It's an Ad, Ad, Ad World

The next time an overly friendly blond sidles up in a crowded bar and asks you to order her a brand-name martini, or a cheery tourist couple wonder whether you can take their picture with their sleek new camera-in-a-cell phone, you might want to think twice. There's a decent chance that these strangers are pitchmen in disguise, paid to oh-so-subtly pique your interest in their product. Their game, known as "stealth marketing," is one of several unorthodox ploys that Madison Avenue is using to get through to jaded consumers.

Covert product placement has been around for years, with movie and TV producers accepting cash for the casual positioning of a particular brand of soda or make of sports car in the background of a scene. But now the concept has leaped off the screen into other areas of life, often catching consumers unaware. Celebrities such as Lauren Bacall and Kathleen Turner appear on talk shows and praise prescription drugs without disclosing that they have been paid by the drugmakers. Marketers give expensive sneakers, colognes or even cars to young trendsetters on college campuses, at the fringes of show biz or at hot nightclubs with the understanding that they will use and talk up the products. Producers of soap operas and sitcoms and even best-selling author Fay Weldon take money to build plots around a certain brand of makeup or jewelry. In an age of rising media saturation and sinking corporate credibility, the theory is that marketing is most effective when you don't know that it's marketing.

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Such stealthy efforts are but one phase of a larger growth industry of alternative and guerrilla marketing that ranges from handing out free samples to sponsoring concerts and other events. "We need to take our brand to them and not wait for them to come to us," says Hilary Dart, president of Calvin Klein Cosmetics. Its estimated $45 million campaign to launch the men's fragrance Crave this fall will include street sampling, product seeding among opinion leaders and other guerrilla tactics (even building sand sculptures of the Crave logo on beaches on both coasts) before any ads are unveiled.

There are no reliable estimates of spending on alternative marketing, in part because agencies and clients rarely admit to using stealth methods. Certainly, it represents a small fraction of the estimated $236 billion that will be spent this year on traditional print, broadcast, radio and online advertising in the U.S. But industry experts say that outlays for alternative campaigns are growing rapidly and that Madison Avenue has little choice but to seek new ways to push products. After tightening their belts during the recession, clients are increasingly wondering what exactly their hefty ad budgets are getting them and "demanding greater accountability," as Steve Moynihan, managing director of ArnoldMPG, puts it. "Advertising is only one part of the communications mix and not the whole arsenal," says Seth Matlins, who runs marketing for Hollywood talent agency Creative Artists Agency, which helped land Coke a high-profile role on Fox Broadcasting's summer talent-contest hit, American Idol. (Notice that instead of the standard green room for guests waiting backstage, there's the Coca-Cola Red Room with curvy red couches that look suspiciously like the Real Thing's logo.)

Critics say stealth marketing is tinkering with our minds. Jeffrey Chester, executive director of the Center for Digital Democracy, dubs the phenomenon the "brand washing of America." Many ad-industry executives are worried that it could all too easily backfire, making consumers even more wary. "I'm against any form of deception," says Keith Reinhard, chairman of DDB Worldwide. "In the end, it's bad business."

Like it or not, consumers are probably going to see more and more unexpected, and undercover, pitches. That's because the old model, the 30-second TV spot, is proving less and less effective. Digital video recorders such as TiVo now give viewers the ability to banish commercials, prompting network executive Jamie Kellner, CEO of Turner Broadcasting System (which, like TIME, is owned by AOL Time Warner), to warn that commercial-supported free TV is an endangered species.

That may be a stretch, but there's no denying that the major ad holding companies are having to justify the value of their creative work as never before. They are already hedging their bets, setting up or funding alternative shops in New York City or Los Angeles with such hip monikers as Brand Buzz, Renegade Marketing Group and Interference Inc. Al Ries, a veteran marketing strategist and co-author of the just-published book The Fall of Advertising & the Rise of PR (Harper Business), says the reason is simple: traditional advertising has lost most of its credibility. "Anything you say about yourself is now automatically suspect," he says.

It is no wonder, then, that so many companies are relying on celebrities, trendsetters or even seemingly ordinary consumers to say it for them often with no hint that money or merchandise has changed hands. The New York Times revealed that drug companies are making payments to celebrities or their favorite charities in return for their touting pharmaceutical products on talk shows: Lauren Bacall praised Visudyne as a treatment for macular degeneration, Rob Lowe plugged Neulasta to combat a side effect of chemotherapy, and Kathleen Turner directed viewers to a website for a drug for rheumatoid arthritis. Sometimes, as with Bacall's controversial appearance on NBC's Today, the celebrities fail to mention that they are being paid. Just last week CNN (which is owned by AOL Time Warner) announced that from now on, it will always disclose any such financial ties during an interview, and the three major broadcast networks have suggested that they will follow suit.