Podcasting has become big business. For those of you who aren’t up on the medium, a podcast is simply a recorded audio show that you can download or stream and play any time you like. Top podcasters like John Lee Dumas of Entrepreneur on Fire are generating hundreds of thousands of dollars a month. Businesses are jumping into the podcast world as a hot new marketing channel—and as a new source of direct revenue.
Many companies are embracing podcasts as a fresh component of their content marketingstrategy. With that being said, you may want to monetize a podcast directly through advertisements, paid expert testimonials, and endorsements. As with any other type of advertising, there are a few laws that apply to podcast ads. But don’t worry—they’re very straightforward and easy to follow.
In this post, I’m going to share five simple rules to follow to help you avoid legal issues while you’re monetizing your podcast, based on two documents put out by our friends at the U.S. Federal Trade Commission (FTC): Guides Concerning the Use of Endorsements and Testimonials in Advertising and .com Disclosures: How to Make Effective Disclosures in Digital Advertising. At the end of this post, we’ll talk about the financial penalties for not following these rules. Trust me, you’re going to want to know the laws.
To keep it simple, I’m going to use the word “endorsement” to include any type of endorsement, testimonial, or affiliate arrangement. Also, you might be asking, “Which kinds of products do these rules apply to?” The answer is that if you’re endorsing or advertising just about anything, these rules apply. When in doubt, disclose!
…And Now For the 5 Simple Rules:
Rule #1: Be Honest
The Guides states, “Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser”.
What This Means:
If you listen to some popular podcasts, you’ll hear that the host often promotes a product or service. Ford has been advertising cars on the wildly successful podcast Startup, while many podcasters have been known to talk to their listeners about web services like Squarespace.
The rule here is pretty simple: be honest. If you haven’t used the product or service that you’re advertising, don’t say “We use this software every day!”
Rule #2: If You Claim to Be an Expert, Actually Be an Expert
The Guides state:
“Whenever an advertisement represents, directly or by implication, that the endorser is an expert with respect to the endorsement message, then the endorser’s qualifications must in fact give the endorser the expertise that he or she is represented as possessing with respect to the endorsement”.
What This Means:
Let’s say your company is paid to state on your podcast, “We’ve tried every product on the market, and Social-Ad-O-Rama can get you the highest converting social ads”.
This statement suggests that you’re an expert. Don’t make this kind of statement on the podcast if your company doesn’t know the first thing about social ads.
Let’s be clear: it’s fine to run a pre-recorded advertisement for a product that you’ve never used and don’t know much about. That’s happened on every TV show and every radio show since those media were invented. It’s called “advertising”! However, you personally shouldn’t endorse or testify, on behalf of your company, about the quality of a product that you’re not familiar with.
Rule #3: It’s About the Relationship
The Guides are just that—indications of how to go about making the proper disclosures. Ultimately, the key is to communicate the nature of the relationship so that your audience understands what’s going on.
The FTC states: “The issue is—and always has been—whether the audience understands the reviewer’s relationship to the company whose products are being reviewed”.
Here’s what the Guides say on this topic: “When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement…, such connection must be fully disclosed”.
What This Means:
Advertising law is based on the assumption, right or wrong, that people want to know that a host has been paid or received something for free in exchange for an endorsement (or even a potential endorsement). So if your endorsement fits into that category, you need to disclose that information. Keep reading to the end of this post to find out the financial penalties for not doing so.
Rule #4: You Can’t Hide or Bury the Disclosure
The .com Disclosures says, in bold letters: Don’t be subtle.
Therefore, the disclosure must be clear and conspicuous. Say it upfront. It’s not enough to endorse something at the beginning of the podcast and then reveal at the end of the show that the company was paid or otherwise compensated.
If the endorsement is repeated in your show notes, blog post, or other medium, the disclosure must be repeated there as well.
Rule #5: Fancy Legal Jargon Is Not Your Friend
From the .com Disclosures: “For disclosures to be effective, consumers must be able to understand them. Advertisers should use clear language and syntax and avoid legalese or technical jargon. Disclosures should be as simple and straightforward as possible”.
Easy enough. Use the same type of language to explain the relationship between your company and the product that you’d use in explaining anything else to your audience. Thus…
Don’t Say: “This statement is here to comply with the requirements of the U.S. Federal Trade Commission”. —Who knows what that means?!
Do Say: “Just so you know, Amazon pays me a small commission every time you purchase the book through this link. That helps support this podcast and allows us to bring you this valuable content for free”.—That type of language is clear, simple, and provides your listener with an opportunity to feel good about supporting your show.
OK, But What If I Don’t Follow These 5 Simple Rules?
The FTC states that failure to follow these rules can result in penalties of up to $11,000 per violation. Let’s say your company has a podcast that runs three times per week, and in each podcast you have three ads where you don’t follow the disclosure rules, and you’ve been doing so for three years. Well, multiply all that times $11,000 and you’ve got a nice fat check to write. Don’t worry—I’ve got a calculator handy—it’s $15,444,000! Most likely, the penalty would be adjusted according to the particular circumstances—but if I were you, I wouldn’t rely on asking a judge to give you a break on the fine. It’s much easier and less of a headache, not to mention less expensive, to follow the rules in the first place.
To wrap this post up, there’s nothing wrong with monetizing your podcast. You just need to know the rules and disclose the details to your audience. As long as your audience is clear, you’re in the clear.
For more information, take a look at the two aforementioned guides: Guides Concerning the Use of Endorsements and Testimonials in Advertising and .com Disclosures: How to Make Effective Disclosures in Digital Advertising (which is available in ebook format.) Of course, since this post should not be taken as legal advice, I recommend you familiarize yourself with those documents before proceeding with your advertising program.
Looking for more legal tips for business podcasters? Download my free ebook, Podcast Law, at PodcastLawGuide.com.
David Lizerbram is an attorney and business law strategist in private practice in San Diego. When he is not assisting clients or working on his blog, David enjoys watching movies, listening to podcasts, and sipping craft beer. Check out his blog at http://LizerbramLaw.com/blog/