What Would the FTC Say about Paid Links?

Cara Bowles    By under Link Building.

What Would the FTC Say about Paid Links? 1(Please note, I'm not a lawyer.)

As you probably know, Google's Matt Cutts recently posted a video about what they consider a "paid link." It addressed the gray area where, say, you might buy a blogger a beer, and soon after that they write a post about you containing a link. The takeaways from the video were pretty straightforward:

  1. If you explicitly exchange money for links, which is evidently what happens in "99.9 percent of cases," it's a no-brainer.
  2. How much is the exchange "like" money, and is its financial value comparable to the black-market value of a link?
  3. Are you gifting a product, or just loaning it? It's common to loan products to review sites so that they can give adequate reviews, but giving them the product for free is not so common.
  4. Intent. A gift isn't really being sent in exchange for a link if there's no expectation that a link is going to be given.
  5. Surprise and relevance. A movie blogger wouldn't be surprised if they were given free access to a movie, but they would be surprised if they got a free iPad.

What really caught my ear, though, was when Matt Cutt's mentioned that Google's policies pretty much mirrored the FTC's policies. This is something a surprising number of SEOs aren't aware of: that their link building strategy could be violating FTC law.

So what would the FTC have to say about your link building strategy?

On Disclosure of Material Connections

In 2009, the FTC updated their "Guides Concerning the Use of Endorsements and Testimonials in Advertising." The Guides hadn't been updated since 1980. So what does the FTC have to say?

According to the document (PDF link):

When there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.

Here's where a lot of digital marketers are already on unstable ground. Forget SEO Google. If you're paying somebody to say something nice about you, in any context, you need it to be clearly disclosed. Otherwise, you're violating the law.

But does this really apply to links?

This is an interesting question, and as far as I know, it's never made its way into the courts. If we buy into Google's opinion that a followed link is an endorsement, then yes, a paid link would violate the FTC Guidelines.

But what if an SEO were to approach a blogger and offer payment in exchange for a link, but with no expectation of positive sentiment? What if I emailed a blogger and said "Hey, I've got $500. I'll send it to you if you write about me and point a followed link to my site. I don't care what you write. It could be a scathing review, as long as it links to my site."

This is terrible marketing, in my opinion, and it clearly violates Google's guidelines, but Matt Cutts might be overstepping his bounds in saying that their guidelines pretty much follow the spirit of the FTC. I'm not quite sure how a situation like this would play out in the courts.

Still, to be safe, let's go ahead and adopt the assumption that a followed link is an endorsement, regardless of the emotional sentiment surrounding it. If we operate under that assumption, what would still be A-OK in the eyes of the FTC?

Here's an example given in the document:

A film star endorses a particular food product. The endorsement regards only points of taste and individual preference. This endorsement must, of course, comply with § 255.1; but regardless of whether the star's compensation for the commercial is a $1 million cash payment or a royalty for each product sold by the advertiser during the next year, no disclosure is required because such payments likely are ordinarily expected by viewers.

And here's another one, which I find particularly interesting:

Assume that instead of speaking about the clinic in a television interview, the tennis player touts the results of her surgery - mentioning the clinic by name - on a social networking site that allows her fans to read in real time what is happening in her life. Given the nature of the medium in which her endorsement is disseminated, consumers might not realize that she is a paid endorser. Because that information might affect the weight consumers give to her endorsement, her relationship with the clinic should be disclosed.

According to the FTC, an endorsement made by a celebrity in a commercial doesn't require any disclosure, but an endorsement made by that same celebrity on a social network does need to be disclosed. The argument is that media like Twitter and blogs are more intimate, and we don't necessarily expect these to be paid endorsements.

So if we assume that a followed link counts as an endorsement, paying for links violates the FTC guidelines.

So what about "fuzzier" forms of payment? Here's one great, relevant example:

A college student who has earned a reputation as a video game expert maintains a personal weblog or "blog"...As it has done in the past, the manufacturer of a newly released video game system sends the student a free copy of the system and asks him to write about it on his blog...Because his review is disseminated via a form of consumer-generated media in which his relationship to the advertiser is not inherently obvious, readers are unlikely to know that he has received the video game system free of charge in exchange for his review of the product, and given the value of the video game system, this fact likely would materially affect the credibility they attach to his endorsement. Accordingly, the blogger should clearly and conspicuously disclose that he received the gaming system free of charge. The manufacturer should advise him at the time it provides the gaming system that this connection should be disclosed, and it should have procedures in place to try to monitor his postings for compliance.

Here's what it comes down to: a lot of the readers won't assume that the blogger is being compensated, and if they knew he got the video game system for free, it would change how they look at the whole thing. It's also important to note that the manufacturer needs to overtly tell the blogger to disclose that he received the gaming system for free. The onus isn't entirely on the blogger.

Reading the FTC examples, the overall themes seem to be:

  • If a significant portion of the audience wouldn't expect there to be any financial compensation, it needs to be disclosed.
  • If knowing about the material connection would influence how people interpreted the endorsement, it needs to be disclosed.
  • If no opinion or representation is being made, it doesn't count as an endorsement, and the financial exchange doesn't need to be disclosed. (This is where a purely "neutral" paid link seems to live on gray legal territory, even though it's clearly against Google's terms of service.)
  • If the financial exchange has no reasonable impact on the endorsement, it doesn't need to be disclosed. They gave the example of a restaurant patron being asked questions about the food when a hidden camera was present. Even if the patron was paid for their presence in a commercial, it wouldn't need to be disclosed, since they stated their opinion before knowing about the compensation. In contrast, even if the patron wasn't paid, but they knew that what they were saying could end up on TV, they would need to disclose this.

Virtually all endorsements will involve some kind of value exchange. As far as the FTC is concerned, it comes down to how much that value exchange might influence the endorsement, and whether it's an expected part of the medium in question.

So what would the FTC say about paid links?

  • If the sentiment of the link is neutral, this is a legal grey area that's never been fully explored.
  • If the financial value isn't comparable to the market cost of an advertisement on the site, it's probably fine.
  • If the material relationship wouldn't reasonably influence the audience's perception of the endorsement, it's probably fine.
  • Even if no money changes hands, if the webmaster is incentivized to place the link in a way that would alter the audience's perception of it, the incentive needs to be disclosed.

Oh what a tangled web we weave.

Image credit: ~Ealasaid~