There can be little doubt that social media has “crossed the chasm.” Social media surely meets Gladwell’s tipping point criteria as well: “Ideas and products and messages and behaviors spread just like viruses do.”

So with mass adoption under its belt, where is social media headed next year? The end-of-year predictions are already starting. Rather than depend on casual prognosticators, however, I like to follow the thinking of people who analyze trends and offer perceptive observations grounded in reality.

That’s why I think David Armano’s blog for Harvard Business Publishing is worthy of mention. Armano is a founder of Dachis Group, a consultancy based in Austin, TX specializing in social business. Its clients include AXA, BP, Philips, and Coca-Cola, so I have a feeling Armano knows what he’s talking about.

Armano identifies six social media trends for 2010, but I want to focus on the implications of his commentary rather than the specifics. One underlying theme of Armano’s blog seems to be that social media’s mass adoption comes with consequences, both to individuals and businesses. Individuals overwhelmed with multiple messages from multiple sources may bring a new meaning to the term “anti-social,” because, as Armano says, they need to “filter out the clutter.” But at the same time, Armano believes businesses will be impacted by social media’s popularity: “…employees will seek to feed their social media addictions on their mobile devices.” What used to be a coffee break may turn into a “social media break.”

“There are relatively few big companies that have scaled social initiatives,” says Armano, so in 2010, there could be more companies looking “to uncover cost savings or serve customers more effectively through leveraging social technology.” At the same time, companies will probably need to extend their email and Internet policies to include social media. “From how to conduct yourself as an employee to what’s considered competition, it’s likely that you’ll see something formalized about how the company views social media and your participation in it,” says Armano.

Notice the beginnings of a complex situation emerging when it comes to social media — not unlike what has occurred with email and cell phones. People can’t get enough of social media, but it may come to a point where there’s a backlash and it needs to be controlled. Businesses want to do more with social media and do it better, but they are likely to put rules into place to prevent its abuse.

Maybe in 2010, people will begin to think about social media in a new way: Can’t live with it, can’t live without it.

That was before smartphones came along. Blackberry brought in the era of hand-held email, particularly for business users. But Apple’s iPhone has created a new and robust mobile advertising marketplace. (Never mind the kazillion apps, which is a burgeoning marketing opportunity in and of itself.)

Now, with the introduction of more new smartphones like the Palm Pre and the recently launched Android, built around Google’s operating system, mobile advertising promises to become strategically important.

A recent Gartner Group report put worldwide mobile ad spending for 2009 at a little over $910 million – not huge in the greater scheme of things, but a whopping 74 percent increase over the previous year. Gartner said worldwide mobile ad spending would exceed $13 billion by 2013, led by the Asia-Pacific region and followed by North America and Europe, according to Online Media Daily.

The Interactive Advertising Bureau’s A Mobile Advertising Overview, while somewhat dated (July 2008), is a document worth reviewing. According to this overview, even two years ago, the active audience for text messaging was over 100 million, and for mobile web it was over 34 million. (As a matter of context, the iPhone was introduced in June 2007; the data reported was as of November 2007.)

The overview quotes the 2008 Pew Internet Life study, indicating the following percentages for individuals with a mobile phone using one or more mobile data services: 96 percent of 18-29 year olds; 85 percent of 30-49 year olds, 63 percent of 50-64 year olds, and 36 percent of Americans older than age 65. I was surprised at the relatively high percentages for individuals 50 and over. It bodes well for mobile marketers.

The IAB defines mobile advertising as having two major forms: “display ads delivered on the device itself (within a mobile Web browser or some other phone-based application), or display ads in other media that feature a mobile call-to-action (typically sending a message via text messaging shortcode).” On-device ads include text ads, banner ads, and video. Common off-device usage of mobile advertising includes mobile coupons to drive purchase at a retail outlet, mobile PINs to drive traffic to a web page, and mobile ticketing for events. Not surprisingly, major advertisers routinely include mobile advertising as a component of integrated campaigns.

The IAB Overview includes this sub-head at the end of the document, “The iPhone: Smarter phones drive even greater usage.” In July 2008, IAB refers to the iPhone as “the future.” Things have moved quickly: The future is here. Online advertisers need to embrace it, and start making the move to mobile advertising.

The “Pay-What-You-Want” sale marked the 1 year release of the game, so admittedly the game was not at the peak of the sales cycle and was likely in the hands of the users who really wanted the software. Also important is that the publisher reports piracy of the game close to 90%. Even so, the experiment provides some insight into pricing models for games and possibly content sold online.

What did people pay when they had the chance? 57,000 people paid an average of $2.03 for the game during the promotion. That’s a quick $110,000+ sales for a one week experiment, but that doesn’t tell the whole story.

Due to transaction fees, all sales less than $0.30 meant that the publisher received nothing from the sale. Since nearly 17,000 people paid $0.01, with another 6500 paying from $0.02 to $0.99, it’s likely at least one-third or more of sales were unprofitable.

The publisher also took a survey to determine why people were paying what they paid. The largest responses fell into two categories: paying what buyers could afford and supporting the model. More specifically, nearly 23% of respondents said that they chose the “price” they paid based on what they could afford, and just over 22% paid just to support the pay-what-you-want model. More importantly, only a touch over 5% responded that they paid what they thought the game was worth. Twice as many or 11% reported that they were “cheap bastards”, at least they were honest.

The sales figures, piracy rate, and survey lead me to a few obvious and non-obvious take aways:

1. Buyers appreciated the option to choose what to pay, so much so that any mental transaction costs of paying $0.01 were overcome.

2. The price users are willing to pay to has much less to do with perceived value than affordability.

3. Sales experiments, even a year after a game release, can lead to a healthy bump in revenue when done right.

This suggests to me (feel free to argue with me on this) that the $0.99 and $1.99 micropayment sized price points for apps on the Apple App Store and others may be driving huge sales simply because of affordability. If I’m right, where is your $0.99 app?

Amazon recently declared that it’s Kindle e-book reader was its overall bestseller by number of units shipped and total revenue generated. According to a MarketWatch article, Amazon CEO Jeff Bezos recently mentioned during the company’s Q3 financial results (ended Sept 30, 2009) call that the Kindle is now the most popular product on its site by unit sales and dollar value across all product categories. Analysts expect that the e-book reader and ebooks will fuel the online retailer’s next stage of growth.

Google announced details of its upcoming Editions service, to be launched next year, which will allow ubiquitous access to books on web browsers and other devices. In a recent announcement,   Google Book Search’s publisher partnership program head Tom Turvey said the new Editions service would kick off with between 400,000 and 600,000 books in the first half of 2010.

Consumer electronics giant Sony has judged the e-book reader segment important enough to take some focus off its television and Playstation projects to develop it’s Reader product. According to the Wall Street Journal’s WSJ.com, Sony had sold about 300,000 units of the product from its October 2006 launch till end 2008. (The WSJ.com post is currently unavailable online)

With e-book readers experiencing a boom, writers might be looking forward to a boom for their wallets.

Whether you’ve already had a few published books under your belt, or you’re working on your first book, you will be wondering: What’s not to like especially with Google Editions’ payout model?

With Google Editions, the revenue split of 55% to Google and its distribution partners and the balance 45% going to your pocket is more than just making about half the revenue from your sales, it breaks the historical monotony long held by publishing houses. Most published authors receive a fraction of the value of books sold. It’s not uncommon for an author to receive a $0.50 to $1 royalty fee for each copy of a book sold. If you’re a superstar author such as JK Rowling, author of the Harry Potter series of wizardry books, or king of horror, Stephen King, you’ll have more room to maneuver.

In fact, the 45% royalty that Google Editions looks set to payout looks like the perfect out for many budding authors to quit their day job and do the “writing thing”.

Before you fire your boss, take note of a couple of big holes in the new business model.

#1 Quality, quality and quality

Someone investing a couple of hours reading a book would prefer a good book, over a poorly-written book in most circumstances (a fetish for spending reading kitschy/trashy romance/potboiler novels notwithstanding).

Yes, the possibility of self-publishing will break the hegemony/monopoly of the publishing houses, especially since manuscript acceptance rates of 1 in 10,000 are not uncommon. But just because you get to publish what’s in your mind, i.e. the “great American novel”, doesn’t mean that anyone else is going to like, or buy it. If your book meet Joe Public’s quality standards, you’ll have the consumer telling you “No”, rather than the publishing house.

The refund policies aren’t out for Google Editions yet, but judging by Sony’s ebookstore policy on refunds: “Please confirm all purchases before you complete them as all sales are final. There are no refunds for digital content.” It sounds like you can’t give a refund for a poorly-written book, but if everyone and his brother is blogging and tweeting about how badly your book sucks, you can expect sales to suffer.

#2 But I only like to write…

Assuming you’re going the self-publishing route and making the decision to avoid giving the publishing houses your fat writer’s paycheck, means having to ensure quality on your own.

There’s a myriad of service providers online to find proofreaders, book editors, designers and other specialists to make sure your novel looks like more than just a Microsoft Word document converted to Adobe PDF. Hint: the lack of a cover and extensive use of Times New Roman size 12 font throughout the book are dead giveaways…

Being able to post an accurate job description, screen service providers, screen competitive bids, and manage the team you’ve hired, will require more project management skills, than just being a dang good writer.

#3 Traffic Generation and The Lesson from Satellite TV

With the launch of satellite TV a couple of years ago, the complaint shifted from “There’s nothing to watch on network TV”, to “I’ve got 500 channels on satellite now, but there’s nothing to watch”. The lesson? Having lots of choice is always a good thing, but being able to stand out from the pack will play a direct impact on your sales.

Remember back in the early 1990s when there were just 20 websites in your niche? And you would make bank even if you had a garish bright yellow website and a couple of typos liberally sprinkled across your site? Google Editions may be that way too…for the first week or two.

Being able to market your book successfully means being able to put together the elements of a cohesive and integrated marketing plan. Almost every blogger or twitter user will be able to publish some content and generate a few random sales, but if you’re planning to make writing a full time gig, you’ll need a whole lot more marketing mojo in your corner.

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E-Books: The Bottomline
Here’s what e-book have going for them:
* More money in your pocket: The technology has eliminated the brokers and middlemen from the traditional book publishing ecosystem.
* Write what you like: You’re not constrained and restricted like you would have been if you had signed on with a major imprint.

But like Peter Parker’s Uncle Ben would say “With great power there must also come – - great responsibility!”

The balance of power and more importantly, profit, comes with the writer’s responsibility for viral/guerilla marketing skills. If you decide to DIY everything, you’d need to have decent editing, project management and marketing skills (the majority of which most writers lack). If you’re not represented by a publishing house, which invests heavily in a publicity campaign, you’ll have to find alternatives since most bookstores will probably not arrange “e-book signings” (especially if it’s a product which they don’t sell), unlike an author with a published paperback or hardcover novel.

In my opinion, unless self-published writers have the whole package, including management and social marketing skills up their sleeves, they might end up being the biggest losers in the new e-book paradigm.

If any of those things ring a bell, then you might look back fondly on October 27, 1994. That’s when the first banner ad was created. Adman Frank D’Angelo was in on that historic moment, and he shares his perspective in a fascinating piece in Ad Age.

As with many advances in marketing, the birth of the banner ad really started because of an industry leader’s vision – in this case, Ed Atzt, then chairman of mega-brander Procter & Gamble. At a May 1994 industry speech, Atzt implored his colleagues to jump on the new media bandwagon. Frank D’Angelo’s boss, an ad agency head, was in the audience. He brought Ed Atzt’s challenge back to his agency, which happened to have MCI, then a rising telecommunications company, as a client. (MCI would later become WorldCom – but we won’t go there.)

MCI, says D’Angelo, was a perfect fit for this “new” online advertising. After all, one of the company’s employees was Vinton Cerf, the acknowledged “father of the Internet.” But D’Angelo makes it clear what a bold move it was for an advertiser to agree to a banner ad on Hotwired.com, a spin-off of WIRED and the first commercial digital magazine.

“Keep in mind,” says D’Angelo, “this was 1994; the first graphical web browser, Mosaic, was less than a year old (soon to be replaced by Netscape Explorer), and Web access? Purely dial-up, 24.4kps if you were lucky, meaning these ads took a while to load. The online U.S. population? Two million, if that.”

Still, MCI and five other advertisers took a crack at admittedly clunky banner ads. Read the rest of D’Angelo’s story to discover what happened.

Fifteen years later, banner ads may be under siege, but they are still very much a part of the web advertising landscape. D’Angelo says “no other development since has advanced advertising measurement, effectiveness and accountability than the display banner.”

The larger issue today, however, is the continuing quest for optimal measurement. In that context, D’Angelo references a recent report from eMarketer, “Online Brand Management: Connecting the Dots,” that is worthy of consideration.

The report discusses a huge challenge: Are advertisers getting their money’s worth from display ads and other branding-oriented ads? The report asks: “Do [advertisers] have the right metrics, and are they able to connect the dots, both within online platforms and between online and offline media?”

Needless to say, there are no easy answers, but the report offers valuable insight into where we are and where we need to go in terms of measuring advertising effectiveness. One of the quotes from Carrie Frolich, managing director, digital, for Mediaedge:cia, sets the tone for the report’s findings:

Remember why you’re advertising. You are not advertising for clicks or [gross rating points]. What you’re advertising for is to sell me stuff or change perception, and that’s what we need to be measuring against.

As we look back on the past fifteen years, and look forward to the next fifteen, we should always keep that in mind. No matter what technological advances come along, no matter how wonderful the creative might be, no matter where the ads are placed – the objective of advertising, both online and offline, should always be to have a measurable impact. Let’s not forget it.

About a week ago, ReveNews contributor Andrew M. Baer, Esq, wrote “FTC Regulates Blogger, Viral Marketing Relationships: Analysis and compliance tips” stating why he’s not concerned about the FTC intentions.

The guides which come into force on 1st December, are aimed at addressing endorsements by consumers, experts, organizations, and celebrities, with the intention of holding bloggers or other “word of mouth” marketers accountable, with the enforcement mechanism of a possible $11,000 fine.

As short-sighted and ambiguous as some bloggers have painted the guides to be, many bloggers’  objections have been equal in the fear, uncertainty, and doubt camp as they accuse their detractors. Many blogs painting worst-case scenarios and posting what-if scenarios with $11,000 fines for receiving cheap paperbacks as a freebie in the mail, writing a positive review and linking it to an Amazon affiliate link.

The Interactive Advertising Bureau (IAB), which comprises more than 375 leading media and technology companies is responsible for selling 86% of online advertising in the United States and includes organizations like:
* AOL Advertising
* AT&T Internet Services
* BBC Worldwide
* Google Inc
* Microsoft Advertising
* Yahoo! Inc
* Sony Computer Entertainment America, Inc
* Harvard Business Review
* CNN.com
* FOX Interactive Media
* Nokia Inc

and other technology/internet/news heavyweights in its membership roster. IAB has come out swinging off the ropes with IAB CEO Randall Rothenberg firing off an open letter to FTC chairman, Jon Leibowitz, published on the IAB website and the Huffington Post, expressing his disagreement with the guides on the basis that they are unconstitutional and should be retracted.

In case you’re wondering if the IAB is shooting from the hip, take note that the organization has attempted to start a dialogue with the FTC since March this year, with correspondence detailing(pdf) feedback on the proposed guides. The attempt to have the industry self-regulate appears to have failed, given that the FTC has expressed its intention to keep an eye and active hand in the industry.

In a FTC arranged media call on 14th October to address reporter’s inquiries on the guides, FTC’s Bureau Consumer Protection’s Associate Director for Advertising Practices, Mary Engle, stated:

Although the [Interactive Advertising Bureau (IAB)] contends the FTC’s Endorsement Guides are unconstitutional, the Guides apply only to marketing and they attempt to illustrate some of the factors relevant to distinguishing advertising from editorial content,” says Mary Engle, the FTC’s director of the division of advertising practices, in an email statement released today. “If particular communications do not in fact constitute advertising, as the IAB appears to be suggesting, then the Guides do not apply. Where the message is advertising, however, disseminators have an obligation to ensure it is not misleading. This includes, when it is not otherwise clear from the context, identifying when the endorser has been paid for the endorsement. Although IAB may disagree with the policy, nothing in this approach is unconstitutional,” .

From FTC’s Engle terse reply, it’s unlikely to halt the IAB’s attempt to rescind the FTC’s guides.

Even with the FTC contention that the primary targets are advertisers, rather than bloggers, have failed to assuage Rothenberg.

IAB’s Rothenberg contends that even with the FTC’s intention to go after advertisers, rather than bloggers, doesn’t mean that bloggers are off the hook. By it’s “social” nature, bloggers and their blogs are the advertising medium, hence they could still be looking at $11,000 fines.

How will this play out as the December 1st enforcement date draws near?

It’s unlikely that the FTC or IAB are going to back down at the moment, but the IAB’s Washington DC Public Policy office will be keeping very busy till then.

What raised my hackles? I read this eWeek article and choked when I saw this line:

“Twitter boasted astronomical growth, up 1,170 percent from its negligible .15 percent market share from September 2008″.

I decided to check out the source, Experian Hitwise’s press release on social network traffic, and examine their report using my own calculations:

Twitter September 2009 social network market share of a whopping 1.84% is 12.26 times (or 1,226%) of it’s 0.15% September 2008 figure. This is derived by taking 1.84 divided by 0.15 (1.84/0.15).

Taking a leaf out of a grade school math book, the increase in traffic can be calculated by the following formula:

Percentage Increase = [(new figure - old figure) / old figure] * 100% which should be [(1.84-0.15)/0.15]*100% = 1,127% or an increase of 11.27 times over the previous figure.

So where did the 1,170% figure mentioned in Hitwise’s release come from? Beats me. Maybe someone was a little lax in checking their own stats.

Should we be concerned when a web measurement firm whose bread and butter comes from reporting data, reports it inaccurately? If the reported data is incorrect, how about the validity of the web data contained the report? What happens when a respected media outlet like eWeek publishes data verbatim, without running their own checks to verify accuracy provided by a newsmaker?

Quality control of data is obviously an issue.

Even more interesting is the 1,127% or 1,170% year-on-year growth figure attributed to Twitter’s growth. Everyone loves to see impressive numbers, especially if it’s in multiples of 100%.

Mark Twain popularized the phrase “There are three kinds of lies: lies, damned lies, and statistics.”

Statistics are powerful because they are viewed as logic based.  In school math was the only subject you could get a perfect score in, and that thinking has carried over into adult life. People like seeing statistics, no matter how skewed, because it makes them feel secure in the information they have been given. When delivered by a smart PR firm, marketing team, or in the media the data is often accepted without question. 

This is because most individuals (internet marketers included) are inherently bad at math and numbers in general. Whether by choice or circumstances, they just aren’t equipped to deal with data critically or intelligently.

I’ve seen more than a few isolated instances where writers cite 500% growth or 1,270% increase in profit, but does this mean anything?

Context is key if you want to make sense of data. A sales increase from $1 to $5 is an increase of 400%, and publishing an article announcing a 400% increase will get you more than your fair share of eyeballs. However, if you consider that $5 would barely pay for lunch, it’s a case where statistics, without appropriate context, can be manipulated to distort reality. What’s important when dealing with data is to look at information against the appropriate backdrop.

If your company is growing at 90%, while comparable peers in the same industry are growing at 300%, you’re lagging behind the industry. By “comparable peers” I’m referring to partners or competitors that are equivalent in size or can be mathematically adjusted to provide a meaningful basis of comparison.

Context and relevance and looking at data in a meaningful way means seeing a $1 billion revenue figure and a net profit margin of 0.5%. Or a 500% monthly sales growth figure from a baseline of $27 in sales. Do these figures mean anything? Only when they’re seen from the perspective of the big picture.

If you want to see the forest and not just the trees, don’t simply swallow the “lies, damned lies, and statistics” they are trying to spoonfeed you.

Cone, a strategy and communications agency that specializes in cause branding, looked only at users of “new media,” defined as “dialogue among individuals or groups by way of technology-facilitated channels” – social networks, blogs, games, message boards, and the like. Over one-third of the respondents use new media two or more times a week.

Highlights of the study include the following:

1.    Consumers are increasing their interaction with companies and brands online. Almost 80 percent of new media users interact with companies or brands via new media sites and tools. This is an increase of 32 percent from the 2008 study. More than one-third of users (37 percent) interact via new media at least once per week, up from about 25 percent last year. New media users “overwhelmingly believe companies or brands should not only have a presence in new media, but also interact with their consumers in this space,” says Cone. In addition, consumers “think more highly of companies or brands when they or their friends can interact with them in a new media environment.”

2.    Consumers believe they can influence businesses by voicing opinions online. Sixty-two percent of respondents believe they can influence business decisions by voicing opinions via new media channels. About one-quarter have offered their opinion on an issue or contacted a company directly. Consumers are also interested in and influenced by information they get online. A large majority of respondents (85 percent) want companies to tell them what is in products and how they are made. Three-quarters of new media users say new media channels are an effective way to learn about Corporate Responsibility efforts.

3.    Supporting causes is important to new media users. Seventy-nine percent of respondents believe companies and nonprofit organizations should use new media channels to raise money and awareness for causes. Eighty-five percent of respondents say new media provides them with an opportunity to learn about new issues. Eighty percent say new media provides another way to support their favorite causes. Sixty percent have used some form of online or new media to support a cause. However, only 18 percent of users have made a cash donation through new media. Why? Nearly 39 percent said they didn’t trust that their efforts would actually help the cause, and 31 percent said they’d rather support causes offline. While no single cause had a majority of attention, leading causes supported via new media include animal welfare (29 percent), health and disease (28 percent), education (23 percent), the environment (22 percent) and human rights/equal rights (21 percent).

New media users appear to be active, interested and engaged. They are influenced by information they get online – and they believe they can influence businesses by communicating with them online.

It is clear that Internet-savvy consumers have high expectations. They want businesses to use new media. This is good news for online marketers, but there is this cautionary note as well: Businesses need to be ever-vigilant about using new media appropriately, and they must be responsive to consumer inquiries and comments.

This is the principle behind microfinancing – a concept that facilitates money-lending to business owners who might not be able to get bank loans. As John Liebhardt discusses in his blog on Global Voices Online, we can thank social media for bringing microfinancing to the Internet.

The microfinancing model is perhaps best explained by looking at such sites as Kiva.org, Wokai.org, and Babyloan.org. All of these sites are similar in that their primary goal is to help tiny entrepreneurs, primarily in developing countries, connect with investors who are willing to loan them money.

The social networking aspect of these microlenders is significant. Basically a lender is anyone who wants to help a person start or grow a business. Lenders browse budding business owners and pick one or more of interest to them. Lenders can lend even a modest amount of money to the individuals and, eventually, get paid back. Their motivation is simple: they are helping someone less fortunate than them start or grow a small business.

Kiva (a Swahili word meaning “unity” or “agreement”) started in late 2005 and was the first peer-to-peer microlending website. Forbes says “Kiva mixes the entrepreneurial daring of Google with the do-gooder ethos of Bono, lead singer of the rock band U2.” Kiva currently has about 574,000 lenders who have loaned more than $95 million to over 239,000 entrepreneurs in 184 countries. Kiva recently opened up its program to small business owners in the United States.

Kiva’s institutional supporters include the Clinton Global Initiative, The Kellogg Foundation, and The Rockefeller Foundation. Their corporate partners include American Express, Ernst & Young, Google and Intel.

Microfinancing is even becoming segmented. Wokai, referenced earlier, specializes in facilitating loans between online lenders and recipients only in rural China. Babyloan is the first French website to operate in a similar fashion to Kiva. eBay liked the microfinance idea so much that they bought MicroPlace.com, a business not unlike Kiva.

Clearly, microfinance is not just some far-out, idealistic dream that won’t amount to anything. Big companies and organizations are getting very interested in the idea. And to think it all started because of social media.

High search volume + high offer payouts = A perfect niche?
Is the financial niche a strong one? You betcha.

Comparing “head traffic” via a broad keyword like “credit report”, it’s not surprising that it has 7 times the search volume as another high traffic keyword phrase “internet marketing”. The phrase “credit repair” is no laggard either, posting about half the search demand as “internet marketing”.

Couple that with CPA street payouts ranging from $20 to $50 per lead and you can see why consumer credit repair is a great niche to be in.

So where has it gone wrong in the eyes of the FTC?

The key issue the FTC seems to have with the way “free credit reports” are being marketed is how rebill offers and upsells are placed ahead of giving consumers their federally mandated free credit report which is available through a centralized website, AnnualCreditReport.com.

Navigating through an advertisers site embedded with upsells, uninformed consumers may feel they are required to sign up for the CPA advertiser’s premium and/or rebilling services in order to receive their credit reports. The FTC reports in paragraph 4 of the release that they’ve received “consumer complaints about promotions for products and services that confuse and frustrate consumers as they attempt to obtain their free annual credit reports.”

The fact is few people go to these sites to “just check” their credit report.  Most people seek their credit report when they are faced with a big decision: because they want/need / or where denied a home loan, personal loan, auto loan, student loan. When a consumer pulls their report they are probably anxious about an upcoming decision or perhaps they’ve been denied a loan and are now confused about why their scores are low. In this state they arrive on a site to get an onslaught of upsells and rebill offers only to feel mislead by the site afterwards which leads to complaints.

With the FTC stepping in to address these complaints, existing credit report affiliates might feel that the FTC’s proposed disclosures are draconian in nature. An example:

“for any Internet site offering free credit reports, the Commission proposes a requirement that, before the consumer may obtain a credit report from that Web site, such site must first display a separate landing page with the required disclosure: “This is not the free credit report provided for by Federal law.”

Giving consumers the message “you don’t have to enroll for any upsells and by the way, here’s a link to your free credit report” will obviously hurt conversions in a significant way. If these measures come into effect, advertisers who provide these credit-related services will have to step up their game and offer compelling information/content that will add to the free credit report, or risk their offer going up in flames.

Think the FTC’s proposed measures lack bite?

A day later (8th October 2009), the FTC issued a media release stating that two credit repair companies and their principals settled FTC charges that they falsely claimed they could repair consumer’s credits and collected upfront fees, in violation of federal law.

Although offering a free credit report is a far step from claiming to being able to repair a consumer’s credit score, the FTC is showing its online mettle when it turns a keen eye on what’s happening in the online space.

The FTC isn’t choosing to deal with internet marketers by slapping them gently on the wrist either. Imposing fines of $8.3 million and $2.5 million against the defendants, the credit repair businesses were suspended due to an inability to pay the fines.

Impact for affiliates and marketers?

Although an affiliate or merchant with a vested interest might think the government is actively seeking and destroying the lucrative livelihoods of online marketers, it’s a stretch to come to that conclusion.

In the scenarios highlighted above, consumer complaints were the catalyst that got the ball rolling, with the resulting legal consequences. This past July, the FTC solicited public feedback on proposed amendments to the Free Annual File Disclosures Rule, also known as the “Free Credit Report Rule.”

Furthermore, the Credit Card Act of 2009 requires the commission to issue a rule by Feb 22, 2010 to prevent deceptive marketing of “free” credit reports. If advertisers are under the impression that the legislative “perfect storm” has passed, there’s going to be more bad news for them, but good news for consumers down the road.

Some advertisers within the credit report/report space have chosen to build their business model around rebills and/or offering premium upsells to uninformed consumers. It might even sound like a great business proposition. The reality as has been shown in the FTC’s recent actions, will likely result in more shady operator’s “businesses” collapsing like a house of cards.

FTC Resources:
Credit and debt related issues