Paid endorsements get Xbox One marketer in trouble with FTC

Online entertainment network Machinima paid video endorsers, but didn't disclose it, the agency says

Payments of up to US$30,000 for video endorsements of the Xbox One have gotten an online entertainment network in hot water with the U.S. Federal Trade Commission because the company failed to disclose the deals.

Machinima, which helped market the Xbox One, engaged in deceptive advertising by keeping the paid endorsements of the gaming console under wraps, the FTC said Wednesday.

Machinima, a so-called next-generation video entertainment network for the gamer lifestyle, paid two Xbox One endorsers a total of US$45,000 for producing YouTube videos, and promised to pay a larger group of so-called online influencers $1 for every 1,000 page views, up to $25,000, the FTC said.

The company didn't require the influencers to disclose the payments, the agency said.

The failure to disclose payments for what the FTC called "seemingly objective opinions" violated the FTC Act, which bars deceptive advertising, the agency said. The agency's endorsement guides, updated in 2009 to cover online endorsements, require disclosure of paid endorsements.

Related: How to engage in influencer marketing: The opportunity and the controversy

In a proposed settlement with the FTC, announced Wednesday, Machinima would be prohibited from engaging in similar marketing campaigns and would be required to clearly disclose paid endorsements.

"When people see a product touted online, they have a right to know whether they're looking at an authentic opinion or a paid marketing pitch," Jessica Rich, director of the FTC's Bureau of Consumer Protection, said in a statement.

Machinima noted that the FTC's complaint stems from company activity in 2013, before a change in management in March 2014.

"Machinima is actively and deeply committed to ensuring transparency with all of its social influencer campaigns," the company said in a statement. "We hope and expect that the agreement we have reached today will set standards and best practices for the entire industry to follow to ensure the best consumer experience possible."

Machinima and its online influencers were part of an Xbox One marketing campaign, managed by Starcom MediaVest Group, the ad agency hired by Xbox maker Microsoft, the FTC said in a press release. Machinima guaranteed Starcom that the influencer videos would be viewed more than 19 million times.

A small group of influencers were given access to pre-release versions of the console before its launch in late 2013, the agency said. Two paid endorsers, one receiving $15,000 and the second receiving $30,000, produced YouTube videos that garnered nearly 1 million page views combined.

The FTC has closed its investigation into Microsoft and Starcom, it said. While both companies shared responsibility for the failure to disclose endorsements, the commission's staff considered the payments to be "isolated incidents" that happened in spite of, not in the absence of, policies designed to prevent them, the agency said.

Both companies also moved quickly to end the Machinima payments, the FTC said.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Latest Videos

Conversations over a cuppa with CMO: Microsoft's Pip Arthur

​In this latest episode of our conversations over a cuppa with CMO, we catch up with the delightful Pip Arthur, Microsoft Australia's chief marketing officer and communications director, to talk about thinking differently, delivering on B2B connection in the crisis, brand purpose and marketing transformation.

More Videos

Hey there! Very interesting article, thank you for your input! I found particularly interesting the part where you mentioned that certain...

Martin Valovič

Companies don’t have policies to disrupt traditional business models: Forrester’s McQuivey

Read more

I too am regularly surprised at how little care a large swathe of consumers take over the sharing and use of their personal data. As a m...

Catherine Stenson

Have customers really changed? - Marketing edge - CMO Australia

Read more

The biggest concern is the lack of awareness among marketers and the most important thing is the transparency and consent.

Joe Hawks

Data privacy 2021: What should be front and centre for the CMO right now

Read more

Thanks for giving these awesome suggestions. It's very in-depth and informative!sell property online

Joe Hawks

The new rules of Millennial marketing in 2021

Read more

In these tough times finding an earning opportunity that can be weaved into your lifestyle is hard. Doordash fits the bill nicely until y...

Fred Lawrence

DoorDash launches in Australia

Read more

Blog Posts

Highlights of 2020 deliver necessity for Circular Economies

The lessons emerging from a year like 2020 are what make the highlights, not necessarily what we gained. One of these is renewed emphasis on sustainability, and by this, I mean complete circular sustainability.

Katja Forbes

Managing director of Designit, Australia and New Zealand

Have customers really changed?

The past 12 months have been a confronting time for marketers, with each week seemingly bringing a new challenge. Some of the more notable impacts have been customer-centric, driven by shifting priorities, new consumption habits and expectation transfer.

Emilie Tan

Marketing strategist, Alpha Digital

Cultivating engaging content in Account-based Marketing (ABM)

ABM has been the buzzword in digital marketing for a while now, but I feel many companies are yet to really harness its power. The most important elements of ABM are to: Identify the right accounts; listen to these tracked accounts; and hyper-personalise your content to these accounts to truly engage them. It’s this third step where most companies struggle.

Joana Inch

Co-founder and head of digital, Hat Media Australia

Sign in