Say, perhaps in a dream, you are Catwoman. You have to chase bad guys through the middle of a city. On your way you need to smash a few walls, crush a few cars, but that’s OK — superheroes don’t have to clean up the mess.
That’s one example of moral hazard, the concept that people protected from risk tend to act in different and often unhealthy ways. History is full of unintended disasters caused by moral hazard — consumers or businesses who pollute the environment because they are decades away from the eventual impact; the recent subprime mortgage meltdown in which unaccountable sales agents or banks made silly loans; or the classic teenager driving his dad’s car way too fast, since he won’t foot the repair bill.
Which brings us to advertising. Marketers are itching to broadcast inside social media, and some of the best efforts involve innovative personal connections (Scott Monty at Ford is one shining example). However, many companies are beginning to simply buy their way into human networks, and the result is a growing pollution of quasi-authentic messages. We’ve written before in BusinessWeek on what a future world of sponsored opinions might look like. Since no individual consumer, or business, bears the cost of the broader clutter — they are protected in moral hazard — the barriers to entry are small. You can sign up now to have third-party companies broadcast inside your Tweets, and make a few pennies, so what’s the harm? The result often looks like this.
Yes, we’ve been critical of such paid pollution, which at root is different from advertising because it misrepresents the source of the message. So in the coming weeks we’ll explore some of the positive ways marketers are using social media, without damaging cars or buildings. Stay tuned.