How covert marketing gets to you

I was exchanging restaurant recommendations with a colleague last week, when she pulled out her phone and shared a local food review account. I gasped. I hated that account. The truth of the matter is I have been following it for a while and I have tried a few of the recommended spots, however I was always disappointed as the food rarely lived up to the expectations set by the content I saw online. I voiced my concerns to a few people in my network and they all seemed to agree.

It wasn’t until I was talking to an influencer friend, that I came to find that the practice of undisclosed advertising, also known as covert marketing, was more common than I thought.

There are multiple definitions of covert marketing. Some experts at the American Marketing Association define it as “attempts to expose consumers to brands by embedding them into outlets not typically considered advertising terrain”. Others argue that the common theme in defining the term is its involvement with the deliberate concealment of the intent and sponsorship of the message.

Regardless of the definition, researchers argue that it is on the rise.

But why is it a big deal? Well to start with, undisclosed advertisements can present an ethical dilemma. A paper published by the American Marketing Association (AMA), Kelly D. Martin and N. Craig Smith, argues that stealth marketing - another term for covert marketing - violates ethical standards due to its reliance on deception which is inconsistent with AMA’s code of conduct.

Moreover, the researchers also argued that it is exploitative in nature, capitalising on “human good nature” and exploiting “social relationships as means of achieving effectiveness", in addition to undermining consumer defence mechanisms.

However, beyond ethics, covert marketing is illegal. Several regulating bodies in the world clearly mandate that any forms of advertisement must be clearly disclosed. Take for example the United States, where the Federal Trade Commission (FTC) is the responsible body for regulating all forms of marketing including social media marketing.

There are multiple definitions of covert marketing. Some experts at the American Marketing Association define it as “attempts to expose consumers to brands by embedding them into outlets not typically considered advertising terrain”.

According to the FTC’s social media disclosure guide, influencers are required to disclose any relationships with a brand when posting, including financial, employment, personal, or familial.

This extends to receiving anything of value to mention the product such as free products, gifts, or even sponsored trips. In fact, influencers are required to pay taxes on the value of gifts, since they are considered income if they exceed a total value of USD 100.

Furthermore, the FTC mandates influencers to post any endorsements clearly in places people can’t miss, keeping in mind various formats. For example, when it comes to disappearing posts on platforms such as Snapchat and Instagram, influencers are instructed to disclose their affiliations over the pictures and provide enough time for viewers to notice it and read it. And in the case of live streams, influencers must repeat the endorsements periodically to inform viewers who join at different times. Failure to adhere to any of the above guidelines can result in fines as hefty as USD 50,120 per violation.

Here in Oman, the Ministry of Commerce, Industry and Investment Promotion (MoCIIP) recently issued a by-law under Ministerial Decree No. 619/2022 to regulate both the marketing and the promotion of goods and services online.

The by-laws require posters to obtain a marketing licence from the Ministry, before posting, and mandates users to clearly post their licence numbers in the profile. But the by-laws do not require users to specifically disclose any brand affiliation.

However, Article (9) of the by-laws require licensees to adhere to ethical conduct rules and standards of honesty and integrity, in addition to posting genuine and unexaggerated content. It can be deduced from this Article that influencers should disclose any endorsements, however, they are not legally required to.

Despite the vagueness of the Omani marketing and promotional activities by-laws in regards to the disclosure of endorsements, I do believe that they do provide a general ethical guideline for influencers. It also helps with creating a database that can accurately assess the influencer local marketing market, which is currently valued at USD 24 billion worldwide.

However, I do hope that future laws will consider the implications of covert marketing, specifically when it comes to consumer impact. Meanwhile, I will keep looking for new restaurants to try. [The author is a business reporter at Oman Daily Observer]