Will the FTC's Blogging Rules Slow Endorsements?

The Federal Trade Commission tightened guidelines for paid endorsements on sites like Twitter and Facebook, leaving big advertisers to rethink their strategy

By Douglas MacMillan

• View Slide Show

More than 75,000 people follow Jeremy "Shoe Money" Schoemaker on Twitter for his candid takes on news and strategies in search engine marketing, his expertise. Recently, they got something else: a 140-character promotion for the new NBC (GE) comedy series Community. The TV network paid Schoemaker a total of $2,000 for two Twitter posts, both of which included a brief disclaimer that the message was an ad.

As advertisers begin to take innovative approaches to tapping online social media, Uncle Sam wants to make sure the old rules of fairness and transparency still apply. On Oct. 5, the Federal Trade Commission issued a set of updates to its guidelines for acceptable use of endorsements in ads. For the first time, the revisions specified that bloggers, like mainstream media outlets, are required to disclose any "material connections" they have to a brand or product they write about. What's more, the guides apply to any users of Twitter, Facebook, and other social media sites where people may be paid to pitch goods to friends, according to Rich Cleland, assistant director of the FTC's division of advertising practices. "We felt it was necessary to address social media marketing because it has become the most significant new area of advertising," Cleland says.

Closer scrutiny from regulators in Washington could give pause to big advertisers wading into the social media space, says Forrester (FORR) analyst Sean Corcoran, author of the March report Add Sponsored Conversations To Your Toolbox: Why You Should Pay Bloggers To Talk About Your Brand. "These new rules mean you have to readdress your strategy," says Corcoran. "The legal teams will be more involved and they're going to be more discerning." Forrester estimates that more than $700 million will be spent on social media marketing in 2009, and more than $3 billion will be spent by 2014.

FTC Could Bring Legitimacy

While the FTC guidelines are not law—rather, they define how the consumer protection agency interprets existing laws in light of new technology —advertisers and bloggers could be issued warnings or be brought into court by the agency for violating the guidelines. "The FTC issues guidance because they think it's necessary," says Michael Mallow, attorney with the Los Angeles law firm Loeb & Loeb. "If marketers do not pay attention to that, then yes, [the FTC] is going to go after them."

Business Exchange

Track and share business topics across the Web.