Startup Watch

CMP.LY: Keeping Your Social-Media Marketing Legal

Startup Was Founded to Address FTC's Rules on Social-Media Disclosures

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Brands are increasingly turning to social media to get the message out on products and promotions, but keeping it legal is a challenge, and that 's where New York-based startup CMP.LY comes in.

Tom Chernaik
Tom Chernaik

Founder Tom Chernaik launched the company in 2009 shortly after the Federal Trade Commission issued new guidelines on the use of testimonials and endorsements in social media. Those guidelines say that anyone blogging, tweeting or otherwise talking about products or brands in social media must disclose if they've been paid to do so.

CMP.LY launched with a couple of solutions to automate compliance and keep brands on the right side of the regulations. The company has just eight full-time employees and raised a $750,000 seed round earlier this year. Clients using its paid offerings include the social-media agencies Big Fuel, Likeable Media and Neighbor Agency.

The company's free service is designed for individuals to use, providing shortened URLs -- ideal for a Twitter post -- that link back to a disclosure page with statements of up to 500 characters. The social-influence measuring site Klout uses the basic service for its "Perks" program, where it partners with brands to distribute free goods and instructs recipients to insert a CMP.LY link if they opt to write about it.

CMP.LY badges
CMP.LY badges

CMP.LY rolled out paid service earlier this year that automatically monitors social users for compliance when they link their accounts to the service. They're given a unique URL and an embed code for a badge that can be deployed on blogs. CMP.LY is then able to monitor and alert the agency executing the campaign to remind people to add disclosure links.

According to an FTC spokeswoman, advertisers should have "reasonable monitoring" in place to ensure that social-media agents are following through on making disclosures.

"If you can't monitor and follow up with people, you're really not taking disclosure and compliance seriously," said Adriana Kampfner, CMP.LY's chief revenue officer, noting that 80% of social-media users monitored in the company's programs don't follow through on disclosure until they're reminded.

Mr. Chernaik said that due to the FTC regulations, many social-media campaigns are getting stopped in legal, even though formal action has only been taken in three instances since the new rules went into effect. The most noted was an investigation last year into an Ann Taylor blogger program, but no penalty was assessed. But in a decision last March, Nashville-based Legacy Learning Systems was fined $250,000 for promoting its business using reviews posted by paid affiliates.

According to Carlos Gutierrez, compliance officer at Big Fuel, which is currently running three influencer programs with up to 100 people through CMP.LY, there's still a tendency among some brands to not take the FTC rules terribly seriously, since there's still been no major action taken against a big advertiser. There's also a widespread practice of instructing social-media users who've been included in promotions and contests to use the Twitter hashtag #ad or #spon, but Mr. Gutierrez doesn't believe that goes far enough in addressing the spirit of the FTC regulations, which he says are vague in terms of spelling out what active steps advertisers should take to be in compliance.

"We wanted to make sure we were doing everything we could do in regards to transparency and disclosures," said Mr. Gutierrez, who added that many of Big Fuel's employees are enrolled in a separate CMP.LY program for when they post about clients or the shop itself.

Mr. Chernaik said that CMP.LY is also developing a product to facilitate social-media disclosures for the highly-regulated financial services and health-care industries to abide by rules set by the Securities and Exchange Commission and the Food and Drug Administration. CMP.LY has deployed an early version of a corporate solution through a third-party platform that eBay and LinkedIn have used for their corporate communications teams to disclose that tweets posted during investor calls contain forward-looking statements.

As for Klout, Mr. Chernaik said the site is in talks with CMP.LY to buy a paid offering that would include monitoring services for its "Perks" program.

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