The advent of new media such as blogs (short for web logs – personalized websites regularly updated with content) and social networking sites (such as Facebook and MySpace) has opened vast new territory for information dissemination, networking and connectivity. Due to the low start up costs associated with creating a blog or joining a social networking site, every “netizen” with an opinion can set up a web-based soapbox from which to broadcast to the world.

As a result, like-minded communities of bloggers, social networking site members and their readers and followers (who can interact with the author via comment sections incorporated into the site) have sprung up around any number of topics large and small: from politics to film, video games to parenting tips.

The word of mouth informal style that prevails on blogs and social networking sites, and the interactive exchanges that regularly occur between author and readership, creates a certain level of trust between bloggers/social networking site members and readers. That familiarity and trust is bolstered by the fact that most bloggers and social networking site members are unpaid for their efforts, and are instead motivated entirely by an interest in the subject matter at hand.

This level of comfort is particularly valuable in the context of product review sites – blogs or site pages that review the latest and greatest products within a particular industry. Readers looking to make purchases have come to expect and appreciate honest appraisals from impartial and informed bloggers/site members who are not, themselves, looking to sell anything. It’s like going to an electronics store and talking to a knowledgeable salesman, but without the salesman’s ulterior “sell, sell, sell” agenda.

Advertisers, too, have begun to take notice of the enormous potential that blogs and social networking sites have as vehicles to promote their products and/or services. Riding this trend, some advertisers are providing free samples to review sites and others are creating corporate sites to: (1) provide real time updates on product releases; and (2) foster interaction with their consumer base.

Affiliate marketers and other publishers have taken notice and are discovering the advantages inherent in the blogging/social networking environment. Many are now incorporating product promotion within various blogs and web pages. Some have even begun creating fake blog/social networking site pages masquerading as review sites (known as “flogs” in industry jargon). Going even farther, some aggressive marketers have penned fake articles (or “farticles”) and include fake or paid testimonials extolling the virtues of a given product that they promote on their blog or other web venues.

While potentially lucrative, this conflation of marketing and blogs/social networking sites carries significant risk and potential liability. Because of the historical nature of the medium as a place for amateurs and average citizens to voice their opinions, there is an expectation on the part of the consumer that the blogger/social networking site member in question is not a paid spokesman or salesman. But when a blogger/site member is engaged in marketing products and services for a fee, or when that person is an employee of a company that is selling products on the blog in question, there is an inherent conflict of interest. Under those circumstances, flogs, farticles and dubious testimonials amount to a form of deceptive marketing, and the Federal Trade Commission (FTC), various state attorneys general and other regulatory bodies are cracking down. For example, in June 2009, as part of the increasing attention that governmental regulators have directed toward these practices, Lifestyle Lift, a cosmetic surgery franchise, paid $300,000 in penalties to the New York Attorney General to settle allegations that it had posted fake customer reviews of its services on Lifestyle Lift’s blog and other websites.

In turn, the FTC recently issued a draft of proposed revisions to its Guides Concerning the Use of Endorsements and Testimonials in Advertising designed to address marketing efforts now proliferating in the new media environment. The essence of the proposed guideline revisions, insofar as they relate to online marketing vehicles, is that online marketing fora must fully inform the unsuspecting reader of any and all financial interests that the subject bloggers or writers have in connection with blog posts, social networking site pages, articles or testimonials, as applicable.

Pursuant to the draft guidelines, if a blogger/social networking site member would receive a commission for the sale of a given product (or if he or she is an employee or owner of the company promoting a product on his or her blog or site page), that blogger/site member must disclose this fact prominently on his or her blog or site page, as applicable. Even where the author has received the product for free for review purposes, the reader must be made aware through an appropriate disclosure.

Similarly, the author of a fake article (perhaps the riskiest form of marketing) must disclose prominently and explicitly at the top of the piece (or other suitable location) that the article is not from a real news organization, that it is not a real article but, rather, that it is a marketing device and what, if anything, the author stands to gain by virtue of the products or services promoted therein.

The draft guidelines also contain provisions that are applicable to the use of testimonials. First and foremost, fake or fictitious testimonials are strictly prohibited. Second, when using a testimonial, the blogger or writer must not edit or change it from the original in any material way (outside of correcting grammatical or spelling errors, and cutting down the size when doing so does not distort the testimonial itself). Lastly, where the provider of the testimonial is paid or stands to gain by providing the testimonial, this fact must be disclosed to the reader in close proximity to the testimonial itself.

In conclusion, the sense of community, group interaction and citizen input facilitated by blogs, social networking sites and other new media, when properly utilized, can greatly enhance your business (whether you are an advertiser, marketer or both). However, in order to steer clear of regulatory scrutiny, you must take steps to ensure that you are not deceiving consumers by pretending to be an Average Joe with an opinion when you’re really just utilizing a different medium through which to make your sales pitch.

Please note that this is only a brief overview of some of the legal issues surrounding new media advertising on the Internet. Remember to obtain guidance from a licensed legal professional prior to engaging in such advertising.

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