California based Machinima, an online entertainment network that promoted Xbox One, has settled an investigation with the FTC surrounding its advertising practices. The FTC alleged that Machinima paid “influencers” to post YouTube videos endorsing Xbox One and other online games. However, the “influencers” failed “to adequately disclose that they were being paid for their seemingly objective opinions,” according to the FTC.
According to the complaint, a small group of influencers were paid between $15,000 and $30,000 for producing YouTube videos at the beginning of the Xbox One marketing program. Thereafter, Machinima promised to pay a larger group of influencers $1 for every 1,000 video views up to a maximum of $25,000. Machinima did not require the influencers to disclose they were being paid for the YouTube videos.
The FTC’s blog post announcing the settlement stated: “The law says reviewers should disclose their connection to a company. Why? Because a connection could affect the credibility a consumer gives to the review.” In its press release, the FTC stated “When people see a product touted online, they have a right to know whether they’re looking at an authentic opinion or a paid marketing pitch. That’s true whether the endorsement appears in video or any other media.”
The settlement is clear in explaining the FTC’s requirements for paid endorsements in marketing campaigns, and online marketing companies may wish to consider the settlement when developing online marketing campaigns that use paid endorsements.