Global Challenges in Advertising: A Look Across the Pond

Twice a year, a distinguished group of advertising experts and practitioners from around the world convene under the aegis of the International Chamber of Commerce (ICC) to discuss major issues and challenges facing the marketing and advertising sector. The 2006 session of the ICC Commission on Marketing and Advertising was held in New York this week and was focused on emerging challenges to industry self-regulation.

Delegates came from Belgium, India, Italy, Mexico, the Russian Federation, Sweden, Switzerland, Turkey, the United Kingdom and the U.S., representing leading corporations, advertising agencies, media companies, trade associations and law firms involved in marketing, advertising and commercial communications. In addition to a broad discussion on the challenges of self-regulation, a dedicated task force met to review possible changes to the ICC Code of Advertising and Marketing Communication Practice.

While many who follow advertising issues in the United States may not be familiar with this group or the series of codes it promulgates, it is a big deal in Europe where the advertising sector and governments take the ICC's deliberations quite seriously. There, the ICC's position on marketing and advertising practice sets a high standard for a wide range of commercial marketing communications, and plays a key role in advertising litigation and enforcement.

International Self-Regulation

For example, the ICC Code sets out clear guidelines on basic matters such as decency, honesty, truthfulness and social responsibility in marketing and advertising. There is a decidedly protective (and some say over-protective)element to marketing communications directed toward children and young people, recognizing their inherent sensitivities. The Code speaks to everything from sales promotions, sponsorship, direct marketing, and the uses of electronic media to environmental advertising.

At its core, the Code is a self-regulatory framework that complements existing national and international laws. It is intended to bolster public confidence in advertising by showing that the marketing and advertising sector abides by the principles of corporate responsiblity and respect for consumers' privacy and preferences.

In Europe, there remains a patchwork of laws and regulations governing advertising of certain products such as food, and advertising to certain markets, such as children or youth. Variations from country to country make it difficult to plan global campaigns. The ICC Code provides companies with a credible and reliable set of guiding principles that respect those frameworks. As such, it is an indispensable tool for companies seeking to expand their global reach into new and emerging markets.

As the ICC turns its attention to newer practices involving product placement, branded content, and direct marketing, it is paying close attention to the concerns of consumers, regulators and non-governmental organizations in Europe. As it turns out, European concerns are not much different than those in the United States, especially on the matter of transparency and disclosure in commercial communications.

One other message is clear. Self-regulation in advertising, a practice that has been heralded in the United States by serial chairmen of the Federal Trade Commission from both political parties, is alive and well in Europe. The robust self-regulatory regime put forth by the ICC in its Code of Advertising and Marketing Communication practice is something in which the advertising industry can take pride.

Unfortunately, much of the good work and adherence to ethical principles remains hidden from the very consumers it is designed to protect.

(c) 2006 Adonis Hoffman

Food Advertising to Kids--A Winter of Discontent?

We may look back to Winter 2005 as a seminal period in advertising. While nothing has changed, much is changing.

The title of the long-awaited report from the Institute of Medicine, "Food Marketing to Children and Youth: Threat or Opportunity?" may just say it all. The fact that a highly respected governmental body has raised tough questions about food marketing to children at all puts the industry in a hard-to-win position.

Even if we accept that current food advertising to children is benign (and there is ample evidence to support this assertion), the way that companies market, sell and advertise food products to youth, hereafter, will no longer be the same.

The Committee on Food Marketing and the Diets of Children and Youth, along with the Food and Nutrition Board and the Board on Children Youth and Families, all have concluded that "there is strong evidence that television advertising influences the food and beverage preferences of children ages 2-11, and that statistically, there is strong evidence that exposure to television advertising is associated with adiposity (body fatness) in children ages 2-11 and teens ages 12-18 years."

The Committee recommends that food and beverage companies should promote more healthful diets for children, including shifting their product portfolios to foods and drinks that are substantially lower in total calories, lower in fats, salt, added sugars, and higher in nutrient content.

With this and more stringent recommendations, food manufacturers must decide how much resistance to muster against an unmistakable mandate for healthier foods.

For some companies, this will be a simple call: phase out advertising of the suspect products--a move recently aplombed by Kraft and heralded by critics and policymakers alike. For other companies more heavily invested in the kids' food category, the decision could be much more wrenching, as the choice becomes (1)to continue in a significantly changed category or (2)leave it altogether. Certainly no easy call.

Whatever happens in the short-term, the long-term imperative is clear: the companies that make foods which appeal to children not only have to make their products different, but they also have to market and advertise them differently.

Any such changes are certain to affect the bottom lines of food companies and the advertising agencies involved. Only time will tell whether kids will become healthier as a result.

One thing is certain: Congress, regulators, children's advocates and the media will be watching with raised expectations. If for no other reason, that alone should propel the industry to continue its rapid and responsible course of action. In so doing, it will find there is goodwill to be gained among every quarter.

Plus, when it comes to children, everybody knows that a little bit of goodwill goes a long, long way.

(c)2005 Adonis Hoffman

Internet Advertising--A Tale of Two Cities

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way--in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received for good or for evil, in the superlative degree of comparison only."--Charles Dickens, 1858

There is much ado about Internet advertising these days.

In New York, the epicenter of the advertising world, interactive advertising is ascendant. Internet advertising has grown from $6 billion in 2002 to nearly $13 billion this year, according to research firm, eMarketer. Google's dominance in Web search and the expectation that it will reach $9.5 billion in ad revenue by 2006 has legitimized the mad migration of ad dollars to the online space.

Predictions by Veronis Suhler that Internet advertising will grow at an average of 24 percent a year over the next five years, compared with 7 percent for the advertising industry overall, add credibility, and perhaps rationality, to the exuberance. Plus, recent maneuvers by Microsoft, AOL and Yahoo to improve their place in the space suggest that the big players have figured things out and are increasingly significant to advertisers.

It seems that in the business world, companies are readily improving technology and techniques to reach consumers more efficiently. That is, after all, what the digital space delivers. As more Americans come to engage media online, marketers invariably have followed.

The tale in Washington is different; policymakers seem to see the world through a set of Dickensian lenses. As earnestly as marketers seek to expand the uses of interactive technologies, Congress is seeking ways to contain them.

Don't misunderstand. It's not that the government wants to do away with Internet advertising altogether. But in its sincere attempt to protect consumers from abusive behavior, government could just go too far.

In a recent meeting with Senate staff, a group of advertisng experts led by the American Association of Advertising Agencies (4-As), Association of National Advertisers (ANA) and the American Advertising Federation (AAF) made that point. In seeking to set the record straight on spyware and adware, their message was, "you can regulate conduct, but leave technology alone."

Norm Lehouillier, Managing Director of Grey Interactive told Senate staff that "when used ethically, adware and other forms of behavioral marketing can offer benefits to consumers and marketers. Unfortunately, like so many Internet technologies, there are bad guys who use the same technologies to deceive."

Mike Donahue, Exec VP at the 4-As reminded them that "reputable ad agencies working on behalf of major companies would be loath to abuse adware. Not only is it not smart business, but it's against industry guidelines which are spelled out in our Terms and Conditions for online advertising." 4-As Washington chief Dick O'Brien added: "We're the good guys. The culprits deploying spyware are not on Madison Avenue--they're taking shelter somewhere in Kazakhstan."

Nick Pahade, Managing Director at Beyond Interactive pointed out that "policies that protect and educate the consumer should not hurt marketers out there that use technology to create opportunity and efficiencies. The attention should be on prosecuting those who are taking advantage of emerging technologies for the wrong reasons."

Following the recent markup of the Burns-Boxer, SPYBLOCK bill by the Senate Commerce Committee, these admonitions should be well-received. The bill now appears to have the buy-in of most industry groups involved in internet marketing or advertising.

Perhaps the biggest paradox in the legislative effort is what Internet security expert Greg Blair of Blair Dubilier points out: "While computer exploits will continue as long as there are computers, we have seen a significant decrease in hijacked browsers and computers compromised by undesired and undesirable software during 2005. We believe this is due to improved security within browsers, better anti-threat software and most importantly increased user awareness of the techniques used by those seeking to install unwanted applications."

The Internet space is so dynamic that the online practices Congress is regulating against today, will soon become, if they have not become already, things that have gone by the wayside for a variety of reasons. There already has been a measurable decline in the type of spyware that seems to be at the heart of the Congressional effort, and the good guys (reputable advertisers and agencies) are simply not involved.

So as Washington continues to search for ways to protect Americans from Web abuses, marketers in New York and beyond are searching for ways to make abuses of Web technology unproductive, unprofitable and one day, perhaps, obsolete.

It is the best of times, it is the worst of times.

(c) 2005 Adonis Hoffman

Broadcast Decency on Congressional Horizon

If you had any thoughts that Congress might be inclined to overlook media and advertising issues as it deals with more pressing matters of state, take a look at the Senate Commerce Committee's agenda for the next four months.

In the prelude to a long-awaited rewrite of the 1996 Telecommunications Act, the Commerce Committee will hold hearings on a broad range of media and communications issues. Some of the topics don't really have much to do with the Telecom Act, per se, but are far too juicy for policymakers to ignore.

It is probably no coincidence that the Senate chose to focus on "decency" and "pornography" as the first two hearings for January 2006. January is Super Bowl month in America, after all, and it was not too long ago that Janet Jackson's risque, breast-baring, half-time routine focused the nation's attention on the issue of decency in broadcasting.

The growing public enmity over indecent broadcasts has been seized upon by a few activists who are seeking nothing short of a sea change in the status quo. Citing Jackson, plus ABC’s prime-time, backside-baring promo for Monday Night Football featuring Terrell Owens holding a scantily-clad Nicollette Sheridan, and repeat offender Howard Stern’s liberal use of the F-word, these crusaders hope to chasten the media into adopting new cultural idioms.

In the interim, the FCC has issued a series of rulings on indecency, from broadcasts of Saving Private Ryan to the excited utterance of the F-word by a winning quarterback in a post-game interview. In one of his first high-level appointments, FCC Chairman Kevin Martin selected a senior official to monitor decency in the airwaves. We can bet that more, not less, scrutiny lies ahead.

So what does all this have to do with advertising, you ask?

Well, advertising is a creative medium that, in its earnest efforts to be funny, cool or edgy, often tests the current boundary line of social acceptability. These efforts have not gone un-noticed by policymakers and regulators who bristled at the "Go Daddy" commercial featuring a buxom brunette writhing in mock testimony before a Congressional hearing. To some, this bordered on indecent; to others it was simply a saucy--and completely acceptable--satire.

Since there is no bright-line test on broadcast decency, advertisers may be forced to guess, and, in so guessing, risk erring on the wrong side of the line.

Consider the FCC's current guidelines on indecency, taken from its website:

What makes material “indecent?” Indecent material contains sexual or excretory material that does not rise to the level of obscenity. For this reason, the courts have held that indecent material is protected by the First Amendment and cannot be banned entirely. It may, however, be restricted to avoid its broadcast during times of the day when there is a reasonable risk that children may be in the audience. The FCC has determined, with the approval of the courts, that there is a reasonable risk that children will be in the audience from 6 a.m. to 10 p.m., local time. Therefore, the FCC prohibits station licensees from broadcasting indecent material during that period.

Material is indecent if, in context, it depicts or describes sexual or excretory organs or activities in terms patently offensive as measured by contemporary community standards for the broadcast medium. In each case, the FCC must determine whether the material describes or depicts sexual or excretory organs or activities and, if so, whether the material is “patently offensive.”

In our assessment of whether material is “patently offensive,” context is critical. The FCC looks at three primary factors when analyzing broadcast material: (1) whether the description or depiction is explicit or graphic; (2) whether the material dwells on or repeats at length descriptions or depictions of sexual or excretory organs; and (3) whether the material appears to pander or is used to titillate or shock. No single factor is determinative. The FCC weighs and balances these factors because each case presents its own mix of these, and possibly other, factors.

Given this standard, I would not be surprised if a few Congressional champions of the public interest sought to tighten the standards on broadcast decency, and in so doing, include a little piece on advertising, too.

If that were to occur, advertisers would certainly find out where the new line on decency is drawn and, unlike today, they very well could be penalized for the slightest misstep over it.

(c) 2005 Adonis Hoffman

Senate Poised to Seriously Curtail Adware, Spyware

The growing interest of Congress and regulators in Internet practices continues--this time with serious consequences for online advertising. Today, the Senate Commerce Committee is considering legislation that would significantly curtail the use of ADWARE and SPYWARE software on the personal computers of every American.

The SPY BLOCK Act

Introduced by senior Senate Commerce Committee member Conrad Burns (R-MT), S. 687, the “Software Principles Yielding Better Levels of Consumer Knowledge Act" (popularly known as the SPY BLOCK Act) authorizes the Federal Trade Commission to go after any person engaged in deceptive acts and practices related to SPYWARE, and imposes stiff civil and criminal penalties for violation of the law.

Intent

S.687 is intended to put an end to deceptive online practices that install surreptitious software on the computers of unsuspecting users without any notification or consent. It prohibits a number of practices that cause the installation of computer software through e-mail, viruses, and advertising messages, as well as software designed to capture the personal information of the user.

For example, the bill prohibits the use of Zombies and Modem Hijacking—programs that take control of the user’s computer by transmitting or relaying commercial E-mail or a computer virus—and puts it in the hands of an unauthorized user. It also prohibits software that attacks the computer to effectively deny any further service to the owner.

Putting An End to Endless Loop Pop-Up Ads

The legislation expressly prohibits the installation of software launched for the purpose of “opening multiple, sequential, stand-alone advertisements in an authorized user’s protected computer without the authorization of that user and with knowledge that a reasonable computer user cannot close the advertisements without turning off the computer or forcing an application to close using means other than the ordinary means for closing the application.”

Preventing Identity Theft, and Tampering With Security and Browser Settings

S. 687 would prevent the installation of software that enables the theft of personally identifiable information from the user. It also prohibits software that disables the security settings and browser settings of a person’s computer, including a page that appears when a person launches an Internet browser or opens a bookmarked page.

Uninstall Deception

The bill disallows software that falsely represents that a computer user has the option to uninstall the program, but does not allow them to do so, or that falsely directs a user to the Internet to remove the software.

Adware That Conceals Its Operations

In a clearly marked title, Section 6 of the legislation would prohibit software that “causes advertising windows to appear on the protected computer regardless of whether any other non-advertising-related functionality of the software or of other software installed as part of bundle with such software is (A) activated by the authorized user; or (B) conspicuously active on the protected computer.

Adware Labeling Requirements

The only way Adware can be used is if “the software displays to the user, each time the software causes an advertisement to appear, a clear and conspicuous label or other reasonable means of identifying to the user of the computer,

(1)The identity or name of the software that caused the advertisement to appear;

(2)If the software was installed as part of a bundle of software, the name of a program in such a bundle that the authorized user is likely to identify as the main component of the software bundle; and

(3)A clear and conspicuous hypertext link to instructions concerning how the user may uninstall the software causing the advertisement to appear through usual and customary means within the computer’s operating system.

The exception to this requirement is when a user is accessing or using an Internet website or online service that is (1) owned or operated by the author or publisher of the software; or (2) the owner or operator of which has authorized the author or publisher of the software to display such advertisements to users of that website or service.

Stiff Fines and Penalties

The legislation imposes stiff penalties for violations, especially if they are determined to be part of a pattern of practice. In those cases, the FTC can impose fines up to $3 million for each violation. In addition to the seizure of assets, the FTC also can force violators to disgorge any ill-gotten gains derived through the unfair and deceptive acts. The bill also allows state attorneys general to bring actions on behalf of aggrieved citizens in federal courts.

Mark-up Today, More to Come

The SPY BLOCK Act is set for markup today in the full Senate Commerce Committee. Stay tuned for results and further action on this bill and its companion legislation in the House of Representatives. With all of this attention, something is bound to happen this Congress

© 2005 Adonis Hoffman

DTC Advertising--A Fact Sheet

The Food and Drug Administration (FDA) recently conducted two days of public hearings to review attitudes toward direct-to-consumer (DTC) advertising of prescription drugs. This follows a series of internal surveys, reports and hearings conducted by the agency over the last three years, all with the intention of possibly revamping the rules governing DTC advertising.

Whenever a federal agency opens the door to public comment, it is a good thing. It allows every conceivable stakeholder to go on record with its views--whether supported by data or not--and prescriptions for policy changes. The downside to this open record, however, is that a lot of misinformation becomes permanently indited in the annals of history.

In the interest of setting the record aright, I thought this brief fact sheet on DTC advertising might be helpful.

DTC Advertising Plays an Important Role in Public Health

A number of medical studies and public opinion surveys indicate that millions more Americans are being treated for previously undiagnosed diseases since the FDA expanded the use of advertising for prescription drugs in 1997.

Advertising can provide valuable information that can help save lives. It can lead consumers to identify and find solutions for serious medical conditions by making them aware of previously unrecognized conditions and potential treatments. There is a common sense reason why this information enjoys the protection of commercial speech under the First Amendment.

For example:

Prescription drug advertising has been part of a public health revolution. It informs patients more about their health and it is directly responsible for getting patients to visit their doctors. Surveys by FDA (2002) and Prevention magazine (2004) indicate that DTC advertising prompted between 23 and 30 million Americans to talk to a doctor about a new or previously untreated condition.

Advertising produces new diagnoses of clinically important conditions. Faculty from the Harvard Medical School and Harvard Business School, in a study for Health Affairs, found that DTC ads prompted a sizeable portion (35%) of patients to visit a physician for clinically important conditions. The authors, Dr. Joel Weissman and Alvin J. Silk, noted these conditions are often under diagnosed and under treated, and that approximately 43% of new diagnoses and 51% of existing diagnoses were "high priority" conditions such as high cholesterol, hypertension, diabetes, and depression.

Advertising raises health awareness and can lead to earlier diagnosis and treatment. DTC reaches out to the estimated 6 million Americans who suffer from diabetes but have not been diagnosed. As many as 56 million Americans have high blood pressure, and yet it appears that 18 million are unaware they have this silent killer. Another 8 million Americans know they have high blood pressure but are not taking medication. Advertising also can help the U.S. Public Health Service achieve its goal of increasing from 23% to 50% the treatment rate for the 19 million Americans who suffer from depression.

DTC advertising encourages greater patient compliance. As many as one-third of patients fail to take all of their prescribed medicine. These ads help remind people to properly use their medicines. 33% of respondents to a Prevention magazine study said the ads reminded them to refill their prescriptions, and 22% reported the ads made them more likely to take their medicine regularly.

The physician must write the prescription. Patients cannot go to a pharmacy and request a particular drug – a doctor must write the prescription after examining the patient and recommend the best treatment. FDA nevertheless requires that DTC advertising be accurate and balanced, and FDA has aggressively increased its oversight of these ads.

Insurance companies can safeguard against inappropriate prescribing or overuse of prescription drugs. They determine what drugs to cover under their formularies and the amounts they will reimburse for drugs. Co-payments also are a critical component of patient compliance.

Prescription drug advertising is constitutionally protected commercial speech, and Americans recognize the value that these messages offer them. The U.S. Supreme Court for 29 years has continuously elevated the standard for protecting this and other forms of commercial speech. The Court has held, "As to the particular consumer's interest in the free flow of commercial information, that interest may be as keen, if not keener by far, than his interest in the day's most urgent political debate."

These facts support both the value and legality of DTC advertising. Words to the contrary belie a long and persuasive public record that speaks in favor of allowing more of this kind of information to American consumers, not less.

(c)Adonis Hoffman 2005

Advertising To Children: A Fact Sheet

Advertising and marketing to children is one of today’s most controversial issues. Throughout the world, governments are engaged in ongoing debate on the impact of marketing to children and whether there should be limits to that marketing. In many European nations, there is an outright ban on television commercials that target kids under the age of twelve.

In every society throughout the world, children are sacred. As God’s gift, these young creatures are to be guided and nurtured by their parents. As the most vulnerable members of society, they are to be protected by the law of the land.

When it comes to advertising, children present a wrenching paradox. They comprise a major market for the makers of toys, clothes, and foods, among many others. It is a market that grows steadily every year, and is global in scope. Yet, by their very nature, children are a special class. They are impressionable. They have difficulty discerning fantasy from reality. They are easily influenced by cartoon and other fictional characters. The lack sophistication and discernment. They are vulnerable to cultural and societal influences. They rely on the wisdom and judgment of their parents.

Special Care in Marketing to Children

Because children are special, marketers must behave responsibly in their advertising practices.

Responsible advertising of products to children has been an important issue for both the advertising industry and the government in the United States. For almost thirty years, the advertising industry has upheld self-regulatory guidelines for advertising to children. In 1972, the Association of National Advertisers published the Children’s Advertising Guidelines to encourage truthful and accurate advertising that would be sensitive to the unique needs of children.

In 1974, the National Advertising Review Council (NARC), a strategic alliance of the advertising industry and the Council of Better Business Bureaus (CBBB), established the Children’s Advertising Review Unit (CARU) to promote responsible children’s advertising, and to serve as an independent manager of the industry’s self-regulatory program. The NARC Board of Directors is drawn from key executives of the CBBB, the American Association of Advertising Agencies (AAAA), the American Advertising Federation (AAF) and the Association of National Advertisers (ANA). This board sets policy for CARU's self-regulatory program, which is administered by the CBBB and is funded directly by members of the children's advertising industry.

In 1975, CARU edited and republished the Self-Regulatory Guidelines for Children’s Advertising, and revised the guidelines again in 1977, 1983, 1991, 1995, and 1996 to respond to new developments and growing public concerns. The most recent revisions focus expressly on data collection and privacy on the Internet. CARU, with the support of its industry partners and patrons, has been a beacon light of responsibility and practical guidance on children’s advertising.

Basic Principles for Advertising to Children

The advertising industry has developed six basic principles for advertising directed toward children:

1. Advertisers should take into account the level of knowledge, sophistication and maturity of their audience. Younger children have a limited capacity to evaluate the credibility of the information they receive or to fully understand that information; therefore advertisers have a special responsibility to protect children from their own susceptibilities.

2. Advertisers should exercise care not to unfairly exploit the imaginative quality of children.

3. Advertisers should communicate information truthfully and accurately, and in language understandable to children, recognizing that the child may learn practices that affect his/her health or well-being.

4. Advertisers should capitalize on the potential of advertising to influence behavior by developing advertising that addresses positive and beneficial social behavior such as friendship, kindness, honesty, justice, generosity, and respect for others.

5. Advertisers should take care to incorporate minority and other groups in advertisements in order to present positive and pro-social role models, where possible, and to avoid negative stereotyping.

6. Although many influences affect a child’s development, it is the prime responsibility of the parents to provide guidance to their children. Advertisers should contribute to this parent-child relationship in a constructive manner.

Incorporating these principles into their marketing messages, advertisers continue to pursue responsible ways to advertise to children. In a dynamic environment of new media and new technologies, balancing innovative and creative messages with principles of responsible advertising is one of the many challenges faced by advertisers.

(c)2005, Adonis Hoffman