Viral, “Buzz,” and “Stealth” Marketing 

Table of Contents

1. Introduction
2. Regulations Affecting Viral Marketing
3. Third-Party Rights
4. Analogies for Regulatory Intervention
5. The Future of Viral and Buzz Marketing

Summary

Regardless of what name it is given, there is one thing that is clear – viral marketing is
advertising, and must be treated as such from a legal perspective.

1. Introduction

The concept of viral marketing describes the use of marketing techniques that seek to exploit
pre-existing social networks to produce exponential increases in brand awareness through viral
processes comparative to that of an epidemic. Though the term is currently used to describe a
wide variety of marketing practices, it traditionally referred to advertisements that spread
briskly through the cyberspace, or via e-mail. The term was originally conceived by venture
capital firm Draper Fisher Jurvetson after its investment in Hotmail grew dramatically once e-
mails from Hotmail users would automatically add an advertisement at the end of the message
suggesting that the recipient sign up for the free service. In a year and a half, more than 12
million people became Hotmail users.

Viral marketing was recognized as a full-blown phenomenon when the now-legendary

Subservient Chicken advertisement created by Crispin Porter + Bogusky (see
www.subservientchicken.com) in the spring of 2004 proved that consumers would forward
interesting or esoteric campaigns to friends and family. The success of the Subservient Chicken
and other similar campaigns has made it clear that the Internet can be used to influence trends
and spread product awareness in ways far more cost-effective and exponential than traditional
media.

Viral marketing campaigns can generally be lumped into four types of messages: (1) forward-to-
a-friend, (2) incentivized viral, (3) stealth or guerrilla and (4) buzz or word-of-mouth. While
much of the current public criticism against viral marketing involves companies who are
allegedly deceiving customers by not disclosing monetary interests behind promotions, these
practices are a small part of the full panoply of viral marketing techniques. Each of these
different techniques can be described as follows:  

 Forward-to-a-friend messages are those that attach a tag line at the end of an e-mail, or
as part of a web site asking the recipient to pass the message along. Examples include
chain letters, or more recently, advertisements with a tag that reads "Pass this on! It's
fun!" Since the success of viral marketing often relies upon the extent that the message
will be conceived as interesting or entertaining, the rate at which the message is
disseminated will be proportionate to the relevance of the message to its target.  
 Incentivized viral messages are those that encourage recipients to provide a friend or
family's address in return for some reward. Examples include offering more expensive
prizes upon referral of a friend, or accumulating points toward a specific prize. These are
really nothing more than a subset of forward-to-a-friend e-mails, and are used widely in
sweepstakes, where extra entries are given for each time an e-mail about the promotion
is sent to a friend.  

 Stealth or guerrilla messages consist of an e-mailed online advertisement, a news piece,

or an active use of a product – without disclosure of its true form as an advertisement.
The more creative and unconventional guerrilla marketing techniques have received a
lot of media coverage, but have also prompted several advocate groups to criticize the
techniques, particularly when directed at children. In employing guerrilla or stealth
marketing, particular attention is paid to ensure that the advertisement appears to be
spontaneous or natural and to feature as entertaining a message as possible.  

 Buzz Marketing messages consist of advertisements or messages that create coverage

by encouraging discussion, often by enlisting "normal" people to influence or create
"buzz" within social networks. While similar to stealth marketing if no disclosure of
compensation (be it monetary or product equivalents) is made, buzz marketing in a viral
context is traditional word-of-mouth marketing enabled by technology. An example of
buzz marketing is Google's Gmail service, where the initial scarcity in receiving a Gmail
account generated considerable buzz, thereby increasing desire for the service.

Regardless of what names it is given, there is one thing that is clear – viral marketing is
advertising, and must be treated as such from a legal perspective.

2. Regulations Affecting Viral Marketing

The FTC Act  

While no specific laws have been enacted to address the practice of viral marketing, existing
federal, state and local laws that impact upon traditional advertising and marketing are relevant
to marketers as they strategize viral marketing campaigns. The most important law at the
federal level is the Federal Trade Commission ("FTC") Act, which prohibits unfair or deceptive
acts or practices affecting interstate commerce. Under the FTC Act, "deception" includes any
misrepresentations or omissions likely to mislead consumers acting reasonably under the
circumstances, and "unfairness" refers to advertisements that cause or are likely to cause
substantial consumer injury, not reasonably avoided by the consumer, and not outweighed by
countervailing benefits to consumers or competition. The FTC Act is broad enough to cover
many different activities and certainly must be considered when conducting any viral marketing
campaign. Indeed, the FTC's Guides Concerning Use of Endorsements and Testimonials in
Advertising (the "Endorsement Guides"), issued by the FTC pursuant to its authority under the
FTC Act, are of particular importance for certain types of viral campaigns. According to the
Endorsement Guides, "an endorsement means any advertising message (including verbal
statements, demonstrations, or depictions of the name, signature, likeness or other identifying
personal characteristics of an individual or the name or seal of an organization) which message
consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party
other than the sponsoring advertiser."

Viral marketing is impacted by the Endorsement Guides, therefore, in any situation where a
person has been used to promote the advertiser's message. The Endorsement Guides require
not only that statements made by endorsers reflect the honest opinions and beliefs of the
endorsers, but also that any connections between the endorser and the advertisers that might
materially affect the weight or credibility of the endorsement (i.e., the connection is not
reasonably expected by the audience) be fully disclosed. The FTC states that "[a]n example of a
connection that is ordinarily expected by viewers and need not be disclosed is the payment or
promise of payment to an endorser who is an expert or well known personality, as long as the
advertiser does not represent that the endorsement was given without compensation.
However, when the endorser is neither represented in the advertisement as an expert nor is
known to a significant portion of the viewing public, then the advertiser should clearly and
conspicuously disclose either the payment or promise of compensation prior to and in
exchange for the endorsement or the fact that the endorser knew or had reasons to know or to
believe that if the endorsement favors the advertised product some benefit . . . would be
extended to the endorser."

Given the Endorsement Guides, any viral marketing campaign involving the use of individuals
who have been induced or compensated in some way to talk favorably about a product or
service, without any disclosure of such compensation, are likely in violation of the FTC Act. For
example, hiring street teams to go to bars to talk positively about a malt beverage, without
identifying their relationship to the brewer, could be considered to be misleading. In the same
manner, using a company to include favorable postings on a message board or chat room could
also be misleading.

At least one group agrees that, in certain situations, viral marketing is running afoul of the law.
On October 18, 2005, the consumer advocacy group Commercial Alert sent a six-page petition
to the FTC requesting investigation of companies that engage in "buzz marketing", alleging that
such companies are perpetrating large scale deception upon consumers by not disclosing that
they have engaged stealth marketers to promote their products. Commercial Alert's petition
requested an FTC investigation, and further demanded that participants in buzz marketing
campaigns be required to disclose their relationship, including any related compensation. While
not citing to the Endorsement Guidelines, Commercial Alert called a failure to disclose
fundamentally fraudulent and misleading. Commercial Alert's petition singled out Proctor &
Gamble's "Tremor", a sales force of more than 250,000 teenagers used in buzz marketing
campaigns, where such teens are compensated with coupons or product samples and where,
according to the petition, Tremor does not tell its endorsers to disclose that they are being
compensated. As of March 2006, the FTC has not responded to Commercial Alert's petition.

The CAN-SPAM Act

Since many of today's viral marketing campaigns are conducted online, and include a
component heavily reliant on e-mails, the federal Controlling the Assault of Non-Solicited
Pornography and Marketing Act of 2003 and its regulations (the "CAN-SPAM Act") can have a
major impact. The CAN-SPAM Act applies to "commercial electronic mail messages" where the
primary purpose of such messages is the commercial advertisement of goods or services. The
CAN-SPAM Act affects viral marketing campaigns by requiring, among other things, that any
commercial message distributed via e-mail contain the following: (1) a notice that the e-mail is
an advertisement or solicitation; (2) a valid physical postal address; (3) a functioning opt-out
method; and (4) an accurate e-mail header. Any e-mails distributed via a viral marketing
campaign may need to be compliant with the CAN-SPAM Act and, at any rate, a complex
analysis must be undertaken to determine whether the content of the e-mail is commercial. For
example, a viral video distributed via e-mail may not even mention the product or service the
video is "advertising." Such an e-mail campaign may not need to comply with the CAN-SPAM
Act, since there is no commercial advertisement of goods or services.

However, one of the simplest types of viral campaigns, so-called forward-to-a-friend e-mails,
may easily run afoul of the law. If the e-mail that is being forwarded contains commercial
content, such forwarded e-mail may still need to comply with the CAN-SPAM Act. According to
the FTC's latest rulemaking process on this subject, forward-to-a-friend e-mail campaigns are
subject to the CAN-SPAM Act when there is consideration or inducement for the individual to
forward the e-mail. Consideration includes rewards, coupons, discounts, payments or extra
sweepstakes entries. An advertiser will be responsible for complying with the CAN-SPAM Act,
even if there is no consideration, if the advertiser induced the recipient to forward the e-mail.
However, a Web page with a "Click here to forward" feature that allows someone to forward a
message or link to someone else (and that does not provide any encouragement to do so)
would not be considered an inducement.

State Laws

It is also important to remember that laws that are similar to the FTC Act exist at the state level,
and can be applicable to your viral marketing campaign. These "mini" FTC acts and other state
consumer protection laws are customarily enforced by the attorneys general of the state, and
serve to provide a general framework within which viral marketing campaigns must be
structured.
There may be other specific laws that come into play as well. State privacy laws are one
example. California's Online Privacy Protection Act of 2003 requires a privacy policy posted "in
a conspicuous manner" for websites collecting information from California consumers. Viral
websites that collect consumer information may be implicated.

Local Laws

Finally, a panoply of different laws at the local level can serve to minimize the effectiveness of a
viral campaign. Many cities and municipalities have specific regulations relating to graffiti,
littering, crowd control, and similar matters. For example, images spray painted on sidewalks or
on buildings could be in violation of anti-graffiti laws, and even flash mobs (a group of people
who assemble suddenly in a public space, do something unusual and then disperse) could be in
violation of protest or parade permit laws. In any event, a thorough review of local law should
be undertaken before embarking on a campaign involving large groups of people, sound
broadcasting equipment, or placement of materials other than in purchased media.

Self Regulatory Guidelines

As viral marketing gains in popularity, and calls for increased regulation and oversight become
more widespread, industry groups are also taking notice, and attempting to stave off regulation
by implementing self regulatory guidelines. One such group is the Word of Mouth Marketing
Association (WOMMA). WOMMA has drafted a Word of Mouth Marketing Code of Ethics
(available at http://www.womma.org/ethicscode.htm), which encourages disclosure in word of
mouth marketing, and specifically requires compliance with the FTC's Endorsement Guides.
Expect more such guidelines from other organizations as this popular form of marketing
continues to grow.

3. Third-Party Rights

As with any other advertising campaign, viral marketing campaigns must abide by any laws that
exist regarding the use of third party materials or intellectual property rights. Therefore, in
general, any third party materials used in the campaign (such as photographs, video, news
stories, websites, music, and individual names, images and likenesses) must be licensed or
cleared prior to use.

More specifically, personal names, nicknames, photographs or any other identifying details of
persons must generally not be used for commercial purposes without written permission. Don't
forget too, that copyright law will apply to protect any original works of authorship that are not
in the public domain. Music, literature, photographs, and artwork are all protected, and so use
of any such items in a viral campaign without permission would be a violation of third party
rights unless deemed to be a fair use. Don't make the mistake, as many people do, that such
use in a fictitious blog or news site would be fully protected by the First Amendment.
Remember, viral marketing is still advertising, and thus subject to lesser protections under the
First Amendment. Trademark laws may also come into play if you are using any third party
trademarks, tradenames, taglines, or slogans. Brand names of products and services generally
may be included in a viral campaign in a descriptive manner without trademark liability.
However, the risk of an adverse claim from such use can be high, particularly if the product or
service whose trademark is used might not be flattered by or see any benefit from that use.

Finally, if your viral campaign contains any Internet component, the use of links to third party
websites or information that in any way implies an endorsement or sponsorship without
explicit permission from such third party could be a violation of such party's rights.

4. Analogies for Regulatory Intervention

While there has yet to be explicit regulatory intervention in the practices of viral marketing, the
use of "fake advertisements" and "subliminal messages" in the past have been cited as
potential grounds for regulatory guidance in this area. An FTC settlement with Georgetown
Publishing House Limited Partnership, Inc., a Washington, D.C.-based publishing firm, where the
publishing house falsely suggested that a "book review" sent to consumers was in fact an actual
review, could be considered one of the first consent orders regarding viral marketing. In 1996,
the company agreed to settle with the FTC regarding allegations that they used deceptive
advertising tactics to promote the sale of a book titled The American Speaker: Your Guide to
Successful Speaking. The FTC alleged that the respondents misled consumers by sending them
what appeared to be an independent book review torn from a magazine. Attached to the
"review" was a self-adhesive yellow note with the handwritten personalized message:

"[Recipient's name], Try this. It works! J."

suggesting that the clipping had been sent by an acquaintance. The proposed settlement
prohibited the publishing house from misrepresenting that an ad is an independent review or
article, or that it is not a paid advertisement. What is particularly interesting about this case is
that the method used to distribute the advertisement was not considered unfair or deceptive
(thousands of people received the same personalized message from "J"), but the fact that the
book review was actually an advertisement. A similar result could be found for many viral
campaigns where the "advertisement" is disguised as something that it is not.

While not directly on point for viral marketing campaigns, for some, the parallel between
subliminal advertising and undisclosed viral marketing is not a difficult one to draw. The FCC
addressed subliminal messages in the mid 1970s, and the practice all but disappeared. In 1974,
the FCC released its only regulation on subliminal advertising in response to a toy
advertisement that flashed the words "Get It" on the screen during the commercial, stating
that:

"The FCC sometimes receives complaints regarding the alleged use of subliminal techniques in
radio and television programming. Subliminal programming is designed to be perceived on a
subconscious level only. The FCC has held that the use of subliminal perception is inconsistent
with the obligations of a licensee because, whether effective or not, such broadcasts are clearly
intended to be deceptive." [from 39 Federal Register 3714, 1/29/1974]

The FTC has stated that it would be deceptive for marketers to embed ads with so-called
subliminal messages that could affect consumer behavior, and in 1974 the FTC issued a
document in 1974 saying that subliminal messages on highway billboards could be potentially
considered unfair and deceptive and thus should not be used. The FTC further noted that
viewing a billboard from a car at 60 miles an hour is similar to viewing subliminal images on a
screen.

Under the scrutiny of the FCC and FTC, subliminal advertising has essentially vanished. While
the actual effectiveness of the practice has not been objectively determined, the presence of
subliminal messages in mainstream marketing campaigns has not been prevalent since the
1970s. Undisclosed viral campaigns could be considered a form of subliminal advertising, if the
consumer is not aware that they are receiving an advertising message.

5. The Future of Viral and Buzz Marketing

The advantages of viral marketing are quite high – low cost, exponential reach, high efficiency
and the possibility of constant alterations to the campaign with little effort. However, the use of
viral marketing also implies a lack of control over the reach of the campaign, as well as the risk
that the message will be viewed as spam by consumers and thus rejected. Further, companies
that try and obscure their connection to a viral campaign could find themselves in a legal or
public relations quagmire.

Thus, though it remains to be seen whether the FTC will investigate stealth or buzz marketing
techniques and practices, many marketers are erring on the side of caution and disclosing when
and where commercial relationships exist in their viral campaigns. Most notably, BzzAgent, one
of the most recognized buzz marketing agencies, changed their policy to ensure that their
workers disclosed their affiliation with BzzAgent. While BzzAgent attributed the policy change
to the fact that it found campaigns to be more effective when consumers were aware of the
additional information, similar requirements may be required by law if the FTC and other
lawmakers decide to address the practice of stealth marketing directly.