Many people start blogs as a way to make money. For some it’s a little extra cash which they hope will cover the cost to maintain a blog, whereas others are going all out and are making blogging a full time job.
And, as the popularity of blogs increases, so does the exposure they are getting.
In some cases, the exposure comes in the form of higher traffic numbers, increased comments, better earnings, and offers from advertisers to review and/or promote a product.
Unfortunately, as of December 1, 2009*, with those free offers comes a new ruling from the Federal Trade Commission (FTC) (a US based government agency whose duty is to protect consumers from fraud).
Today’s Lesson
The hot topic in the last few days has been the release of the FTC announcement stating bloggers will have more responsibility when it comes to endorsing a product.
To quote a section of the article, it reads,
…The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service….
Needless to say confusion has arisen from this announcement, so Edward, of Edward Champion’s Reluctant Habits went to the source and then posted an excellent Interview with the FTC’s Richard Cleland
In part, the interview states,
In the case of books, Cleland saw no problem with a blogger receiving a book, provided there wasn’t a linked advertisement to buy the book and that the blogger did not keep the book after he had finished reviewing it. Keeping the book would, from Cleland’s standpoint, count as “compensation” and require a disclosure.
After reading the interview, it’s obvious there are still lots of scenarios that need to be considered, but in the meantime, bloggers who do product reviews need to be aware of the upcoming changes in the law.
Now that the FTC has its sights set on the activities of bloggers, the next watch dog could possibly be the IRS (Internal Revenue Service).
What’s a blogger to do?
- Don’t seek to make money with our blogs and stay away from product and/or book reviews
- Become vigilant with our record keeping via disclaimers, disclosures and documentation
After all, we never know when “big brother” will come a knocking.
Today’s Assignment
If we’re showcasing books or writing reviews on products, do you think we should start looking at our blog as a business and documenting it as such?
Knowing you may have to disclose your affiliation with an advertiser and/or book author, will you continue to do reviews on your blog?
If you were audited by the IRS, could you show documentation for the income and expenses of your blog?
Let’s talk about this. Together we should be able to come up with great solutions.
~Barbara.
The internet and Twitter is all abuzz with regard to the FTC Guidelines and Announcements. Here’s a small sampling of what’s currently out there:
- *FTC Guidelines for Endorsements An 81 page PDF
- Bloggers to be Fined Up to $11000 for Not Disclosing Payments by Vered at Momgrind
- More FTC news on Techmeme
- FTC says bloggers must disclose payments and freebies by Mark Ghosh on Weblog Tools Collection
- FTC to Fine Bloggers up to $11,000 for Not Disclosing Payments at Mashable
- FTC says bloggers must disclose payments and freebies when reviewing products or risk being fined $16,000 by Etan Horowitz on Etan on Tech
I do keep records because I file all blogging income with my taxes. It’s not a ton, but I want to be able to deduct any legitimate business expenses. I keep pdfs of all receipts and invoices and log them into a spreadsheet. This is sufficient for the amount of business I do.
If anyone has an answer, I would be curious if the value of products received for review counts as income.
Pretty much every advertiser or affiliate I’ve worked for issues that IRS form whose name escapes me, although some will only do so if your earnings were over a certain amount.
I do think it’s prudent to look at your blog as a business if that’s what you intend it to be. That said, it seems a shame if somebody who is running purely a hobby blog is required to keep up with a lot of record keeping just because they get the occasional review freebie.
I will continue to review books and other products that I might receive income from and disclose any links or relationships that might bias my review.
.-= Check out Tracy´s awesome post: Who wants to be rich and happy? =-.
Hi Tracy,
That’s a great idea – to put your income and expenses on a spread sheet. For those who work with software such as Quickbooks or Money could use those, as well.
You’re right. When we make a certain amount from one advertiser or affiliate program, we will get a form called a 1099. I believe the current limit is anything over $600.00. Then that form has to be filed with our taxes. Since they normally don’t withhold taxes from those payments, that income gets added to our gross income and may affect our tax liability.
I haven’t done a spondered or paid review yet, I just started blogging in May. I notice many blogs I follow already disclose if the review is sponsered or not, mine have been purely a review from products I bought myself. I just started signing up with review sites and will notify my readers how I was compensated. If I’m compensated I wouldn’t do a good review if the product wasn’t just that,Good!
Hi Jennifer,
I agree. Full disclosure is the best way to cover our actions.
I’m with you on the review of products that aren’t good. It’s best to be honest with our readers. If we’re not, we would soon lose credibility and could lose readership, as well.
Hi Barbara
Thank you so much for posting this, otherwise I would not have known probably for some time still, or I guess I ran into it somewhere in the future.
I have one big question about this, which I am not too sure of, is this law only for the US? Or is it international?
I do some reviews on two of my blogs, and while some do include a free book being sent, most are products that I went to the store and bought and then decided to tell people about – mainly because I am always on the look out for natural products and those that pose as such but are really fakes.
So I really wonder how this will affect me being based in Canada if at all. Like I said b/c most of the products have no connection to the supplier, yes I will continue to do reviews.
In the end – this is of course a great tactic from them to try to get at people claiming any money made – I guess in the end the government wants a piece of everything we got, get and sometimes even don’t have yet 😉
.-= Check out Evita´s awesome post: Infuse Happiness Into Your Work Day With Happy At Work Action Day =-.
You’re welcome Evita,
That’s an excellent question. With the FTC being a US based governmental agency, I’m under the impression the new laws will only affect the bloggers who are in the US.
You’re second point is great too. By us disclosing we got a product for free (to review), does that mean we’ve entered into some type of barter agreement and must put a value on that “free” product? Having read parts of the 81 page PDF and the other posts I’ve listed at the bottom of this one, I can see how this new ruling could open a bucket of worms.
With regard to products we buy and review, someone asked how do we prove we bought the product and didn’t get it for free? Do we need to keep our receipts as proof? Someone suggested creating a link to a copy of our store receipt in our post.
The more I read, the more I could see how product reviews could end up being more of a pain than what we get in return.
I don’t think I need to worry about it. My blog isn’t monetized. I don’t take money to promote anything. I blog about my passions as do lots of people. My posts are varied as well and not merely reviews or promotions.
I think this new legislation is meant to protect the consumer and I think it is a good thing to have these measures in place. It’s hard to tell sometimes which blogs are commercials so this would help those readers.
That’s my 2 cents.
.-= Check out Chase March´s awesome post: My Prized Autograph from Claire Danes =-.
Hi Chase,
With you being in Canada, I don’t think this affects you either.
But you’re right, some blogs look more like commercials than blogs. For readers landing on those sites disclosure would be a good thing.
Hi Barbara. I appreciate you bringing this to my attention. I have no problem with the regulation. It seems to be commonsense and more about being upfront than anything else. This all seems like a lot of trouble over what “should” already be happening. Why wouldn’t people be disclosing this information already? Am I naive? I’ve read the FTC Guidelines; maybe I need to do more reading. But I’m kinda shaking my head right now — perhaps I don’t get the full picture yet…
.-= Check out Davina´s awesome post: 8. A Trail Through Thyme =-.
Thank you Davina,
I hear you. Disclosure should come naturally either in the form of a statement in a blog post, or in a disclaimer page on a blog. I’m guessing the FTC felt they had to revise their rulings as blogs have become such a great (or in some cases, not so great) source of information to the public. And as we all know, if the information isn’t fact checked, the consumer can get “hurt” in one way or another.
Hi Barbara – We’ve treated PassingThru as a business entity from the get-go. We knew we’d be incurring expenses associated with it, and that there would be an imbalance of income against expenses, as with any business. Losses as well as net income are just as important to the tax man and the tax picture. I’ve got no problem with the disclaimer regulation. We’ve always been fully disclosed, and the trust/authenticity metric emerging out of the blogosphere demands disclosure and transparency. Great topic, thanks.
.-= Check out Betsy Wuebker´s awesome post: THROUGH A GLASS GRIMLY, PART 3 =-.
You’re welcome Betsy,
That was smart on your part to treat your blog as a business right from the start. Not only do you end up keeping the necessary paperwork (receipts, etc), but when we think of a blog as a business, we are more apt to act responsibly, knowing what we put out there determines how we’re viewed online.
My blog IS a business. I’m disclosing anyway. But the FTC requires disclosure on each tweet and Facebook posting too, which is a bit more challenging. Also, I worry about small bloggers who will not be aware of these rules. Although the FTC will likely not go after them.
.-= Check out vered | blogger for hire´s awesome post: Working Moms are Bad Moms =-.
Hi Vered,
First off, thank you for the sharing the great article on this topic.
I’m not sure how those of us on Twitter and Facebook will be able to disclose on each posting, but did notice you added an FTC disclaimer to your profile pages. That’s a good start.
I agree, many small bloggers may not be aware of this. Although it may not affect them, I’d hate to see them get in trouble.
Really great post… It’s great to read what others think and I’m looking forward to giving this some thought in relation to my own blog.
.-= Check out Positively Present´s awesome post: jump in: the pool of positive thought =-.
Thank you Dani,
Glad you enjoyed the post. If you have a chance, check back later. I’m sure the additional comments will prove to be interesting, as well.
Thanks for the very informative post. It’s really nice to read others ideas. Actually i been do blogging for few months and it’s quite fun updating my blogs.
.-= Check out Kris´s awesome post: Motorolla Walkie Talkie =-.
You’re welcome Kris,
There’s a lot of great ideas in the comments, isn’t there?
If is is a business treat it as a business. What is the difference?
The book review is an interesting one, but if it is part of your business it is an expense and when you buy it you deduct it as an expense.
Do not get it for free, buy it as it is part of your business. No book, no product to earn your money with.
You do not get the products for free that you put in your shop window, do you?
It is great to see you bringing up all these questions and issues and I love to see what is coming up.
As always, you keep us on our toes, thanks Barbara.
.-= Check out Wilma Ham´s awesome post: Accessing the wealth that has me BE a wealthy base camp. =-.
You’re welcome Wilma,
I agree, the book review example is an interesting one (did you read the interview? Edward asked the guy from the FTC great questions).
I think for those bloggers who buy a book and review it, there shouldn’t be an issue. But for the bloggers who get dozens of books (for free) from a “supplier” for review, the FTC is seeing that differently.
And…I haven’t seen anything written about ebooks yet, so I don’t know if they just categorize them the same (as books), or if electronic media is treated differently.
To be honest, although they say the ruling is going into effect on 12/1/09, it appears a lot of the kinks aren’t worked out yet.
Hi Barbara!
Interesting post – and thanks for this information. I signed up with Amazon Associates so I could put links to buy books I occassionally review but I bought the books myself. Yes I get a cut if someone actually uses the link – hmmm, I’ve made .40 cents so far in 8 months. I hardly think they’ll be comin after me – or will they? I’m not in a business on my blog. It’s “recreational”.
This reminds me of the hoopla on Ebay about 10 yrs ago when “they” realized people were actually making a LIVING off of what they sold and the tax man cometh.
.-= Check out suzen´s awesome post: A Pace of Grace =-.
You’re welcome Suzen,
I like your comment – how you made 40 cents so far. I use Amazon and made $12 in two and a half years. LOL
What you said may be very close to the truth. What happened with Ebay is a perfect example. I never did hear how they resolved that, but for some bloggers, they too may be seeing the tax man.
I’ve been full disclosing now for quite awhile.
I’m in hopes the new regulations pounces on the stupid Dazzle white/teeth whitening scams….now THAT would be worthy indeed.
.-= Check out Barbara Ling, Virtual Coach´s awesome post: Today’s Humor – Office Crewing Wannabes! =-.
Hi Barbara,
LOL, I hear you about regulators coming down on some of the scams that are out there. All we can do is hope.
I may sound daft, but what about Amazon bookshops and sidebar links? I assumed that folk would know that the only folk who can have those on their sites are those with Amazon affiliate links. It didn’t occur to me to tell readers that I make a few pennies if someone clicks on an Amazon link, and it feels like an insult to folks’ intelligence to draw their attention to it. Thanks for continuing this discussion, Barbara. It really put the wind up me when I read about it over at Vered’s. I’d also like to know what to do if someone sends us a free ebook and we like it so much we want to tell others about it; we can’t send those back.
By the way, I love the idea of keeping a spreadsheet for online income. So far, I rely on my Paypal and Amazon accounts for that. I also love the idea of making it clear on my Welcome page that there are a couple of affiliate links in my sidebar.
.-= Check out janice´s awesome post: Berries and Birds =-.
You’re welcome Janice,
Don’t feel bad. I don’t know if anyone understands what is expected of bloggers yet. Although the FTC does discuss some scenarios in the PDF and in the above mentioned interview, nothing is in stone yet. It will be interesting to see what the new regulation ends up including.
Putting a statement on your welcome page that your blog includes affiliate links is a great way to alert your readers to the fact you may make a small percentage if they click and/or buy via a link on your blog.
You remind me to consult our accountant about this to see what can and cannot be claimed as to blogging for 2009. Is my “labor” deductible?
I’ve done 3 book reviews, but as favors for friends. I was actually thinking of offering to do paid book reviews but I’m not sure if it would pay as much vis-a-vis more music promotion.
Good food for thought and action here, Barbara! Thanks.
.-= Check out Jannie Funster´s awesome post: Only 24 Shopping Days Until Halloween! =-.
You’re welcome Jannie,
Yes. If you’re getting an income from blogging, be sure to check with your accountant as to what you can deduct and what you need to claim as income.
I’m not aware of how the paid book reviews work. Keep me posted if you decided to do them.
Hi Barbara,
This news is not surprising to me and it does make sense from a business standpoint. Being that the majority of bloggers start a blog as form to make money, it is only logical that standard business laws be applied to blogs.
Actually, I am somewhat surprised that bloggers do not regard their blogs as a business. In order to do something well, it has to be taken seriously and so for me, it is a given that a blog be run like a business.
As for IRS audits, the IRS usually audits those that claim high amounts of deductions and those are considered red flags. Plus, to claim deductions, a blogger would have to earn above $400, if they are claiming to be self-employed.
.-= Check out Nadia – Happy Lotus´s awesome post: Mustard, Money, and Fear…What is Going On? =-.
Hi Nadia,
You’re right. If we start a blog in hopes of making money from it (with ads, freelancing, etc), it should be taken seriously and treated like a business.
That’s true about sending IRS red flags if we have a huge amount of deductions and little income. Thank you for also sharing the threshold for earnings if we claim to be self employed.
I read the same article it is interesting to find bloggers hadn’t been taxed.
.-= Check out BunnygotBlog´s awesome post: Come To The Carnival =-.
Hi Bunny,
It will be interesting to see where this new ruling leads. Although bloggers do have to claim any 1099 income, I wonder how IRS looks at freebies we might receive.
I’m glad to have know this new development. Although I’m not yet into endorsing I believe this will affect my future plans. Thanks! 🙂
.-= Check out Walter´s awesome post: Crippling habits people embrace =-.
You’re welcome Walter,
Keeping abreast of what’s expected of us bloggers is important. Although much of the stuff may not affect us, like you said, it good to know about it.
Before a few days ago, its something I never thought of. I do earn money though Google Adsense, but since I’m still a few dollars away from my first payout, I never thought about it. Of course I file taxes for my Green and Chic web store, but haven’t given the blog much thought.
I have never received cash payment for any of the reviews I have written and only received products one time to review.
Time for me to do some homework!
.-= Check out carla | green and chic´s awesome post: Green and Chic Store Makeover & SoLi Design Studios Review =-.
Hi Carla,
It sounds like you’re on the right path if you’re already filing taxes for your Green and Chic website. Adding the blog to the mix shouldn’t be too difficult.
Even for the least business minded bloggers like me, I think it will be interesting to keep a record of sort as Tracy suggested. Hidden costs do stack up in blogging. For example, the internet subscription, costs of having your theme tweaked, web hosting fees, renewal of domain reg, etc. And we’re not even talking about the social cost of our blogging – can we claim it as refundable to our excitable tax men? Ahehehe.
If for example I earn from my Thesis affiliate link – do I break even after deducting my blogging costs? Pretty interesting. But I’d not obsess about it too much. Just might dampen my mood to write more.
Every day blogging for some of us give us the courage to give something of ourselves in every post. That is disclosure in itself, eh? Now they just have to watch where our cents are coming from. Here’s hoping the big business bloggers keep em busy.
.-= Check out jan geronimo´s awesome post: 10 Blog Lessons I Did Not Learn From Darren Rowse =-.
Hi Jan,
Your comment makes me laugh. I love your sense of humor, “Here’s hoping the big business bloggers keep em busy.” Hear ye, Hear ye! 🙂
You’ve raised a good point. We often forget about those little charges that can add up. And, how do we put a price on our time? That’s a tough one, isn’t it? The last time I divided out what I made from ads by the number of hours I spend on blogging activities, it was an hourly rate of pennies.
But what can we say? Most of us bloggers would happily blog for free.
Holy Cow! Why can’t the government just stay the hell out of my business? Regulation always creates bureaucracy and a much greater waste of tax dollars than the revenue they might generate from fines.
I’ve always respected the bloggers who make it clear when they are receiving an affiliate commission form a product. But I don’t think they ought to apologize for making money. For example you have built up a following here by your hard work and community building. Thus you deserve to profit from endorsements if you choose to.
As bloggers we have the opportunity to be merchants of commerce and we ought to cash in. Keeping the money flowing is good for all.
.-= Check out Tom Volkar / Delightful Work´s awesome post: Is Your Business Authentic? =-.
Thank you Tom,
That’s true. As bloggers we do have the opportunity to be merchants, and we should not have to apologize for wanting to make money with our blogs.
Being self employed, I know what you mean about government regulations. Sometimes it can feel overwhelming.
Hi Barbara,
This ruling makes sense. I’m not making money off my blog at this time, though dreams of being as big as Dooce (http://www.dooce.com), for example, and supporting both my husband and I at home by my blog’s ad revenues alone are outrageously fun to imagine!!
Thank you for keeping us posted on all the latest legal stuff related to blogging.
.-= Check out Jodi at Joy Discovered´s awesome post: Opinions, Gratitude and Bridging the Gap =-.
You’re welcome Jodi,
Not only is it fun to imagine being as big as Dooce, but she is also a great example of what we can do with our blogs if we put our mind to it.
BTW: Did you see her when she was on Oprah?
Once again something that is working is hurting someone else who might not be evolving.
I have always declared my blog as part of my business and kept amazing records and an accountant.
After an hour interview with the “church” committees this week…they were excited about my blogging, workshops, and group work out – especially with women vets….then they said….why are you not in church everyweek? You must have a spiritual practice….they did not get it….and the church does not meet my spiritual needs or pay me….ever.
Amazon is the only place that pays me right now…I purchase the books I review and only get a few cents if someone purchases something off my site. The military does not pay me….
It is important to be aware of these things and Thank you Barbara for educating us in your superior classroom….
but I think someone is behind this like newspapers and marketers.
Churches and Governments are always slow responders and understanders…
.-= Check out Patricia´s awesome post: Thoughts about Microwave Ovens! =-.
You’re welcome Patricia,
That’s smart on your part to consider your blog as a business. Keeping accurate records (even if we don’t make a lot of money) is a great practice to get into for when the day comes that we do.
I know what you mean about Amazon. They don’t pay much, but every penny does add up.
Hang in there, Patricia. I think we can all have a bright future.
I see it as an early shot in a war on controlling bloggers and the internet. I see it as a stab at the rights of free speech. Bloggers have interactions and conversations. The government wants to interfere with that?
If scams are a problem, educate people on them. If trust is an issue, learn to research the writers to see if they are trustworthy. If blogging is a business, learn to run it accordingly. NONE of these require “Play nice or else, children” interference from the government.
.-= Check out Lori Hoeck´s awesome post: How to deal with the bully and bullying — a senior karate instructor’s view, part one =-.
Hi Lori,
After reading Patricia’s comment and now yours, you’ve both raised the issue of who is behind this new regulation. With the internet being so powerful and news getting out so quickly on blogs and social media sites, it must raise concerns to those in the government.
Regulation is often used as the first line of defense, but as we all know, it would be mighty hard to police the whole internet.
Hey Barbara,
Late to the party – 😉 Hehe. Sorry I could not resist – just read your other post.
I figure I’ll continue to do what I do. I may consider putting some sort of in-your-face-ftc smart-ass disclaimer but otherwise I guess if our government is going to squander valuable resources on these kinds of things, then so be it – I’ll deal with them if and when I have to.
I mean really. With all of the corruption and scams out there – just use Medicare as an example – should this even be an issue? I am fearful of where this country (US) is heading. Priorities are completely out of whack.
George
.-= Check out George Angus´s awesome post: Apocalypse Now – The New Blog of The Week =-.
Hi George,
You’re funny. But as you know, the party at BWAB never ends. 🙂
I have to agree. Although this new ruling may be good for the end consumer, it does seem like the time, energy and money could be better spent on issues of more importance.
As you may have seen, with the one and only contest I have ever had (still going on), I completely disclose when I’m given gifts to do a review. It just makes sense to me, and I feel everyone should do it.
That being said, I think people who know me (or know my blog), know I speak my mind when it comes to products and services, so I would hope they would realize that even if I was given something for a review, I will be honest in that review.
It sounds like this ruling has more details than I realized, however, so I’m off to do a bit of a review. Thankfully, my blog is mostly personal and I don’t use it for income purposes at all.
.-= Check out RC – Rambling Along…´s awesome post: Birthdays and barcodes =-.
Hi RC,
I saw your contest (was going to enter but we don’t have any AJ Wright stores even remotely close) and you did a fantastic job of disclosing your affiliations.
As for reviews, by being honest we not only help to keep consumers informed but we also protect our reputation.
Thus far, I’ve only reviewed things in articles and such that I buy myself and have read, used…and own!
As for affiliate links, most of the reliable places have ways you can print out the info if it ever reaches an amount that is taxable. I do print save e-mail receipts for blogging related expenses.
I guess business is business, and income is income. Taxes, taxes everywhere!
Karen
.-= Check out PeacefulWmn9´s awesome post: Inspiration in the Sky =-.
Hi Karen,
Keeping copies of our blogging receipts is a great way to document what we spent. That way if our income reaches the threshold, we’ll have written proof it wasn’t all profit.
Mr. Cleland seems to consider all bloggers to be gutter dwellers who must be regulated into doing our work ethically. I am not sure how they will regulate or what the legal language will eventually look like. Here is a great article to share with your readers. http://bit.ly/M5IlU Thanks for keeping the conversation alive.
.-= Check out Gabriella´s awesome post: SEO Techniques: Does Any Optimizer Really Know What To Do? =-.
You’re welcome Gabriella,
I hear you. All bloggers all of a sudden just got thrown into the same pot whether we’re blogging responsibly or not.
I agree. It will be interesting to see how the final “guide” ends up reading.
Hi Barbara .. it does all seem a little amazing – but if we’re good citizens, we’re probably keeping records anyway and know where we’re going.
All regulators have to find something to justify their existence – if it’s painted yellow – statutorily now you must paint it green ..
Bloggers – we need to become rich, then we can have someone else deal with these irritations of life, but just be aware of them and ensure we have enough reserves?!
Thanks- Hilary Melton-Butcher
Positive Letters Inspirational Stories
.-= Check out Hilary´s awesome post: What can you read from Kitchen Utensils? =-.