Drawing the Line on Advertorial Content for Hyperlocals

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One way to boost revenue for a hyperlocal news site may be to supplement editorial content with paid content — such as advertorials, sponsored reviews, or endorsements. But a hyperlocal publisher who takes this path may walk into a legal landmine unless they’re completely transparent in distinguishing its editorial content from its paid content.

Two years ago, the Federal Trade Commission issued new guidelines to crack down on websites, especially blogs, that appeared as legitimate editorial outlets reviewing products but concealed the fact that the reviews were paid for by advertisers or merchants. The bottom line is that if you are going to rely on paid content, here are the steps you need to take to comply with FTC’s guidelines:

• If you run an advertorial for a local business, such as yoga class, you must disclose that the content is a paid advertisement.
• If you obtain free services or a free sample to write a review for a local shop, you must disclose to the reader that you were provided the sample to write the review.
• If you are offered a free meal at a local restaurant to write a review, you must disclose the fact in your review.
• You must disclose if any of your writers or bloggers are sponsored by a particular advertiser or merchant.
• Your independent writers and bloggers must disclose if they were paid to provide an article or review.
• Contributors that provide endorsements or testimonials must have actually used the product or service and base their comments on personal experience; they may not provide endorsement or testimonials purely based on some script provided by an advertiser.

The consequences for lack of transparency can be severe. In March 2011, Legacy Learning of Nashville, Tennessee agreed to pay the FTC a $250,000 fine to settle charges that it deceptively advertised its products through online affiliate marketers who falsely posed as ordinary consumers or independent reviewers on various blogs. The company sold a series of guitar-lesson DVDs. It used an online affiliate program, through which it recruited “Review Ad” affiliates to promote its courses through endorsements in articles, blog posts, and other online editorial material. The affiliate sites never disclosed that Legacy Learning paid for the content.

Yet advertisers continue to test the limits of paid content. The latest drama involves snarky gossip site Gawker. One of the site’s writers, Hamilton Nolan, recently disclosed a series of emails in which a marketer offered to pay him at least $130 to include his clients’ links in Nolan’s blog posts. “That’s the plan,” Mr. Nolan wrote in his post, “get paid under the table to insert links to advertisers of ‘in editorial content’; if you’re caught, just remove the links without a word; if not, continue to get ‘paid handsomely.’”

Nolan wrote “I’m going to have to pass,” taking an ethical stand on the offer. But the dilemma that Nolan faced would be the same dilemma that any independent hyperlocal blogger can often face. In order to make the deal work, you have to decide whether you are willing to disclose that advertisers paid you to incorporate links in your articles. The bottom line: transparency is paramount.

Next week, I’ll provide a follow-up column to offer some steps that hyperlocal news sites can take in terms of service, agreements with writers, and posting disclosures in order to maximize revenue while maintaining transparency.

Brian Dengler is an eMedia attorney and journalist who covers legal issues in eMedia. He is a former Vice President of AOL, a former newspaperman and EMMY-winning TV journalist. He teaches eMedia management as an adjunct at Kent State University.