FTC comes down on Machinima for ‘deceptive’ Xbox One marketing

Microsoft absolved of any wrong-doing

In late 2013, around the time that the Xbox One launched, YouTube content creation group Machinima struck an advertising deal with Microsoft. The marketing campaign would feature videos from Machinima’s network of influencers. More specifically, each video would cast the Xbox One in a very positive light.

The problem with all of this is that the positive coverage was never portrayed as the advertisement that it was. It was released as if it were the objective opinion of the stars in the videos, even though they were given strict guidelines and well-compensated. There was never any sort of disclosure.

The United States Federal Trade Commission came down on Machinima for this and called its actions “deceptive.” A Complaint was filed earlier this year, and the case was settled this week. The terms of the settlement are confidential, but Machinima is barred from acting this way again; it’s unknown if it will pay some sort of monetary penalty for the infraction.

In a news release, the FTC said “Under the proposed settlement, Machinima is prohibited from similar deceptive conduct in the future, and the company is required to ensure its influencers clearly disclose when they have been compensated in exchange for their endorsements.”

Microsoft and Starcom (a Microsoft advertising group) were absolved of any wrong-doing by the FTC. “While Microsoft and Starcom both were responsible for the influencers’ failure to disclose their material connection to the companies, (FTC) staff considered the fact that these appeared to be isolated incidents that occurred in spite of, and not in the absence of, policies and procedures designed to prevent such lapses. The companies also quickly required Machinima to remedy the situation after they learned that Machinima was paying influencers without making the necessary disclosures,” the FTC said.

To give an idea of what kind of money and statistics were at play, here are a few snippets from the Complaint. Machinima guaranteed Starcom a minimum of 19 million views for this campaign. One influencer was compensated $15,000 for his two videos; another was given $30,000 for two videos. By the end of the five-week campaign, there were more than 30 million views. That’s a lot of people being unduly influenced by this deceptive ad campaign.

We need not look any further than the amounts paid out to understand the reach of these Internet stars. $15,000 for one video is a lot of cash. Just keep that in mind the next time your favorite YouTuber or Twitch streamer tells you how great something is. These people always have their best interests in mind, which might not necessarily align with yours.

Xbox One Promoter Settles FTC Charges That it Deceived Consumers With Endorsement Videos Posted by Paid ‘Influencers’ [Federal Trade Commission]

Brett Makedonski
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