also struggling with controversies over the objectivity of online product reviewers. Many online reviewers embed tracking technology in their websites so that they can collect commissions when readers purchase products. Product reviewers must disclose that they receive the compensation through the affiliate arrangements, but they don’t have to say how much they are paid from each company.
The lack of full disclosure has prompted Joe Alexander, CEO of mattress company Nest Bedding, to call upon the FTC to make review websites divulge how much they are paid in commissions, reports Fast Company. He maintains that the mattress marketing industry is a freight train out of control.
In another article, Fast Company highlights efforts by mattress company Casper to encourage a review site to provide more favorable recommendations. Casper attempted to sweeten the deal, but the website, Sleepopolis, continued to recommend mattress from other companies. Casper eventually sued Sleepopolis. The matter was finally resolved when an investor, armed with financing from Casper, purchased the website, which now highly recommends the company’s products.
Mattress reviewers aren’t the only websites facing criticism for conflicts of interests. Just recently, the Milwaukee Journal Sentinel reported on claims that TripAdvisor removed warnings about rapes and injuries occurring at Mexico resorts. The article also explains how TripAdvisor depends on compensation it receives from resorts when individuals click on links to the businesses websites.
TripAdvisor also has contracts with certain hotels and travel agencies that pay the website 15% booking commissions. All industries, of course, have conflicts of interest. It’s possible that, over time, new standards for political advertising and disclosing compensation in digital marketing may be required that will help protect the voting process, consumers while also helping to maintain credibility for the industry.