The FTC recently updated its guidelines – taking dead aim at companies attempting to fake zealotry actions. Failure for bloggers to disclose their potential sponsorship or material gain is potential fines up to $11,000 per posting. “Bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.”

No payment was made to GRM by the FTC for the posting of this article.


Blogola: The FTC Takes On Paid Posts

The Federal Trade Commission wants bloggers to disclose when they’ve been wooed with cash or freebies from companies they cover

Readers of Adventures in Babywearing, a blog for parents, got an up-close look at the Ergo, a $135 embroidered baby carrier in a shade called “organic blue” in a May 14 post on the site. Blog operator Stephanie Precourt was impressed. “The Ergo truly is now my first choice for long-term wear as well as nursing and doing chores around the house,” she wrote.

Money can’t buy that kind of advertising for Maui (Hawaii)-based ERGObaby. Or can it? As Precourt wrote in her blog, the company sent the carrier free, along with a matching pouch and backpack. Precourt says it’s legitimate to blog about a product she’s been given by its manufacturer. “I try to keep my blog filled with personal stories and real-life content so that when I do happen to write about something that I’ve been given, it’s credible,” she says in an e-mail.

But such back-scratching endorsements could become tougher under a coming set of Federal Trade Commission guidelines designed to clarify how companies can court bloggers to write about their products. This summer, the government agency is expected to issue new advertising guidelines that will require bloggers to disclose when they’re writing about a sponsor’s product and voicing opinions that aren’t their own. The new FTC guidelines say that blog authors should disclose when they’re being compensated by an advertiser to discuss a product.

Google Downgrades Paid Blog Entries

It’s the first revision of the FTC’s guidelines for editorials and testimonials in ads since 1980, and regulators say it’s needed in an era when consumers increasingly turn to blogs and other amateur Web sites for information about the goods and services they buy. The rules seek to clear up some of the tangled connections on Web sites that make it hard for readers to tell who’s getting incentives from whom. “The presumption is that we can apply traditional advertising principles like transparency and accountability to social media the same way as it would apply to traditional media,” says Rich Cleland, staff attorney for the commission.

Maybe. But the FTC is trying to legislate ethics in the wild and wooly blogosphere at a time when marketers and amateur writers are forming new kinds of partnerships that fall outside the traditional boundaries between vendors and consumers, say critics of the plan. And the Commission’s rules may be less effective at squelching behind-the-scenes arrangements between advertisers and bloggers than policies at Google (GOOG), which has been penalizing paid blog entries by demoting them in its search results. The FTC’s policy change mostly concerns the activities of independent blogs vs. posts written by journalists who work for news organizations.

As marketing budgets remain tight, advertisers are looking for cheaper ways to get their messages in front of shoppers. Many have turned to the blogosphere, offering cash and products to amateur journalists in exchange for glowing reviews about their products. “Bloggers are cost-efficient,” says Sean Corcoran, an analyst at Forrester Research (FORR) who wrote a Mar. 2 report titled Add Sponsored Conversations to Your Toolbox: Why You Should Pay Bloggers to Talk About Your Brand.

Nonbinding FTC Rules Have Wiggle Room

Often companies don’t need to disburse cash to win bloggers’ favor. Microsoft (MSFT) sent bloggers pricey Acer laptops loaded with Windows Vista to promote the software’s launch in 2006.

Blogger Jessica Smith of the lifestyle and product reviews site Jessica Knows got a free Ford (F) Flex for a year in April, plus a gas card for it. And readers of Shake the Salt, a blog for frugal moms, were among the first to hear about Banana Nut Cheerios when General Mills (GIS) released the cereal in March—after the blog’s author got free cereal and kitchenware from the company.

In some cases, bloggers disclosed the incentives up front. But there’s wiggle room: The coming FTC guidelines don’t define what’s meant by a “payment” and don’t specify what incentives—other than cash—must be disclosed to readers by blog authors. “That’s a real challenge, determining what compensation means,” Corcoran says.

The FTC says it wants to protect consumers, who may take a blogger’s opinion at face value without knowing it was influenced by an advertiser. But advertisers say the new guidelines don’t take into account nontraditional partnerships being forged between bloggers and their sponsors. The rules “really raise more questions than they answer,” says Thomas Cohn, an attorney with Venable, a law firm that represents the American Assn. of Advertising Agencies, Interactive Advertising Bureau, and four other ad industry groups that have weighed in with the FTC on the policy change. Cohn advocates self-regulation by bloggers.

Advertisers’ “Obligation to Control”

Like other FTC guidelines, the new policies won’t be binding. But they may influence which cases the agency decides to bring to court, says FTC attorney Cleland. Two bloggers’ trade groups, the Word of Mouth Marketing Assn. and the Blog Council, have already adopted self-regulatory guidelines for how advertisers should work with bloggers. According to the FTC, however, the buck will stop with marketers who pay for favorable posts. “If it’s paid for by the advertiser, then the advertiser has an obligation to control it,” Cleland says.

Yet an even more powerful force on the Web—Google—may bring opaque bloggers and advertisers to heel. In 2007, Google began tightening restrictions on blogs that linked to sponsors’ sites, requiring them to insert software code that negates the value of those links when users search for those sponsors. In February, Google turned the rule on itself when it penalized Google Japan for paying several Japanese blogs to advertise Google software. “When you have large organizations like the federal government and Google coming at you, it deters you from being deceptive,” says Forrester’s Corcoran.

The world’s more ambitious bloggers like to call themselves ‘citizen journalists.’ The government is trying to make sure these heralds don’t turn into citizen advertisers.

Douglas MacMillan is a staff writer for BusinessWeek in New York.