In December, the FTC released revised Guidelines Concerning Use of Endorsements and Testimonials in Advertising. I think it’s important to address specifically the FTC’s requirement that companies and endorsers disclose material connections. That’s why I will be writing a series of blog posts about best and worst practices and the impact the regulations may have on your company.

First, cases from Kmart and Wal-Mart illustrate how companies and bloggers have chosen to or not to disclose material connections and payments for endorsements in the past.

Kmart generated significant positive word of mouth from its 2008 holiday season blogger campaign. Six bloggers received $500 gift cards to post entries about their experiences at Kmart, positive or negative. Each post was identified as a sponsored post. Each blogger was able to give away an additional gift card to one of their readers. For readers to enter the contest to win a $500 gift card from the bloggers, the reader had to promote the contest and Kmart to their Twitter followers or post a blog comment with the item they wanted most from Kmart. This was done more than 3,000 times on blogs, yielding 600,000 network connections. It was also tweeted more than 3,000 times on Twitter which generated considerable discussion.

In contrast, Wal-Mart created a stir with its sponsorship, through Working Families for Wal-Mart, of a blog where disclosure was not apparent. In 2006, a couple made a cross-country trip across the U.S. in an RV, parking at Wal-Marts for free. The couple started a blog called “Wal-Marting Across America”, which frequently posted stories of Wal-Mart employees they met along the way. All of the featured Wal-Mart employees only had positive things to say about the controversial corporation. Wal-Mart denied hiring the couple, but it turned out that Working Families, which received funding from Wal-Mart, decided to sponsor the couple’s entire trip when it learned about their plan. Working Families paid for the couple’s flight to Las Vegas to pick up the RV, extended the trip’s duration, provided an RV emblazoned with the Working Families logo, paid for the gas, set up the blog and paid the woman to write blog entries. While there is a Working Families banner on the blog, nowhere does it disclose that Wal-Mart sponsored the trip.

The differences in disclosure between these examples (and many others) illustrate why the FTC may have decided to create regulations around endorsements and testimonials.

The Vandiver Group is working with the Word of Mouth Marketing Association (WOMMA) to help the industry understand and apply these new guidelines. Donna Vandiver serves on the Membership Ethics Advisory Panel and you can learn more about the guides at the WOMMA web site.

Check in next week to discuss the impact the regulations may have on your business.