Quickbooks Affiliate Disclosure: FTC Compliance or Advertising?

Compliance with the new Federal Trade Commission (FTC) guidelines (effective December 1, 2009) is a scramble for both Internet entrepreneurs and large online companies. For Internet marketers who sell multiple products, I’ve created affiliate compensation disclosures that can be used regardless of what is being sold. These documents are part of  Website Legal Forms Generator v. 2.0.

However, it appears that bigger companies are taking a proactive stance by requiring affiliates to place special banners specifically targeted to their products on the affiliate sites. Intuit’s QuickBooks Affiliate program now requires the banner shown to the left. Here are the instructions that came with it.

Please be aware of the recent FTC guidelines about product endorsements. Affiliates, bloggers, tweeters, and endorsers are now required to disclose their relationship with Intuit. Please let your audience know that you are an affiliate of Intuit. Please make these changes ASAP. We will be auditing landing pages next week. For more information, you can visit the FTC website: http://ftc.gov/multimedia/video/business/endorsement-guides.shtm

ACTION ITEM:

We have an “Authorized QuickBooks Affiliate” badge for you to post on your site. The badge should be placed somewhere prominent on your site to inform your audience.

Although I applaud the intent, these instructions are too vague. First, QuickBooks leaves it to your discretion where to place the banner. If you’re blogging, does this mean that you’re supposed to put it in every post that mentions QuickBooks? That would be reasonable.

My concern is that the intent of the banner is to encourage affiliates to put the banner in the sidebar, i.e. less about compliance and more about taking up valuable space with the QuickBooks banner. If every affiliate program operator requires a special banner to be placed in a sidebar regardless of post content, there won’t be enough room to fit all of the “badges.”

Quickbooks should allow a generic Affiliate Compensation Disclosure to suffice. There’s really no need to brand the material connection with the Quickbooks brand…except extra exposure for Quickbooks by using the badge as an advertisement. Note that nothing in the FTC guidelines requires the disclosure to state the name of the product or even the material connection details. The guidelines require disclosure of the connection’s existence so that the reader knows that the content may be biased/tainted rather than an independent review of the product’s merits.

Testimonials, Federal Trade Commission, and Your Website

Two key website testimonial issues that the new Federal Trade Commission (FTC) guidelines discuss are compensation and context. Let’s look at both issues and how to deal with them.

1. Compensation. Material connections are a big part of this issue. If the testimonial provider is receiving something of value from you (such as free products, free services, or cash), the conservative approach would be to disclose this relationship to your website readers.

Example: You solicit and receive a testimonial from someone you have given a copy of your $997 info product and free tickets to attend one of your $5K seminars. Do you think these types of freebies might influence what the testimonial provider is going to say about you, your business, and the quality of your products and services? Would the same type of testimonial be typical from those who did not receive the gifts from you?

There’s also a gray area where the testimonial provider has a relationship with you that could affect the content of the testimonial provided. Although the types of relationships will vary, here are a few examples.

Example: You’re paying for Internet coaching from a guru. One of the benefits of being coached is that the guru will promote your online business to his lists and provide you with testimonials that create third party credibility. This relationship is relevant to the testimonial’s content and even the fact the testimonial was given in the first place. Would the average reader want to know that the testimonial was potentially biased because you’re paying the provider for coaching?

Example: You and your friends have formed a mastermind group that promotes each others’ product launches. When one of your group has a launch, all the rest promote as affiliates and provide testimonials for that launch. Each individual member profits both as a product creator who has affiliates promoting his launch but also as an affiliate (or even super affiliate) on the launches done by other members. Would this type of relationship affect the content of the testimonials provided for your launch? Should a prospect know about this mastermind relationship because of its affect on both who provides testimonials and what is said in those testimonials?

2. Context. If your testimonial provider makes claims about results achieved with your products and services, what the testimonial doesn’t say could be considered a deceptive trade practice by the FTC because important facts were omitted from the testimonial. These are facts that are material because they were essential to the results achieved by the testimonial giver.

Example: Ima Guru provides you with a testimonial that she made $33,476 in just two days using your e-mail marketing course. However, the testimonial doesn’t disclose that Ima Guru and her two employees work around the clock for 48 hours to generate that income. The testimonial doesn’t say that Ms. Guru’s net income for those two days was just $11,948 after deducting labor, affiliate commissions, and other marketing costs. She also didn’t mention that the income was only possible because she had a pre-existing e-mail list of 40,000 subscribers to market to using your methods.

Example: You receive a testimonial from John Slim who claims that he lost 78 pounds over six months while drinking a weight loss shake that you sell. You receive before-and-after photos to use with the testimonial. However, the testimonial omits important facts. Mr. Slim’s diet the whole six months consisted of your shakes, Acai berries, and beef jerky. He also exercised a minimum of 3 hours daily with the assistance of a personal trainer. Would your prospective purchaser reading Mr. Slim’s testimonial want to know these missing facts before relying upon the testimonial as part of the buying process?

In each of the above examples, your typical purchaser will not be able to achieve similar results. The purchaser’s expectations are based on false assumptions because of material omissions. That’s the type of testimonial that can land you in trouble with the FTC.

Does this mean the death of results-based testimonials? Of course not. But how you provide them should change.

In Give Your Testimonials a Reality Check, copywriter Michel Fortin describes a great solution to this problem. Provide readers with context by converting your testimonials into case studies. With case studies, you’ll be able to disclose the material facts so that the reader can make an informed decision whether or not to purchase from you. Using the above examples, with the context provided in case studies, you can:

• disclose what has been been given of value to your testimonial provider
• tell the reader about the nature of your relationship with the testimonial giver
• reveal the resources needed to achieve the earnings your testimonial provider made
• inform your prospective purchasers what it really took to lose X pounds with your diet shakes

To learn more about this issue, you’ll want to get your complimentary copy of the new special report How to Comply with the New FTC Compensation Disclosure Guidelines (PDF file) right now.