Belkin has released a statement saying it was unaware such activities were taking place and that it is “extremely sorry.” The company said that Belkin “does not participate in, nor does it endorse, unethical practices like this. We know that people look to online user reviews for unbiased opinions from fellow users and instances like this challenge the implicit trust that is placed in this interaction.” The full note is at CrunchGear.

Original post:

A couple of days ago, an astute blogger poking around Amazon’s Mechanical Turk “crowd-sourcing” engine discovered that someone from Belkin — a company that makes computer and electronic peripherals like mice, USB hubs and so on — was paying people through Mechanical Turk to submit fake reviews to Amazon of Belkin products. The wording of the ad (which offered to pay the princely sum of 65 cents for each review) was very specific. It said:

“– Always give a 100% rating (as high as possible)
– Write as if you own the product and are using it
– Mark any other negative reviews as ‘not helpful’”

I have no doubt that whoever came up with this idea — I don’t know if it was Michael Bayard, the Belkin employee whose name was on the ad, or someone else in the organization — thought they were pretty smart. After all, what better way to harness the Web’s “conversational” marketing than by paying people to spread the good word about Belkin’s stuff? Simple as pie. I’m sure the same thoughts went through the minds of whoever came up with a similar Nvidia campaign a couple of years ago. Pay a few people to pretend they like your gear, and Bob’s your uncle. Web 2.0 FTW!

As I’ve often said when I talk to groups of marketing people about social media, this kind of strategy — or even Wal-Mart’s disastrous motor-home adventure — seem like a great idea, right up until someone finds out about it and blows the whistle (and surely by now everyone knows that’s going to happen eventually, the Internet being what it is). And when that happens, you will not only lose whatever goodwill you thought you were buying with your 65-cent reviews, but you will lose a bunch more besides. You will wind up in a hole, since people will now believe that even things you didn’t pay for were either paid for or fraudulent in some way.

It’s easy to understand why someone would come up with that kind of strategy. It must be frustrating to see word of mouth becoming such a powerful force, and your company not getting what you feel is your fair share of it. So why not goose things a little? Because it inevitably fails, that’s why. The best marketing, they say, is having a product and service that doesn’t suck. If you don’t have that, then paying people to say you do isn’t going to help, and in fact is going to put you even further behind the eight ball. To all of you in the marketing biz, please remember: Friends don’t let friends use manufactured word of mouth campaigns.

The latest company to feel the slings (pun intended) and arrows of a Twitter-storm is Pepsi, which was apparently trying to make light of the fact that Pepsi Max has a single calorie with a campaign that showed a cartoon-like representation of the calorie committing suicide by drinking poison, shooting itself through the head and hanging itself. While according to the company, it only officially ran in a single magazine ad in Germany, it quickly made its way around the world. Not surprisingly, it struck some observers as being in very bad taste, particularly since the primary target market for soft drinks — young people — has a high suicide rate.

Among those who criticized the company’s campaign was Christine Lu, a blogger and video podcaster whose sister committed suicide and who said that Pepsi — or more specifically, the ad agency BBDO — should be ashamed of itself for making light of such a terrible phenomenon. Her Twitter posts were subsequently picked up by a number of advertising and consumer-related blogs, and reports about the campaign started appearing on news sites as well. Soon, a comment appeared on Twitter from Pepsi spokesman Huw Gilbert, who apologized and said that the campaign was totally inappropriate, and that it would not happen again.

Both Johnson & Johnson and Pepsi quickly removed the controversy-inducing ads, even though there was a considerable amount of debate (in the case of Motrin, at least) about whether they were actually offensive at all, or whether critics were simply being hypersensitive. Some have argued that doing what Motrin and Pepsi did was worth it, even if they got a lot of criticism, because at least people are talking about their products (as the old saying goes, “There’s no such thing as bad publicity”). A couple of years ago, Chevrolet allowed people to use video clips to make their own commercials about the Chevy Tahoe, and while a number of them chose to make critical commercials about how bad the vehicles were, the company reportedly still saw the campaign as a positive thing.

One thing is clear, however: Regardless of how valid the criticisms of either Motrin or Pepsi were, using Twitter gave both of the companies behind the products the tools to respond to those concerns quickly and directly — not days or weeks later with a press release or an official statement, but minutes or perhaps hours later, with a personal comment from someone directly associated with the campaign. In that sense, as I pointed out at a Canada News Wire event this morning, Twitter can act as a kind of early-warning system, alerting companies to sparks of customer dissatisfaction that could (if ignored) turn into all-out forest fires. That’s not to say every company should remove an ad or change a product just because someone complains on Twitter; but it certainly makes it easier to get a head start on such a decision if one needs to be made.

Denton has written several times over the past year or so about online advertising falling off a cliff as a result of the weakening economy. Before the recent global financial meltdown, his warnings seemed sort of quaint, like your crazy uncle ranting about the dangers of skateboards or the importance of eating all your vegetables. But now, his vision of a collapse in ad revenues seems a lot more realistic. Will it be 40 per cent? I’m not so sure.

Nick makes a lot of comparisons between the U.S. economy and what happened to Japan after it went into recession, as well as Indonesia and so on. I may be playing Pollyanna to Denton’s Dr. Doom, but I don’t think the U.S. will be quite as badly off as all that (although obviously I could be completely wrong). In any case, Nick’s point — I’m pretty sure — is that media outlets like Gawker, and even Time Warner and other giants, should be as pessimistic as possible. If they err on the side of cutting too deep, his argument goes, then it just makes for more upside later.

In an IM conversation with Nick, he said he would “rather be more pessimistic than too sanguine.” When I mentioned that lots of people were saying online advertising might hold up even during a downturn because it is cheaper, more measurable and so on, his response was:

“Yeah, that’s bullshit. Same thing everybody said in 2000. First of all, the only bit that’s really measurable is search, and it’s not nearly as measurable as people think. It’s retailers paying for clicks that they already paid for once with PR or brand advertising.”

Denton also said that between 2000 and 2002, online advertising dropped by about 28 per cent. While that was a time when the online ad market was relatively immature, he points out that it also wasn’t a full-fledged recession in 2000, and the underlying growth rate in the online ad market was also around 80 per cent at the time. Now it’s closer to 30 per cent. So what is Denton planning to do with Gawker? In his post, he comes right out and says that six of the network’s 12 titles provide the bulk of the revenue — which I would assume means that the others are at risk.

“We definitely have further to go… the company needs to be making money even in the harshest of environments. Some of these companies like Time Inc. that think 6 per cent [cuts] is enough, or the Internet companies that think they’ll be immune — people are still delusional.”

Even if the wolf turns out to be smaller than Denton foresees, being pessimistic at a time like this is probably wise. On the other end of this downturn, Gawker could be in a position to make some headway while others are still struggling. Doug McIntyre, a smart guy who runs 24/7 Wall Street, says in a comment at Silicon Alley Insider (where Nick’s post was also published) that he thinks Denton is probably right, and Peter Kafka of All Things D seems to think so too.

Update:

As more than one person — including Valleywag editor Owen Thomas — suspected, Denton has put Consumerist up for sale and Valleywag will cease to be a standalone site and will become a column at Gawker.

If anything, in fact, the Rubicon report indicates that online advertising is still growing relatively strongly despite the turmoil in credit markets and the slump in stock prices, and could even benefit as advertisers look for more quantifiable results for their spending, which online ads provide. The report also says that while overall ad rates tracked by the network dropped 11 per cent in the quarter:

“performance varied by network type and channel. Several channels experienced greater than 25 per cent lift in CPMs from Q2, while others dropped by almost 20 per cent.”

To me, that sounds a lot like a flight to quality, which is hardly surprising. Until recently, I think a lot of companies were basically throwing money wherever they could online, regardless of the quality of the ad network or the sites involved, and regardless of whether using banners or pop-ups made any sense or not. Perhaps now they are being a bit more choosy when it comes to spending their money online. Rubicon also notes that in the “news and reference sites” category, ad rates outperformed just about any other market, with CPMs up by 36 per cent.

Before everyone starts berating me for taking Rubicon’s word for it, I realize the company is an “ad-network optimization” service, and therefore has a vested interest in showing that online ads are growing. But at the same time, the data it is using come from more than 270 ad networks and about 30 billion impressions, which at least gives them some claim to valid information on what rates are actually doing. And J.P. Morgan says it sees online ads continuing to grow as well, just not as quickly.

According to an announcement today, MTV has teamed up with MySpace and a company called Auditude to do exactly that (I mean sell ads next to copyright-infringing videos, not legalize prostitution and marijuana use). Theoretically, that means the network — and MySpace — could benefit any time someone uploads a clip from The Colbert Report or South Park or a music video, based on the advertising that Auditude inserts into the clip. As the LA Times story notes, YouTube rolled out similar technology earlier this year, giving copyright holders the option of monetizing their content rather than removing it. And some are taking that offer.

As more than one person has noted, the approach that MTV Networks is taking seems a little ironic, given that its parent company Viacom is still suing Google for $1-billion in a long-running copyright infringement case. Will that kind of lawsuit go away, as more content providers try to monetize their content wherever it appears, rather than suing to have it taken down? I hope so. What if Auditude or YouTube offered its identification technology as an open API, so that video clips posted by people like me could include ads? I think that would be a great solution. Bring it on.