The Washington Post is reporting that the Federal Trade Commission issued a staff opinion yesterday saying that companies engaging in word-of-mouth marketing, in which people are compensated to promote products to their peers, must disclose those relationships.
We are working to obtain the opinion to see how this might affect the PayPerPost business. This might force their hand and require their bloggers to disclose when they promote products for a fee.
Our previous PPP coverage is here.
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I thought PPP already made the move on requiring disclosure. If they haven’t, it would be a damn good idea to start working on it NOW.
Good. I hope FTC follows through.
Great find - very interesting article. I didn’t realize such big companies were doing this.
Michael,
You must be frothing at the mouth over this! I know how much you love PPP.
http://www.iRegift.com
Seriously…you have like 10 ads on TechCrunch!
We come here to read about new stuff…not listen to your cry about PPP.
I’m this close to never coming back here because of this garbage and I’m sure others as well.
Hi Michael,
I’m at the WORD OF MOUTH MARKETING ASSOCIATION (WOMMA) event in DC. A lady from the FTC spoke about the ruling. Essentially, they are taking the view that if you paid for it, you are liable for what people say, and that if it is not disclosed that you were paid, then it is a deceptive advertising practice and that the FTC would look into criminal charges in those cases. It is actually a great ruling for WOM marketers who believe in up front, honest communication (which has been espoused by WOMMA from the start).
WTF, why is FTC getting involved in this?!? This is BULL!
This is great news. Pay per post really reminds me of payola back in the “old days” (as if it doesnt happen today) of the music industry. I think we need to ensure that a disclaimer is placed on every paid blog through pay per post.
What is the “may regulate”? Do we remember the stock analysis pumping up stocks they owned during our bubble or so they could get more investment banking business. How about tv commericals that tell you this is a paid advertisement? This way when u buy the Ron Popeil spray on hair you know what you are getting. Same should go with Blogs or any form of advertising, because if you have something to hide than probably your product belongs more in a landfill than in a home.
“WTF, why is FTC getting involved in this?!? This is BULL!” - Vik
Yes, makes you wonder. However you ask if not them, who? Truth PayPerPost is a brilliant idea in a world that already blogs but bloggers have to be forced to maintain honesty. If not credibility will be shot and shot pretty quickly.
Since when did Techcrunch become the ethics gauge for the rest of the community. Why do you have this personal crusade against pay per post. I mean honestly it’s really ruining your reputation as a journalist. The government getting involved in trade practices is a pretty scary concept. When you compare the real evil that is government regulation against the perceived evil that is Michael’s opinion of PPP there is no contest. I think personally if they are going to target anything they should be targeting the massive amounts of spam inflating stocks. It’s going to be a long hard road to regulate something like this and it’s yet another constraint on the public network known as the internet. Regulations like this are scary.
Didn’t some journalists just come under fire for taking payments from our government for writing articles that were pro Bush Administration policies and trying to pass it off as real news?
I’m surprised to hear people bring up TechCrunch banner ads in comparison to the concept of PayPerPost. There’s a pretty significant difference between being paid for endorsing something without disclosure and a banner ad, but somehow it always comes up. I don’t think Michael’s issue is with the idea of being paid to write content - the issue seems to be more about whether or not the blog’s telling the reader about it. I think we all need to remember that it hurts credibility but moreso, the readers - aka, your traffic - don’t like it. That for me is more than enough reason to support disclosure when something’s “advertorial”. Magazines have done it for years - I just can’t see why it’s an issue for bloggers.
Gee, I cannot imagine a business where you have to pay to get word of mouth marketing opportunities… oh wait… that would be any industry conference.
talk about a business that relies on pay for play… and very few folks on a panel ever say “oh yes, we are a paid sponsor of this event…”
What’s the diff?
I think this is a step in the right direction.
Ack too many Sean’s!
(I’m #3 apparently)
@ calvin, totally untrue - at least in the tech space. I’ve been to something like 400 conferences in six years. Everybody knows what a “sponsor” is.
PayPerPost concept is writing about an item for payment. That’s seen, technically, as an endorsement by the public and therefore, it’s often trusted. The idea that somebody’s being paid to do it takes away that trust. Disclosure solves the issue. I wish people would realize that the issue is more about not disclosing than it is the actual idea of being paid to write about something.
It’s kind of nonsensical to argue the latter, given that it’s not the issue at hand. If it’s so legit that people want to fight for the right to do it, they shouldn’t have an issue with disclosing - readers honestly don’t care, as long as they’re aware.
Michael’s argument (I believe) is about not telling people you were paid. Let’s say you buy consumer reports to buy a car and you take that advice and make a choice. Let’s say the magazine actually writes about things based on who pays them what - now all of the sudden, that credibility and trust changes. That’s all there is to it. I don’t personally care if people want to do that sort of stuff, but I think it’s in everybody’s best interest to tell readers what’s advertorial and what’s not.
If you all want to ruin your reputation and credibility by not telling readers who trust you that you write about things based on being paid, that’s alright I think - it’s just that hurting reader trust for bloggers means less consumers will trust everybody regardless of whether they disclose or not.
I believe the staff opinion letter is available here: http://www.ftc.gov/os/closings.....lalert.pdf
The letter from Commercial Alert (to which the FTC was responding) is available here: http://www.ftc.gov/os/closings.....equest.pdf
Patricia,
Michael’s argument is specious and overblown. Every time he tosses around PayPerPost he suggests that PPP bloggers as a group are not disclosing, when in fact they ARE disclosing.
When PPP went to the lengths of assisting bloggers in creating disclosure policies for their blogs he roundly criticized that effort as well, instead of contributing more constructive suggestions to the discussion.
And so it goes — no one bothers to really look at the facts, choosing instead to assume that we’re all a bunch of evil jerks out to rip off our friends and grub a little money.
Here’s what I did with my PPP money: I donated it to a friend who was in need.
I wouldn’t have had it to donate if I hadn’t done it. And yes, I do disclose as a matter of policy on each paid post — there are not many, but they all disclose.
I can see how there is an ethical issue with PPP-like services - however I, for one, think that a requirement to post a positive review (or to restrain your criticism when making the post) should be a far more serious issue that non-disclosurse.
I haven’t worked with PPP but I have experimented with a number of other similar services (Blogvertise and CREAMaid among them). Personally, whenever I do receive an offer, I always ask myself a) whether the product or service is something I would normally write about anyway and b) whether I would still write a positive review even if I was not being remunerated for the service. If the answer to both questions is yes, then I don’t see why disclosure is such a big issue since effectively all the service accomplishes is providing you with content to write about as well as additional revenue.
This might be a somewhat simplistic way of looking at things, but I sincerely believe in the difference between simply writing about a product and writing an extremely positive review of it. If it is the latter, then disclosure is a must; if it is the former, then I don’t see disclosure as a reasonable requirement so long as the answer to the aforementioned questions is “yes”.
Patricia: you misunderstood me. I was referring to the fact that if you want to be on a panel at one of those shows, it sure does help if you are a sponsor… ever try and get on a panel without paying a sponsorship? It almost never happens… I call that dynamic pay 4 play.
This is a little disturbing. I mean, too many steps in the “right direction” may not be good from a first amendment perspective.
Since when did Techcrunch support regulation of blogs?
Perhaps the next step would be for the FTC to require all bloggers to register with them and require a license… (and no, I’m not a PayPerPost blogger)
I think the whole idea hurts the integrity of blogs…because the readers trust your true opinions not your paid opinion.
I hate PPP just as much as the next guy but I do NOT want the FTC involved here.
Government regulation is not the solution.
I receive a lot of indirect compensation for my blog. Early access to book deals, gadget reviews, etc.
I usually disclose this of course but under no circumstances do I want the govt involved here.
Any transparency that provides insight into who’s behind an ad seems good to me. Given the proliferation of certain illegal U.S. business practices on the web such as gambling and the subsequest crackdown, I’m not surprised that the FTC would get involved here.
You’re kidding me. More government regulations and oversight. This is not what the FTC should be doing.
I dont like the whole positive negative review thing you can do with PPP but if they just took that out and advertisers were cool with whatever the blogger reviewed, good or bad, that would be fine with me. The main value in PPP is just link generation anyways.
Geez I hate the way Michael infects this site with his views on everything. Your recent posts are boring and lame. Where are the new Web 2.0 companies you say you blog about? All I see are Yahoo, Skype and now your slanted views towards PPP. Come on Michael, lift your game or me (and a whole lot of others from the sounds of it) wont be coming back.
@ Sean - “…you are liable for what people say…”
Who is “you” in that context - PPP or the advertiser?
Also, isn’t FTC just limited to US? How can they press criminal charges against a foreign advertiser or a PPP like entity that could spring up elsewhere. Isn’t there something called freedom of “paid” speech.
It’s been a slow week. We’re coming off of the sugar high of the GooTube deal. I’ve got news for next week, but I can’t disclose here or yet. http://www.iregift.com
When you look at a number of blogs each day you soon find out which ones are using PayPerPost. And I have also found that most of them seem to disclose anyway. I do think that PayPerPost should force bloggers to disclose!
In terms of the ruling, I looked through it and didn’t find anything thats woth a mention. I suspect it will have no effect on PPP at all.
@ calvin, yes for sure i’ve seen that too, especially with smaller shows. the thing is, though, that’s kind of killing the shows too…..
Mike, your position is clear - but a tad hypocritical, no? You can’t exactly invest in Dogster, while at the same time blog about them (and slam competition, pawspot) - then turn around a criticize PPP. I really like your blog, but watch out for the whole “glass houses” and “stones” thing.
Hello Mike.
Thanks for offering a weblog like TechCrunch for general consumption; I really appreciate it. I like what you write about it and I like how quickly you get up to date information out there. Thanks for keeping me informed.
Hi Michael
I think you need to look at this a little deeper, and not specifically in regards to Pay Per Post.
This affects billion dollar companies, not just startups.
Here are some references to what 2 lawyers have written about this
http://www.copywritersblog.com.....vertising/
http://www.copyblogger.com/aff.....ed-by-law/
This affects Amazon, Google, Ebay, Clickbank, Commission Junction, Linkshare and a host of other billion dollar companies that allow affiliates to link directly through to a particular product or service with a recommendation.
In fact this affects affiliate marketeres more than Pay Per Post, because a PPP writer earns very little per article they write compared to an affiliate who may earn thousands of dollars per affiliate product mention.
Solution? My Disclosure Policy Plugin possibly if you use Wordpress
Just a response to MT (11):
“The government getting involved in trade practices is a pretty scary concept.”
Concept? Its a reality. There is no such thing anywhere in the world as a government that is not involved in regulating trade. We have and have historically had a very involved government. If you think this is just a “concept” you are severely out of touch.
Thanks Mike
I was just about to launch BlogPayola.com and/or IBlog4Cash.com
These were going to be My Pay for Post Sites.
FTC Frowns on Radio Payola.
Payola is Pay To Play Certain Songs or ones Labels songs.
This is Totally Different concept this is Guerilla Marketing.
Has anyone heard of freedom of speech?
So what if its Pay For Speech and Not Free Speech.
Rqtect
Rqtect.com
I think disclosure by journalists is a good thing, which includes TC when they write up stories on companies they have close / material relationships with, it has to go across the board.
Radio needs even more disclosure rules because we are talking big bucks, not a a few hundred bucks to a blogger, or whatever the model is.
My startup, Promoterforce.com which is platform for WOM for SME’s, is currently developing our full disclosure messaging strategy around this issue. We fully agree with the WOMMA that disclosure is a fundamental element of trustworthy (credible, meaningful) marketing.
Freedom of money is the most important.
My 2c: Govt should regulate trade and advertising to help ensure rip-offs do not occur, otherwise people are forced to waste vast amounts of extra time before every transaction doing due dilligence to ensure that they are not being fooled. Government regulations are the price you pay for an efficient interdependent society. If the regulations are often badly drawn up, or actually designed to give advantage to one group over another rather than to make the system fairer or more efficient, then you start loooking at unelecting the current government, and also pushing for electoral reform, campaign finance reform, and (much) more transparency, rather than simply moaning that all regulations are evil. To do that is merely to play into the hands of the snake oil salesmen.
I live in New Zealand. We have it easy here, in terms of sensible government regulation. Despite the fact that our right wing bloggers claim our Govt is “socialist” we are the #1 place to do business on this planet according to the World Bank. I really do sympathise with you Americans and your crazy inefficient multilayered inconsistent systems of government, I can see why you hate them so much, but trust me, anarchy would be worse.
Will this affect product placement in movies?
I’m not a fan of paid posts (in fact, I just wrote a blog entry today about this very topic)… however I am even less of a fan of the government becoming more and more involved in common practices such as word of mouth marketing. I don’t even know how many things I have talked about on my blog just because I felt they were neat products (not paid to do so), and now someone is going to tell me that I can’t do that unless I meet certain critiria?? Isn’t this a freedom of speech issue?
I think blogs should disclose when they are posting for money, but I’m not sure this is something the FTC should regulate.
Maybe FTC should regulate on this. But I’m afraid it’s really hard to have a good achievement.
Bloggers don’t like any regulation, anyway.
-Mike
Tech Tutorials: http://www.hotcoding.com
There is no way this is seriously going to happen, what a waste of time and energy. Doesn’t the FTC have more important things to review?
http://davidchao.typepad.com
Thanks Again Mike
I was just about to launch BlogPayola.com and/or IBlog4Cash.com
BlogVison.com These were going to be My Blogging for Dolars sites.
FTC Frowns on Radio Payola.
Payola is Pay To Play Certain Songs or ones Labels songs.
This is Totally Different concept this is Guerilla Marketing.
Has anyone heard of freedom of speech?
So what if its Pay For Speech and Not Free Speech.
Rqtect
Rqtect.com