TechWag

: Image via CrunchBase

After the major blowout on the Gillmor Gang about reporting a conflict of interest, and the issues that have arisen over Social Spark, Payperpost and Izea, the FTP according to the AP is planning on going after bloggers if they do not say that they are taking compensation for a blog entry or took a “freebee” as a way to generate buzz for a product. While many bloggers say that the post is compensated (at least the better ones do when there is not an explosive blow out on the issue) at some level, this adds a level of complexity that is going to tag a number of bloggers who work purely on a compensation basis.

The AP article is on Yahoo news, and the link is here, but due to restrictions on AP content (and that it will expire in about a week from this link we are providing) we cannot quote the article. It is also here on Business Week.

In the mean time, this is going to be another issue that bloggers have to deal with, especially when dealing with compensation issues. Many blogs do not see a dime in revenue; few see six figures or better. All blogs in some form are capable of getting some form of revenue via systems like Izea Payperpost. The bigger blogs will often get free product to try out from the larger companies who understand that the word of the top bloggers can help launch a product amongst the digital elite/first adopters.

This kind of sponsorship is not unusual, and has been a business standard for blogs seeking income beyond Adsense or advertising based on pay per click. Many bloggers have given up on advertising revenue as a way to focus on sponsorships or other forms of compensation. Often sponsorships can be lucrative, but the blogger must have an excellent page rank, a large audience, and be industry recognized. Unfortunately, though not all bloggers report the amount of compensation that they get, nor do they report that the articles are compensated in one form or another. This is where the conflict comes in, and where FTC oversight could be problematic for bloggers, from the small to the larger bloggers who do not report compensation, or report that the article/video is compensated will run into problems. Oversight though should mean that the FTC at some point is going to issue a set of guidelines, ones that are going to be published, or at least put out for comments.

The problem is going to be in how bloggers report compensation, one other issue not touched upon is the idea of taxation, like many prizes in game shows, and free product can be taxed as it has a tangible value. Most bloggers do not realize that these can be taxed although I am not an accountant, taxation of goods but there is a guide on the IRS web site (PDF LINK) that might help people who are curious about the issue. In all cases, you should work with an accountant if you think there is a tax liability for the free products you get and that you keep. In the mean time, the FTC is a government agency, meaning they will move slowly, and there will be an option for people to issue comments on the policy changes. If you are interested in this issue, it might be time to follow what the FTC is planning, and work out a way that it will not seriously damage your blogs economic model.