When a new product launches, one of the most important things to do is get good marketing to the world. While television, web and mobile ads are good, what is better is positive content. The best way to get this is from tech blogs and websites, but sometimes that is not possible. For example, when Microsoft released the Xbox One, many media outlets misunderstood the platform or wanted to see it fail and published negative content instead.
Because of this, Machinima was brought in to produce and market positive content about the Xbox One around its launch. They paid 2 YouTube personalities a total of $45,000 to produce videos, and created a program for other "influencers" to receive $1 for every 1,000 page views, maximum of $25,000. All of this is completely legal and fairly common. The problem is that this is not the whole story.
What Machinima failed to do, or possibly actively discouraged, was provide disclosure of these payments. As it turns out, since these were paid product endorsements, they fall under the purview of the FTC Act, which prohibits deceptive advertising. Because the videos contained "seemingly objective opinions," they require the video producers to disclose that they are paid advertising, just like an infomercial. Jessica Rich, FTC Bureau of Consumer Protection director said,
When people see a product touted online, they have a right to know whether they're looking at an authentic opinion or a paid marketing pitch.
In a proposed agreement, Machinima would be prohibited from running future campaigns of this nature, and would be required to clearly disclose future paid endorsements. Microsoft and ad agency Starcom MediaVest Group were both cleared for their involvement in the issue, citing corporate policies prohibiting such activity and swift action once informed of the problem. Machinima points out that these issues came about before a corporate leadership change in March 2014.