Choosing Truth: LifeLock, Inc. Settlement

Last week, we shared four different versions of the $11 million settlement LifeLock, Inc. agreed to pay the Federal Trade Commission and $1 million to a group of 35 state attorneys general over deceptive advertising. We then asked readers to compare these truths, choosing the most likely truth.

There wasn't enough data to call this poll scientific, but there was enough to prove a point. When faced with four stories, the truth is often left behind and consumers are baffled.

LifeLock Poll Results

• 28.57 percent said they were most likely to believe the Federal Trade Commission.
• 28.57 percent were not inclined to believe any of the four stories released.
• 14.29 percent said they believed LifeLock worked with the FTC to set new standards.
• 14.29 percent were inclined to believe all of the stories, assuming each had some truth.
• 7.14 percent thought what CEO Todd Davis said in interviews was the most accurate.
• 7.14 percent believed investor David Cowen that the FTC was politically motivated.

Interestingly enough, poll participants do not match the greater online sentiment. Online coverage is overwhelmingly negative, with approximately 85 percent of the conversation centered on the FTC release, and only 15 percent accepting any version of the LifeLock story.

Sentiment is overwhelmingly influenced only by which release mainstream and new media decided to cover. However, based on cursory research, the FTC release, which dominated the conversation on March 7, seems like it will have a much shorter shelf life than LifeLock public relations efforts.

The Public Relations Lesson

With some certainty, LifeLock had an opportunity to move beyond the settlement and return to business as mostly usual, but the public relations message is largely inconsistent and overreaches, undermining its own attempt at damage control. In addition, Cowen would have better served the company if he had not offered his opinion. The best the company can hope for now is that the settlement issue will eventually fade into history.

It's very possible it will, given the company partners with the FBI Law Enforcement Executive Development Association on training programs. And, despite Nevada being one of the settling attorneys general offices, it is also hosting a cooperative identity theft town hall meeting.

Still, LifeLock is probably fortunate so far that the FTC has not sought to penalize the company in its handling of communication regarding the settlement, given the FTC barred LifeLock from overstating protection against all types of identity theft and the risk of identity theft to consumers. After all, LifeLock's settlement release clearly overstates its role in the settlement, which is ironic given the settlement was all about reigning in overstatement.

The Truth Lesson

While truth is not relative, the facts chosen by all parties seem somewhat selective. But most people will only be exposed to one of the four messages, which will shape their opinions about the company. And yet, none of those stories provide a full accounting of the truth.

Chances are that the truth resides somewhere in between everyone telling the truth and nobody telling the truth, depending on how you want to look at it. All of the releases seem to contain some truth and some spin, which prompted some poll participants to conclude all of them were true while others, given that a partial truth is not the truth, all not true.

For instance, Cowens' post is true in that the FTC is under greater scrutiny from the current administration, which may prompt it to pursue some cases that do not warrant it. It is also likely true that LifeLock accepted the settlement even if it felt it could win the case in the court of law because settlements seem cheaper (not always). His opinion, though, overreaches on speculation of a very specific agenda. It seems unlikely the ties are that tight, specific, and planned.

Still, the FTC release is heavy-handed. Usually, settlements come with some sense of resolution between the two parties, but this release is clearly punitive and doesn't provide a timeframe of when the deceptive advertising supposedly occurred. The FTC clearly wanted the settlement to be seen as a win, even if its own disclaimer admits that the settlement is no indication that the defendant violated the law.

Given the heavy-handedness, it seems painfully clear that LifeLock and the FTC were not cuddling up together in order to set new industry standards as LifeLock alleged in its release. And, at least one of the commissioners was not even interested in accepting the settlement. LifeLock also overstates that everything is business as usual as there are tighter guidelines in how it communicates its advertising messages in the future.

The message is further complicated by conflicting interview messages. Those messages seem to be closer to the truth but still overreach in communicating that the settlement did not have an impact on the company. That statement alone contradicts its claim to have set a new industry standard.

Another lesson here is how "he said, she said" journalism does little to get at the truth. When time-strapped reporters increasingly rely on reporting statements as opposed to investigating facts, nobody is served. It's especially par for the course for more complex subjects where topics like health care and TARP money give consumers the choice of believing the person who says the sky is "green" or the one who says the sky is "purple" while leaving "blue" out of the options all together.

In Conclusion

The real trouble spot for the FTC in this story is that there seems to be some dissent over whether such a service is needed. Based on the varied releases from attorneys general offices, identify theft is a problem, nothing is foolproof protection against it, and consumers can take steps to increase protection without such services (and thus companies like LifeLock are not needed).

However, such logic could lead one to conclude all sorts of services are unneeded, including everything from house cleaners and accountants to restaurants and pet groomers. Of course consumers can take measures into their own hands. However, if they want the convenience or peace of mind of having someone do some of it for them, then they might consider a service.

That aside, the FTC was right in taking this case but overzealous about periphery topics on wins that amounts to less than a 10 percent refund per consumer. LifeLock seems to have misrepresented its service by its own admission but seems unlikely to stop spinning the truth. And the decision whether or not a consumer chooses an identity theft protection service or does something on their own (none of which is 100 percent) amounts to nothing more than asking whether they want to clean the house or have someone do it for them. Ergo, everyone tried to be honest, but nobody was truthful. Not really. Case closed.

Hulking Astroturf: Reverb Communications

As if being called out on astroturf over gaming apps while the Federal Trade Commission is considering new rules to regulate reviews on the Internet isn't enough, Reverb Communications added fuel to its own bonfire by sending MobileCrunch what can only be called an incredulous email that defies imagination. The firm, which represents dozens of game publishers and developers, sent an admission of ignorance to writer Gagan Biyani.

A bizarre blend of admission and defiance.

Hi Gagan –

I’m sure you are speaking with one of our former employees that has been contacting media outlets about Reverb. I’m not sure what “unethical practices” you are referring to so it would be hard for me to comment, but I am hoping that you will do the proper research to ensure that the facts you are reporting are accurate and not written based on information provided by a disgruntled former employee who is violating his confidentiality agreement.

My office did mention that you had issues with our staff and interns writing reviews for some of our clients' games, I’m sure you are aware that in order to write a review on iTunes an individual needs to purchase the game or app and can only write one review. Our interns and employees write their reviews based on their own game play experience, after having purchased the game by themselves, a practice not uncommon by anyone selling games or apps and hardly unethical.

I am in Europe until Tuesday, I’ll keep my eyes out for the story, once again I do hope you do some homework before posting erroneous or incorrect information about Reverb Communications.

Doug Kennedy

Although Kennedy is vice president of business development (once listed as "owner" on Linkedin), he seems to have missed the industry memo that includes the standard practice of disclosure, which is precisely why the Federal Trade Commission wants to hold reviewers liable for making false or unsubstantiated claims about products. In fact, companies paying reviewers could be held liable too, which in this case, would likely include all Reverb Communications clients given the Reverb proposal also posted by Biyani.

An alleged portion of the Reverb pitch that promises astroturf.

Reverb employs a small team of interns who are focused on managing online message boards, writing influential game reviews, and keeping a gauge on the online communities. Reverb uses the interns as a sounding board to understand the new mediums where consumers are learning about products, hearing about hot new games and listen to the thoughts of our targeted audience. Reverb will use these interns on [Developer Y] products to post game reviews (written by Reverb staff members) ensuring the majority of the reviews will have the key messaging and talking points developed by the Reverb PR/marketing team.

When firms attempt to 'serve' everyone, they really serve no one.

Yikes. Both communications demonstrate an almost willful ignorance of public relations and ethics, which seems surprising given Kennedy's background at GMR Marketing, Nvidia Corporation, and Sony Corporation. Since, the story of Reverb Communications' astroturfing scheme is making the rounds, and in some cases, dragging Reverb clients along with it.

If it can be said that a core component of public relations includes implementing planned programs of action that will serve both the organization and the public interest, then Reverb Communications seems to have failed both, and itself, equally.

Impacting Everyone: FTC Aims To Regulate

According to Dow Jones Newswires, Lifestyle Lift released a statement yesterday that any complaints were related to the period before the current management team took over and that Lifestyle Lift “regrets that earlier third-party Web site content did not always properly reflect and acknowledge patient comments or indicate that the content was provided by Lifestyle Lift.”

The statement was attributed Gordon Quick, president. We can then only assume that Quick, who became president in February 2008 after working as a executive consultant and mentor, isn't aware of dozens of Web sites created on behalf of the company, including Dr. David M. Kent's Lifestyle Lift Fact, which attributes the cause of complaints to patients with unrealistic expectations and astroturfing by competitors.

"The Internet is filled with misperceptions perpetuated by companies that call themselves 'real this' or 'real that', diaries and 'scams.com' of all sorts," it reads. "Lifestyle Lift is not the only firm being targeted by these unscrupulous websites that profit from sensationalism and hype."

"In the past at Lifestyle Lift, we have had a small number of patients who elected a procedure for the wrong reasons. These patients, although they have no medical problems, tarnish the image of Lifestyle Lift and our Doctors on the Internet," another section reads. "These unhappy patients will often complain of long recovery times, no change in their appearance,'scar for no reason', pain, missed work, unhappiness, scarring, 'no one cares', 'no one noticed me' etc."

The publication date is 2008. Most other sites that look as if they are patient generated (except for disclaimers) were also published in or after 2008.

How It Affects People Beyond Cosmetic Surgery

Lifestyle Lift isn't indicative of all cosmetic surgery or all social media. However, it's fair to assume their online approach sets the tone of the Federal Trade Commission, which has proposed new rules that could take affect this summer.

Most of the changes are harmless. Bloggers would be asked to disclose any relationship they have with a sponsor, any compensation received for a specific post, and whether the product they received was free. All of these changes follow standard ethical guidelines observed by most social media participants.

The one change that might not be harmless, as described by Ragan.com, is bloggers would be held liable for making false or unsubstantiated claims about products. Companies paying bloggers could be held liable too.

The policies would not be exclusive to cosmetic surgery or anonymous posts by executives, but everyone who endorses businesses and plays video games. Unfortunately, regulation of the Internet is problematic, potentially infringing on free speech and censoring honest opinions (good and bad).

Fortunately, the Federal Trade Commission is still seeking public comment. You can find those guidelines here.

Several Stories Related Astroturf And The FTC

"FTC Launches First Wave Of Smackdown On Scammy Loan Consultants" by Chris Walters, The Consumerist

"The Plaintiffs’ Bar’s Covert Effort To Expand State Attorney General Federal Enforcement Power" by Victor E. Schwartz and Christopher E. Appel, Washington Legal Foundation

"TripAdvisor Warns Of Hotels Posting Fake Reviews" by Melissa Trujillo, The Associated Press

E-Mailing Everybody: Marketers Say Spam Works

Forget Facebook and other online advertising models for a minute. Datran Media released a study that says direct-to-consumer e-mail spam works.

More than 82 percent of the marketers surveyed indicated that they plan to increase e-mail marketing this year. That’s a whole lot of e-mails.

Why? As much as everybody complains about e-mail advertising, it seems to work. The Direct Marketing Association (DMA) even released a report that says e-mail ROI can hit as much as $45.65 on every dollar spent, which is twice as much ROI earned from other mediums.

This study mirrors other industry specific releases sent out by the DMA, including one that predicted e-mail from the insurance industry will increase as much as 23.4 percent in the next few years. The insurance industry is not alone. E-mail advertising has become a red-hot choice among marketers nationwide.

Except. There are some things working against e-mail ROI. There is the increasing pressure on state legislatures by the public. There are the issues that cross over into the Federal Trade Commission’s consideration of online advertising. And, of course, there is the growing problem of over saturation.

Simply put, the more e-mail advertisements that consumers receive, the less effective the medium will become and the more likely it will be prone to stricter regulation. There are other considerations too, including that the DMA study on ROI in terms of dollars does not adequately consider long-term brand consequences or negative impressions. It also doesn’t consider the risks that more consumers associate with it.

Like most advertising and communication, direct e-mail advertising is a tool. It does not work for all companies or products, and can even be detrimental for some. Inc. recently published a great column that helps temper the hype and brings it back into focus.

Personally, before considering an e-mail campaign, I think many companies are better off thinking about a well-executed social media plan. Social media can be equally, if not more, effective because it allows the consumer to receive information when they want it and how they want it: RSS feed, e-mail subscription, social network announcement, Google search, etc.

Sure, social media, such as a blog, is considered passive by comparison. But then again, the communication doesn’t rely exclusively on an e-mail list either. In other words, while more than 70 percent of marketers said they intend to use e-mail to enhance consumer relationships, one wonders if consumers share their point of view.

Self-Regulating The Net: FTC

The Federal Trade Commission released five proposed principles and guidelines for self-regulation in the behavioral advertising industry, which includes the tracking of consumer activities online (searches, page visits, viewed content, etc.).

While the FTC has been looking at privacy issues related to the Web for more than a decade, it was expected that the high visibility of privacy issues recently created, in part, by Facebook, that the FTC would be taking a Facebook hard look at privacy issues in 2008.

In sum, the FTC suggests that companies involved in tracking and targeting consumers always inform consumers of the data they collect, how it is to be used, that they have a choice to opt-in, and that any changes to this agreement are stated, which would require their expressed consent.

Here are five principles for behavioral advertising (paraphrased):

Transparency and consumer control. Every Web site where data is collected for behavioral advertising should provide a clear, concise, consumer-friendly, and prominent statement that (1) data about consumers’ activities online is being collected at the site for use in providing advertising about products and services tailored to individual consumers’ interests, and (2) consumers can
choose whether or not to have their information collected for such purpose.

Reasonable security, and limited data retention, for consumer data. Companies should retain data only as long as is necessary to fulfill a legitimate business or law enforcement need. (The FTC staff is also seeking comment on how long companies should retain such data.)

Affirmative express consent for material changes to existing privacy promises. Companies must keep any promises that it makes with respect to how it will handle or protect consumer data, even if it decides to change its policies at a later date. Any changes in how collected data is used requires obtain affirmative express consent from affected consumers.

Affirmative express consent to (or prohibition against) using sensitive data for behavioral advertising. Companies should only collect sensitive data for behavioral advertising if they obtain affirmative express consent from the consumer to receive such advertising. (The FTC staff is also seeking input defining sensitive data and whether some data should never be collected.)

Call for additional information: Using tracking data for purposes other than behavioral advertising. FTC staff also seeks comment on what constitutes “sensitive data” and whether the use of sensitive data should be prohibited, rather than subject to consumer choice. (Comments will be received through Feb. 22.)

The latter suggests carrot dangling (perceived benefits) for sensitive information (like social security card numbers) might not be an option.

Overall, the FTC has been very balanced in its approach to online advertising, recognizing there is a fine between protecting consumers and allowing companies to develop advertising programs that fund content and benefits for consumers.

But what is most important is to consider that self-regulation is generally maintained by the willing participation of companies to adhere to these principles. Every abuse, especially by visible companies, will move these principles toward permanent federal regulation. You can find the complete FTC guidelines here.