Blogola: The FTC Takes On Paid Posts

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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.

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