Mandatory fine print: Bloggers, celebrities, and online distributors MUST disclose material connections come December

While the current global recession continues to catalyze drastic changes in the media landscape, ample space opens up for questionable marketing methods. Indeed, recent government moves concerned with regulating endorsements on the internet suggest it intends to hold the Web to the same marketing standards as it does television and print.

Social Media

After learning that reality TV star Kim Kardashyan is paid and given high-priced gift incentives by Prada to endorse the brand on her blog and via Twitter, I looked into whether or not any social media regulatory policies were in the works.

Sure enough, the Federal Trade Commission is making a serious attempt to freeze undisclosed blog talk and twitter chatter this winter, imposing new rules set to take effect in a matter of months.

On Oct. 5, the Federal Trade Commission announced that, beginning Dec. 1, bloggers who review products are required to disclose any connection with advertisers, “including the receipt of free products” and detail whether or not they are compensated in any manner for their efforts.

Celebrities will also be held accountable; they’ll now need to disclose any ties to companies they promote on a talk show or on Twitter.

So what does this mean?

The F.T.C. hasn’t changed a single rule regarding relationships between advertisers and product reviewers/endorsers since 1980, which means the Commission sees the current controversial practices as a serious issue.

But the inherent potential that internet-based, below-the-line marketing programs have for slashing company ad-spend means advertisers aren’t going anywhere soon, despite the controversy.

Sure, social networking sites and blogs have presented companies opportunities to create a façade of authenticity in their marketing—they can misleadingly endorse their products straight from the keyboards of individual consumers.

But the lines are blurry on both sides.

Linda Goldstein, a partner at Manatt Phelps & Phillips (a law firm that represents several major marketing groups), said both the F.T.C. and e-community marketers alike could really benefit from actually “understanding how viral marketing works.”

“If a product is provided to bloggers, the F.T.C. will consider that, in most cases, to be a material connection even if the advertiser has no control over the content of the blogs. In terms of the real world blogging community, that’s a seismic shift.”

Online Testimonials

In addition, the F.T.C. announced it intends to eliminate the ability of advertisers to: a). conceal material connections; b). “gush about results that differ from what is typical.” Weight loss and male-enhancement products are typically advertised in such a way via infomercials (where a clear, stated material connection is made at the beginning).

But when such products hit the Web, company-owned blogs posing as independent product-review sites create haze.

Recently, Urban Nutrition, LLC, was investigated by the National Advertising Review Council (NARC) after receiving complaints that the company used false claims and undisclosed associations to market supplements. The company, which ran web sites such as WeKnowDiets.com and GoogleDiets.com, was found by the NARC-governed Electronic Retailing Self-Regulation program (ERSP) to have created a consortium of sites misleadingly formatted as independent product-review blogs.

To the government (and many concerned consumers), pushing social media marketers to adapt the principles of transparency and truth in advertising is essential.

As stated by the F.T.C., the industry will continue to thrive in new mediums as long as creativity and accountability are balanced.