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ROBERT SIEGEL, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris.

If a stranger in a drugstore suggest a toothpaste, or if you see it recommended on a blog, you may be playing a role in a trend in advertising. Word-of-mouth promotion has become a huge part of the business, bringing in as much as a $150 multimillion over the past few years. Virtually every major ad agency is now involved.

In the final part of our series in advertising, Neda Ulaby reports on ethics and legality of word-of-mouth advertising.

NEDA ULABY: A couple of undergrads have spotted a friend at the Georgetown University library. The two young woman are not here to study.

Ms. KATHRYN FREEMAN (Student, Georgetown University): We're just promoting a the new I'm making a difference initiative by Microsoft, which is the campaign for their new live messenger service. And basically, all you have to do to help us out is go to imforacause.com and download the booth messenger…

ULABY: Nineteen-year-old Kathryn Freeman is a green eyed freshman who spends up to 10 hours a week pitching Microsoft's instant messenger by talking to fellow students at the library and going door to door in dorms. Most, like Jonathan Medina(ph) doesn't seem to mind.

Mr. JONATHAN MEDINA (Student, Georgetown University): They were cute and perky, it was fun, so.

ULABY: Do you think you're going to do this download?

Mr. MEDINA: No. I might. I don't know. If she's going to, like bother me again in my dorm room so…

ULABY: It's not uncommon nowadays for college kids to act as so-called brand ambassadors for a little extra money on the side. The idea of ordinary people turned pitchmen as part of their daily lives makes sense to advertisers in a fragmented, oversaturated media market, says Peter Kim, who analyzes the advertising industry for Forrester Research.

Mr. PETER KIM (Senior Analyst, Forrester Research): When we think about traditional advertising, the outlook is pretty grim.

ULABY: Kim says only 13 percent of consumers make purchases because of ads and only 6 percent perceive ads as truthful.

Mr. KIM: But what consumers do trust are their own experiences and the words from others in terms of recommendations. So, about 56 percent of consumers say that they trust the words and recommendations of friends and family in thinking about products.

ULABY: And that's how a Georgetown University newspaper came to publish a glowing story about Microsoft's instant-messenger campaign. A student reporter was assigned to cover it after freshman Kathryn Freeman worked her campus connections.

Ms. FREEMAN: I actually know the assistant editor for this paper, so (unintelligible). It was kind of easy to get it in there and I just hounded them a little bit, sent them over a press release and a fact sheet and it's only been a couple weeks, and it was published.

ULABY: The article earned money for Freeman. She could get up to $5,000 if enough Georgetown students download Microsoft's instant messenger. The more buzz she generates, the more money she makes from a company called RepNation.

RepNation targets 14- to 25-year-olds. Marketing director Brandon Evans says clients include MTV, JetBlue, Victoria's Secret and Neutrogena, which commissioned a recent campaign called Undercover Hotties.

Mr. BRANDON EVANS (Marketing Director, RepNation): Where we were looking for the hottest guys on campus or the guys that would be hot on campus if they'd just shave their face.

ULABY: Brand ambassadors persuaded friends and strangers to nominate and vote for Undercover Hotties online.

Mr. EVANS: And then from that, we took the top 30 vote-getters, and the ambassadors planned a shave clinic on their campus where these guys would be shaved in public, in front of everyone. They handed out samples at that, and obviously there's a lot to talk about after an event like that happens on someone's campus

ULABY: The biggest player in the word-of-mouth marketing industry is Procter & Gamble. Its got 225,000 teenagers in a program called Tremor. Another program, Vocalpoint, has over 500,000 moms. P&G executive Steve Knox says the idea is to incorporate specific brands into conversation. For example, Vocalpoint mothers were given a new kind of dishwashing soap from Dawn. They were encouraged to work it casually into chats with friends by talking about how hard it is to get kids to help with the dinner dishes.

Mr. STEVE KNOX (Chief Executive Officer, Vocalpoint): Every mom wants her children to do more chores around the house; every child wants to do less. That's a natural conversation that takes place between mom to mom. We simply link in the Dawn brand to that very natural conversation. In that particular place, we nearly doubled Dawn's business all through word of mouth.

ULABY: It may be effective, but these tactics have drawn controversy. Vocalpoint moms and Tremor teens are not obliged to disclose their marketing when they talk about products. That drew the ire of a watchdog group to ask the Federal Trade Commission to investigate word-of-mouth marketing and establish clear guidelines.

Instead, it issued what's called a staff opinion. In it, Mary K. Engle, the FTC's associate director of marketing practices, said there's nothing illegal about consumers expressing satisfaction.

Ms. MARY K. ENGLE (Associate Director Of Advertising Practices, Federal Trade Commission): If you can get people who have used your product and who love it to talk about it, that's going to be a really effective way of marketing. And at the FTC we have no problem with that - that's great. I mean, you can say a satisfied customer is probably your best advocate.

ULABY: What's problematic, Engle said, is when people disguise their relationship with advertisers while making money from them.

Thirty-five year old Rani Schlenoff says she always discloses, and she never makes money. What she gets is products from a company called BzzAgent. Schlenoff is a suburban stay-at-home mom with three kids. BzzAgent recently sent her a Philips brand Sonicare brand electric toothbrush that retails for around $60.

Ms. RANI SCHLENOFF: There are lots of times that I have talked about it, that I haven't mentioned BzzAgent, because I'm doing it just because I enjoy the product. You know, the Sonicare thing is months and months over, but I'm still talking about it.

ULABY: Schlenoff volunteers teaching teenagers at the Jewish Family Center in Olney, Maryland, where she says she enjoys recommending products she genuinely likes. When she got a book from BzzAgent called "The Power of Nice"…

Ms. SCHLENOFF: I was able to take it to my class because we talked about how being nice helps you with - as people, and I showed them the book.

ULABY: Schlenoff draws no ethical distinction between telling her students about BzzAgent promotions and things she runs across on her own.

Ms. SCHLENOFF: I don't because I really don't view it as any different as me saying, oh, my friend gave me a great book or BzzAgent gave me this great book and talking about it in that way.

ULABY: Even the Word of Mouth Marketing Association, which purports to regulate the industry, does not account for such power differentials as teachers marketing to students or bosses to employees. Analyst Peter Kim says the close relationships that buzz marketing depends on makes enforcement virtually impossible.

Mr. KIM: How likely is it that your mother is going to phone up one of these companies and say, hey, I know that Peter is a BzzAgent, but he didn't tell me that he was, so I'm going to make a citizen's arrest.

ULABY: These ethical dilemmas have been around since at least the days of P.T. Barnum, who famously seeded the crowds outside his shows with people marveling about them. Communications professor Walter Carl says the public may be more ad-savvy than in Barnum's day, but in other ways, we've become more susceptible.

Professor WALTER CARL (Department of Communication Studies, Northeastern University): There is a data set that was collected in the University of Texas at Austin in the 1970s and it was people - students who were for class projects would tape-recorded conversations over the phone. And I went back and looked at that data and there is very few brand references. When I look at the conversations that people have now, some of my research indicates that about 15 to 20 percent of our conversation includes a reference to a brand product or service.

ULABY: Carl says these days' people don't think twice about associating themselves with a brand. For example, you might describe yourself to a stranger as an NPR listener. NPR is a brand.

It's when brands are artificially inserted into private conversations for personal gain that people should worry, says Gary Ruskin.

Mr. GARY RUSKIN (Executive Director, Commercial Alert): It's part of the creep of advertising into every nook and cranny of our lives and culture - it's part of ad creep.

ULABY: Ruskin's group, Commercial Alert, is the one that asked the FTC to regulate word-of-mouth advertising. He thinks it's time for Congress to get involved.

Mr. RUSKIN: This type of marketing is very intrusive. It's like telemarketing, but right in your face.

ULABY: Ruskin believes what's at stake is the undermining of our social fabric. That sounds like a bit much to Georgetown sophomore Zack Kerber. He says buzz marketing has clarified his feelings, at least, about those Microsoft brand ambassadors.

Mr. ZACK KERBER (Student, Georgetown University): If anything, it's, you know, I can now - whenever I see those two girls around, I can be like, oh, so what are you selling to me now?

ULABY: Kerber says consumers his age are already jaded about word-of-mouth advertising, and that may be their best defense against it.

Neda Ulaby, NPR News.

NORRIS: And you can hear the previous stories in this series on advertising on our Web site, npr.org.

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