The ethics of Foursquare and kickbacks

Posted by Lizzie Pine


Many people keep trying new ways to make money off of social media, blogs and anything they can think up online. Most people know they aren’t going to make the next Facebook, so if there are easier ways to score a few bucks off the Web, they want to know how.

Foursquare founder Dennis Crowley wants to give his users kickbacks. A kickback is money given to someone who referred a product. It’s a paid form of word-of-mouth marketing, where advertisers pay a social media user to get their followers to buy certain products.

But there’s a glitch.

This may be against Federal Trade Commission laws, as Dennis Crowley was enlightened of Oct. 26 at a New York University panel discussion.

The Internet is constantly growing and changing. No one can predict exactly what will pop up next, or how to best use it. It’s a place for experiments.

Not surprisingly, the law doesn’t know how to deal with it either. So far, the FTC is following the guideline of “Don’t mislead consumers,” according to

Normally, for blogs and the like, the user adds a disclaimer to the endorsing post that says it is a paid advertisement in the blog. This becomes difficult with the short posts of Twitter and Foursquare.

Symbols such as “#paid” or “$” might be a solution to this problem, but it still might not be legal.

If the FTC isn’t going to clearly make rules defining payments of social media, then it’s up to media to see how far they can go before they cross the line. They might get punished for it, but they won’t see any rewards without trying.

What’s best: asking for permission, or asking for forgiveness?


3 responses to “The ethics of Foursquare and kickbacks

  1. The glory of Foursquare was that it was hard for the founders to make any real money off of it. That’s why they haven’t implemented an actual GPS system that can call people out if they’re lying about their location. But anyway, I think the idea of paying people to refer your product is really unmanageable. It works like a gym membership. If you get someone to join, you get like 20 “gym bucks” you can use. That works pretty well. But for electronic products, I think it would turn into a spam fest and not be functional.

  2. I guess the answer depends on how much you’re willing to lose. For me personally, I’d say definitely permission, but for those trying to launch another Internet company to earn a quick buck, the penalty might be worth it. I’d say look for a solution before causing an uproar.

  3. I think they should try it out. There’s no progress with staying put. Then again, it’s easy for me to say “Go for it” when I’m not getting any potential penalties. But if one website does it, it will at least clear up the dilemma for other media.

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