Bloomberg reports, FTC to Crack Down on Paid Celebrity Posts That Aren’t Clear Ads. Yes, the FTC is saber-rattling on this issue, with its native ads workshop, statements on the issue, and enforcement actions. And the media coverage runs into the same old arguments.  First, “we didn’t intend to mislead.”

We’re venturing into a little bit of ridiculous territory with the FTC saying these things because influencers really want to follow the rules,” Pomponi said. “They want to do a good job — they want to be seen as useful to brands and don’t want to do anything that would jeopardize their relationships.”

That’s great and all, but as an advertiser, you hold the duty to ensure that your messaging is not misleading. You are in control of it. You draft it. You have to anticipate how a reasonable consumer right interpret it. FTCA liability does not require an intent to deceive. The issue is whether endorsements are likely to mislead, even if the deception was an unintentional mistake.

There’s a basic tension here. The point of endorsements, like native advertising, is to create a friendly engagement with the product. However, that friendly engagement may disarm the consumer. When the consumer recognizes material as advertising, it causes the consumer to more skeptically evaluate (or avoid) an advertising claim. Thus, the benefits of secret endorsement are in tension with the goal of enabling consumers to be self-reliant in recognizing commercial persuasion.

Second, there’s something new and different about influencers and ads:

Some advertisers say influencer posts don’t deserve such careful disclosure, because they are not the same thing as a traditional ad. Lauren Diamond Kushner, a partner at Kettle, a creative agency in New York, has worked on influencer campaigns with brands including Sunglass Hut. She said the Instagram stars and YouTubers often only work with the brands that they genuinely like and use.

Wrong! So, before the internet, there was this thing called TV. And on TV, there were celebrities who did ads. Those celebrities too screened products and only did endorsements that were not too embarrassing. (In many cases, real celebrities limit ads so that they only appear outside the US!). And before the TV, there was this thing called radio. And so on.

The “genuinely like and use” argument is baloney. What happens if the influencer changes her mind and stops using it? Do the tweets get deleted?

I have a few friends working at major technology companies who share a similar story—they describe meetings with the founder, always an eccentric, Delphic, creature who gives feedback that is rushed and difficult to understand. The group huddles after meeting with the oracle, attempting to decode his meaning. Some hilarity ensues. Someone among the group is a founder whisperer, with a track record of properly decoding his pronouncements.

Joshua Cohen’s Book of Numbers captures this dynamic and puts the reader in touch with an unforgettable character. The founder of Tetration, a Google-like company, hires Joshua Cohen, a failed writer, to ghostwrite his biography. The founder, also named Joshua Cohen, has some traits of Steve Jobs, and is singularly focused on Tetration’s goal of “equaliz

Much of my book is available free or at low cost.

The lowest cost option for purchasing is Google Play, which sells it for only $20.

You can read the print book free at over 115 academic libraries.

If you are a faculty member or student at an academic institution, you might have a subscription to Cambridge Books Online, which enables you to download a PDF of the entire book.

The introduction, which gives an overview of the entire book, is available free on SSRN.

Now that it is 6 months from publication, I have posted chapter 6 (online privacy) which is probably the book’s most useful chapter, on SSRN.

An essay on the FTC’s early history (drawn from Chapter 1) is here.

An essay on the Bureau of Economics is on SSRN.

An essay on assessments is on SSRN.

Dan Lyons’ Disrupted, the tell all about a prominent journalist’s experience working at Hubspot, a marketing company, is a train-wreck of a read. I could not put it down and have accomplished little work this week as a result 🙂 Lyons details a hundred examples of plain naïveté and pathology within the company. Lyons comes across so harsh that some have dismissed the book, but doing so is a mistake. Ignore the specifics about Hubspot—Lyons’ more important contribution concerns the state of the companies that can attract venture funding and successful IPOs.

Lyons’ book could have used a bit of framing to better highlight some troubling themes, many of which are not specific to Hubspot. First, Lyons paints the company’s executives as out to lunch, and its employees as suffering from the Dunning-Kruger effect, leading to a bozo explosion. So the question arises, how could a company so misdirected and poorly constituted attract big investment? Lyons’ argues that we’re “feeding the ducks.” Investors demand startups that look like Facebook, with young employees and drop-out-of-Stanford leaders. And so our economy is creating hollow imitations of Facebook and Google that keep the ducks satiated.

Second, of course there are incompetent companies out there. But most collapse and the losses are internalized to a small number of actors. Lyons discussions of Hubspot and other companies that have not posted profit (in some cases, not even revenue), sounds a lot to me like the explosion of NINJA loans in the 2000s. Back then, we were feeding the ducks—giving home mortgages to anyone in order to feed investor demand. The logic of the mortgage market was both inscrutable yet unquestionable. Switching to today, Lyons explains how founders and venture capital firms stand to benefit from boosting these firms, and how employees and investors will end up holding the bag. In these bubble situations, even good, smart people will tend to the ducks and attack those questioning the situation. Let us just hope that when the charade ends, the losses do not require a bailout.

Third, while Lyons is preoccupied with his age, (he is a journalist in his early 50s starting a new career at a company where the average employee is 26) the reaction of others to him is troubling. Lyons portrays his Hubspot colleagues as passive aggressive, as dismissive of expertise or experience, as having paper-thin skin, as the kind of people who would fail a philosophy course—or file a harassment case about it—because the argumentation would be too traumatic. Lyons portrays the Hubspot employees’ disgust as palpable. “Culture fit” was first a thinly-veiled, but then explicitly-expressed preference for employees in their 20s.

Finally, Lyons delivers a warning about cloud services and how we have entrusted our data to them. Recall that Hubspot fired a high-level employee and another had resigned concerning an apparent attempt to obtain a copy of the pre-release manuscript of Disrupted. Lyons adds up the evidence—HP’s investigation of a reporter; Uber’s intimations about the power to investigate a journalist; the god-modes built into many social network services; Facebook’s PR scheme against Google; the powerful incentives of venture capitalists to get quick hits; and so on. He explains that the market is set up so that “trust” ensures good behavior with data. That is, the desire for commercial success should police the worst behavior and stop petty abuses with data. His experience at Hubspot has changed his mind:

So we figure we’re safe. We figure we can trust the people who run online services not to snoop on us. I used to believe that. I don’t anymore. The

[Hubspot executives] were not random nerds going rogue in some data center. They were top executives of a publicly traded company. They’re the ones who were supposed to be keeping an eye on the others. During my time at Hubspot, I was shocked to see how badly managed the company was and how packs of inexperienced twenty-something employees were being turned loose and given huge responsibility with little or no oversight. In the world of start-ups that is now the norm, not the exception.

All your data are belong to a bunch of bozos! What could possibly go wrong?