Illegal Acts: Pumping Stocks

If you work in the ad industry long enough, it’ll happen to you. A client will ask you to do something you know is wrong. It might be an explicit request; it might be implicit. But whether you have to read between the lines or not, your agency may share in the liability if you accede to the request.

Perhaps the most common form of illegal advertising act is the campaign that intends to pump a stock or an initial public offering (IPO). These are hard to track. While companies would like their brand images to be burnished and widely distributed at key financial times, the Securities and Exchange Commission considers such deliberate Wall Street pandering a form of stock pumping. This hasn’t prevented many companies from conducting the practice, however.

In my opinion, all that traditional media spending by Internet companies we saw wasted on network TV from 1998 to 2000 can be attributed to this shady objective. Why else would ad executives pay tens of millions of dollars of cash for exposure to people who don’t have access to the product they’re selling? Because the product they’re really selling is the stock, not what can be bought online.



Sometimes, when I’ve experienced resistance to highly rational arguments to move budgets from traditional media spending to online spending, I’ve sensed that there were ulterior motives behind the campaign. Budgets are timed for the few months immediately before an IPO. When the IPO is delayed, the marketing campaign – ostensibly unrelated – gets pushed back the same amount of time.

In the coming months, as the industry recovers, there will be greater scrutiny on these types of practices. I think we’ll do well to heed the warnings and put some more scrutiny on our clients’ objectives. Populist articles and books are already being written about how we Internet folks tricked the masses out of billions of dollars. That type of message, when it becomes a political movement, bodes ill for us. I’d rather the media industry not hold the bag for our former clients.

Amusingly, many people running marketing departments at clients don’t even realize this is illegal. I’ve had vice presidents of marketing tell me outright that they wanted to run such-and-such campaign three months before the IPO to give the stock a head of steam. I’ve told these clients to reformulate their objectives, showing them precisely how they are illegal. While not necessarily the most politic form of client service (imagine: an account guy using the word “no!”), I sleep better knowing I’m not going to get subpoenaed.

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