Dentsu PR & Vector caught up in Japan "stealth marketing" issue

UPDATE: Vector responds to controversy around PR firms not declaring promotional material or paid content as such and whether more formal regulations are required

Recent investigative reports in the Japanese business media around so-called ‘stealth marketing’ tactics led by PR firms have sparked questions as to whether the industry needs to draw up more stringent regulations to ensure greater transparency.

In Japan, the term ‘stealth marketing’ is used to describe the failure to disclose promotional material in the media as such, or the presentation of paid content or advertorials as legitimate editorial coverage.

In November, an article in Diamond Weekly called out Vector, a relatively new, fast-growing Japanese PR agency, for employing such tactics.

Most recently, in February, Facta, another business title run by former Nikkei journalist Shigeo Abe, accused Dentsu PR of the same in a lengthy exploration of the "degeneration" of media and advertising in Japan.

Abe is an investigative journalist best known for uncovering irregular financial practices by Olympus, which mushroomed into a full-blown scandal.

Facta’s article notes that Vector’s president and chief executive, Keiji Nishie, responded publicly to Diamond’s article by stating that such methods, along with reimbursing editorial expenses, are common practice in the industry.

It then says that Dentsu PR’s president and chief executive Takehiko Chikami, who is also president of the Public Relations Society of Japan, subsequently criticised Nishie, refuting his statement and suggesting that Vector was alone in its use of stealth tactics.

The article goes on to accuse Chikami of hypocrisy in criticising Vector. Among other things, it states that Vector and Dentsu PR had worked together in various instances, and cites a whistleblower who claims Dentsu PR also uses stealth marketing as part of its services.

Vector has responded to the issue, telling PRWeek Asia that it believes any paid content should be appropriately credited. 

"In our opinion, establishing new guidelines is strongly recommended due to the fast-growing online media environment that allows a great amount of media content and advertisements to be mixed, especially on smartphones," a Vector spokesperson told PRWeek Asia.

"However, the guidelines should be set after considerable discussions within the industry."

When asked whether PR agencies or media owners are ultimately responsible for transparency regarding content, the Vector spokesperson said it is media "that will make the final decision on whether the credit will be shown or not".

"For PR agencies like Vector, we believe that our role should be to check that content is aligned with the guidance or to advise the clients and media on whether the credit should be shown or not." 

Opinions are divided as to what this means for the PR industry in Japan. Shingo Nomura, The Hoffman Agency’s Tokyo-based VP of North Asia, told PRWeek Asia he does not think stealth marketing is a major issue, and that most PR professionals make media pitches "without payment".

Dentsu PR issued an official comment to PRWeek stating: "the Dentsu Group complies with the guidelines of the Japan Interactive Advertising Association and notes sponsored articles as such". It did not comment further on Facta’s assertions.

Nomura said he believes the damage as a result of recent coverage will be limited, and does not think firm guidelines are necessary to regulate what can be seen as native advertising.

"This is not a matter of guidelines, but of business ethics," Nomura said. "I think we need to be very transparent to the client.

"I also think it’s important for a PR agency to create appealing content. If the content is appealing, people will read it. It does not matter whether it is a pure article or paid."

But Ross Rowbury, president and chief executive of Edelman Japan, took a sterner view. He said stealth marketing had been an issue for several years but recent coverage had heightened awareness of it.

"There is definitely a need for some sort of guidelines to ensure there is a high degree of transparency around any sort of communication that is made from a stakeholder to a consumer," Rowbury said.

"Whether it needs to be government regulation of self-regulation or just guidelines, is something the industry has to debate with itself. But the need for some sort of way of guaranteeing transparency is very necessary."

Rowbury said there was the possibility that the recent negative coverage could result in clients shying away from native advertising.

Whether that happens or not, "we can say the level of understanding that this is something that could backfire is higher than previously," he said.

Both observers agreed that publishers are a big part of the issue and should share the blame for lack of transparency. Non-transparent promotions "are proposed by publishers in most cases", Nomura said.

"So the media responsibility is quite big. [But] it is true that PR agencies are always under pressure to secure coverage. Especially when clients ask their agencies to pitch less newsworthy topics, agencies tend to rely on this method."

Rowbury said: "I think it’s something that’s grown out of the willingness of publishers to accept editorial collaboration as a way of supplementing their income and certain parts of the industry are seeing it as a chance to promote their clients in a different way."

"It’s a question of both sides; the responsibility lies both with publishers and the PR industry."

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