updated 12/20/2006 5:39:13 PM ET 2006-12-20T22:39:13

A company that helps advertisers connect with bloggers willing to write about their products for payment will now require disclosures amid criticism and a regulatory threat.

Before this week, advertisers were barred by PayPerPost Inc. from telling bloggers they can't disclose the sponsorship, but bloggers were able to decide on their own whether or not to do so. Under the new policy, bloggers must disclose that they are accepting payment, either in the write-up or in a general disclosure policy on the blogger's Web journal.

"Ever since we launched, there's been a lot of controversy about disclosure," said Ted Murphy, PayPerPost's chief executive.

Besides other bloggers questioning the ethics of receiving payments without disclosure, the Federal Trade Commission said in a Dec. 7 staff opinion that failure to disclose could, in some cases, violate consumer-protection laws on deception. The FTC did not single out PayPerPost or say whether it would launch any investigation.

David Sifry, founder of the blog search site Technorati, praised PayPerPost's move.

"Overall, this is an encouraging and long-awaited change," he said. "I think that people have learned that without trust, all posts become suspect. ... By encouraging honesty and transparency in sponsored posts, PayPerPost adds (some) clarity to the waters they muddied when they launched six months ago."

PayPerPost lets advertisers tell bloggers about word-of-mouth marketing opportunities such as a new gadget or shoe. Advertisers set a price of $5 or more per post, and willing bloggers respond. The better the price, the more quickly spots fill up. The Orlando, Fla., company brokers the payments.

Bloggers are free to trash products or write neutral reviews, but advertisers can specify whether they pay only for positive write-ups.

Advertisers include News Corp.'s Speed Channel and OfficeMax Inc., Murphy said.

PayPerPost may lose some advertisers with its new policy but believes the transparency will be better in the long term, Murphy said.

"Your bigger advertisers, clients that we really want to go after, the Fortune 500, the Fortune 1000, we saw they were requiring disclosure anyway," he said.

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