• by Shankar Gupta , December 19, 2006

Controversial blog word-of-mouth marketing company PayPerPost, which connects bloggers with marketers that are willing to pay for coverage of their products, Monday began requiring its bloggers to disclose the fact that they receive sponsorship money.

But the company is only mandating that bloggers post a general disclosure on their sites, which can consist of a vague acknowledgement that the author may take money that influences his writing. Some industry observers say that bloggers that take payment for posts should reveal far more specific information.

"Ethics is not a game," said Andy Sernovitz, president of the Word of Mouth Marketing Association. "It's nice that they're requiring disclosure, but there's still this giant loophole," he said, adding: "It's not clear what's being disclosed."

He also criticized PayPerPost for approving vague boilerplate language that he said "puts the obligation on the reader to find your disclosure policy and guess which posts are honest."

Ted Murphy, CEO of PayPerPost, responded that the new terms of service reflect "best practices" of the word-of-mouth marketing industry and customer feedback. "WOMMA and other organizations do not define the way in which disclosure must be made, because it is simply impossible to envision every scenario where a company or organization and individual may have a relationship," he said.

Murphy added that PayPerPost was looking to provide flexibility with its terms of service, rather than mandating a specific behavior for its bloggers. "If a blogger wants to disclose on a per post basis they are free to do so, and advertisers can request per post disclosure as well," he said. "It is up to the advertiser and blogger to decide what form of disclosure works best for them."

Prior to the new terms of service, the company encouraged bloggers to disclose their paid relationships with marketers, but did not require it. Along with the change in terms of service, PayPerPost is raising the minimum price per post to $5 from $1, "to cover the increased blogger and marketplace costs of the new policy," according to a company statement.

Last week, the Federal Trade Commission rejected a claim filed by the anti-advertising group Commercial Alert targeting buzz-marketing, but left the door open to investigate individual companies that pay brand advocates who do not disclose their relationships with marketers.