Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
As blogs morph into broader marketing tools, the feds are casting a more watchful eye.
When Hanover Direct Inc.’s retail apparel site Undergear.com gets its products featured on any of the scores of blogs catering to its legion of faithful followers, the power of blog marketing quickly comes to light. “Blogs are reaching on the Internet more consumers who are moving away from traditional media,” says Matt Bavaro, Internet brand manager for Undergear, which hasn’t had much success in building its brand through mass market magazines or TV. “Getting our products mentioned on specialized blogs with huge numbers of followers can provide a major boost to our brand awareness. Once on a blog, our message becomes viral.”
Maybe so, but unlike traditional media supported by professional journalism staffs and publicly known editorial boards and corporate parents, many blogs are operated by individuals whose credentials as information providers may be at best unclear and whose corporate sponsorship, if any, is unknown.
And as of Dec. 1, the federal government began pushing for some assurance to consumers that, when they read an endorsement of or testimonial about a commercial product on a blog, they at least know what if any business relationship the blog has with the provider of that product that just might color the blogger’s opinion of it.
Full disclosure wanted
When marketers like Hanover and other retailers provide free products to bloggers to review and write about, the Federal Trade Commission now wants both the blogger and the product provider to disclose their relationship.
New FTC guidelines that went into effect on Dec. 1 on blogging and other forms of online marketing include:
-Bloggers should disclose when they have received free products or other forms of compensation from companies whose products they’re endorsing;
-When a blogger cites an unusual level of personal benefits derived from a sponsor’s product, the blogger must also cite any available data that indicates the results the general public have experienced when using the same product;
-Advertisers should take steps to ensure that bloggers aren’t making claims that the advertiser itself can’t back up.
The guidelines include several changes to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, which were last updated in 1980. In effect, the new guidelines are an attempt to extend marketing standards and consumer protection to the digital age of marketing, says Julie O’Neill, a former FTC staff attorney who is now of counsel with the Washington, D.C., law firm Morrison & Foerster.
Failing to abide by the guidelines could lead to an FTC investigation and enforcement of the FTC Act, which sets rules regarding endorsements and testimonials in advertising. If found guilty, bloggers and other such product reviewers can face court-ordered civil penalties of up to $16,000 per violation, an FTC spokeswoman says.
So far, the FTC hasn’t pressed its new guidelines on advertisers and bloggers, and instead has been distributing educational materials, and holding hearings and webinars. But advertisers and bloggers shouldn’t get too comfortable, O’Neill says.
“When new rules or guidelines come out, the FTC often gives the targeted industry a certain amount of time to come into compliance with them,” she says. “But it would not surprise me if the FTC started to do some sweeps of companies by this summer to see if any advertisers and bloggers are not following the guidelines and FTC Act rules. It will look for mentions of main brands that consumers have heard of, because if it results in legal action it will make a nice press release that will set a good example for other advertisers and bloggers. And no one wants to be the first endorsement case that winds up in that press release.”
Not all retailers and advertisers are strictly following the guidelines. Instead, some say they see the rapid growth of blogs and blog audiences as reason to treat blogs more like traditional media-where, for example, newspaper columnists write about products without necessarily disclosing if they have received free products to review.
“Many blog sites receive more hits than local newspaper sites,” says a spokeswoman for Garmin, the manufacturer and retailer of global positioning devices.
Garmin provides its products to bloggers for 30 days to review. It also offers them a discount on Garmin products. But it doesn’t require bloggers to disclose their relationship with Garmin, the spokeswoman says. “We treat bloggers similarly to how we treat traditional media,” she says.
“That’s up to the bloggers to disclose what they want,” she adds. “We don’t speculate whether consumers think bloggers are independent of advertisers. Consumers are savvy enough to read something in traditional media or in a blog and tell if a product has been reviewed thoroughly or not.”
At Hanover Direct, blogs have become important marketing vehicles for several of its niche retail sites, including home furnishings and apparel retailer The Company Store, which is tied in with blogs focused on moms, and apparel merchant Silhouettes, which is connected to blogs about plus-size women’s apparel.
The Hanover property with the most to gain through blogs is underwear brand Undergear, which has the largest following of bloggers passionate about its products and its brand, Bavaro says.
Blogs have helped Undergear to reach its targeted younger audience as well as the large part of its market comprised of gay men, who are more tuned into blogs and more affluent than the general population, Bavaro says.
Hanover has occasionally provided product samples to such blogs, but doesn’t exert direct control over how they disclose their relationships with it. The retailer has left such details up to a public relations firm.
The blog NextModelMen.com published several images of models in Undergear apparel and wrote positively about the quality of the brand’s products. Included in a brief disclaimer paragraph on the same page with content related to Undergear was a note, “Portfolio submissions from fashion brands,” which indicates that the blog receives products from fashion brands for review, Bavaro says.