August 12, 2012 4:37 pm

Aussie challenge for Facebook advertisers

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International advertisers are grappling with renewed concerns over the hidden costs of advertising on Facebook, after an Australian standards board ruled that companies are responsible for policing defamatory or misleading comments posted by ordinary users on corporate Facebook pages.

Though the decision will have varying implications on other individual countries, it points to a lack of consensus among global regulatory bodies over the dividing line between responsible advertising and free speech.

That inconsistency could have a chilling effect on advertisers’ willingness to use social media sites, said Andrea Levine, director of the National Advertising Division of the US Council of Better Business Bureaus.

“If the burden falls on the advertiser to review and ensure that every single thing a third party posts for truthful and accurate advertising, that would be ridiculously expensive to provide that,” she said. “If I were an advertiser, I’d just take that off my site.”

In the Australian case, the Advertising Standards Bureau reviewed the Facebook page for Diageo’s Smirnoff Vodka. It considered whether obscene and sexually suggestive comments from users about the “purity” of the alcohol, and photographs of people drinking Smirnoff who appeared to be under the legal drinking age, violated local truth and decency advertising standards.

Though the complaint was ultimately dismissed, the board concluded that user comments and photos on a company’s Facebook page are in fact considered advertising, and that it was the company’s responsibility to monitor them for compliance with advertising codes.

Countries such as the UK, South Africa and New Zealand, which have similar theoretical frameworks around decency in advertising, could follow Australia’s lead, Ms Levine said.

David Ellison, the marketing services manager for the Incorporated Society for British Advertisers, said advertisers in the UK will “wait with keen interest” for reaction from the local standards authority.

In the US, laws are more strictly formed around truth and accuracy, rather than decency. And two federal laws protect advertisers from liability for content posted to their websites by third parties.

However, those laws were written and passed before Facebook was founded and before online marketing grew to today’s prominence. It is possible that the various self-regulatory boards for the advertising industry could weigh in to scale back that protection, legal experts said.

The result of the Australian board’s decision, and any others that follow suit, could be damaging for Facebook.

The social networking company is already struggling to prove the effectiveness of its advertising model, and has yet to satisfy the concerns of companies in highly-regulated industries in the US such as healthcare and financial services.

Pharmaceutical companies have been particularly reluctant to invest in marketing on Facebook, said Bill Evans, who manages pharmaceutical accounts for an arm of WPP, the ad agency.

“The sales reps that I’ve met with at Facebook don’t really understand how pharma works,” Mr Evans said. “They view it from a consumer, over-the-counter mindset. They don’t have conversations about the regulatory concerns.”

Drug companies worry that comments on their Facebook pages could run foul of laws that require drug advertisements to balance any positive statement about a drug with a negative side effect, or laws that prohibit the promotion of unapproved “off-label” uses of a drug.

The financial industry has also been slow to adopt social media.

Morgan Stanley Smith Barney has just begun allowing its financial advisers to use LinkedIn and Twitter after a year-long pilot programme that included the testing of new software that screens and filter posts that may violate federal rules.

The technology required to do this is still in its infant stages, said Lauren Boyman, social media director for Morgan Stanley Smith Barney. While the technology works, she said, “it’s not perfect.”

“You can’t really control what people say back,” she said. “That’s the beauty and the danger of social media.”

Facebook and Diageo declined to comment.

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