Payola, Extortion and Market Correction

For the last two weeks, I’ve been mulling this concept of market correction as it pertains to the web. There are a variety of stories that have been related, in addition to signatory bubble characteristics that I have observed for some time, but it’s all coming into a lot more focus as time has gone on.

A market correction is an economic term describes a natural occurrence when a certain market sector becomes “over sold” or hyperinflated, or when a sector becomes irrelevant to the market and is put out of its misery, or re-capitalized. It is a “coming to center” that occurs naturally when there is an imbalance in the system.

We’ve seen macro-economic market corrections in the form of the housing and financial market implosion last year or the dot-com bust of the late 90s. Last year, around this time, the stock market gave up half of its value in a correction that wreaked havoc in every market sector. Even the startup market based largely in Silicon Valley felt the effects as leading venture capital firms started informing portfolio companies of looming doomsday scenarios.

Right now, I’m seeing another kind of market imbalance looming larger as a bubble seeking market correction and that is in the area of payola. Bloggers and social media people, anchored largely, but not at all exclusively, by the mommy-blogger sector, have taken and accepted “bribes” (let’s face it, that’s what these things are) from corporate America to provide coverage of their products. These things come in the form of reviews and can include anything from household cleaning supplies to all expense paid trips to New York, Los Angeles… even London.

There seems to be no limit on what corporations will do because they feel they have to win the favor of a small, but vocal minority group. So corporations, thinking this is the way to do business in the new world, and not understanding that the same principles that have always guided their PR efforts should apply to bloggers as well, willingly open their pocket books to garner that good will.

In a vacuum, the idea that the world has changed due to blogs and social media and thus the way to do business has changed too, makes some sense. But because nature abhors a vacuum, we must look at the economic principles that will force a market correction and will assist corporations back to center for the better of the entire market.

111286829_c24b4c7b31This will not go on because at some point, companies will have to realize the ROI involved in “buying off” bloggers and how they represent themselves and the companies they get paid off by, are not worth the dollar drain that will come from it. Bubble burst.

When this happens, and it will happen soon, the ship will return to center. This does not mean bloggers won’t get to do reviews, but the reviews will not be because of payola, but legitimate business-minded ethics guidelines that have roots in traditional journalism.

The New York Times spells out their guidelines on review material:

76. Staff members who borrow equipment, vehicles or other goods for evaluation or review must return them as soon as possible. Similarly, items borrowed to be photographed, such as fashion apparel or home furnishings, should be returned promptly.

77. Automobile reviewers should carry out their testing expeditiously and return the vehicle promptly. Any period longer than two or three days must be approved by a responsible newsroom manager. A reasonable amount of personal use is permissible if that use contributes to the review.

78. Staff members may keep for their own collections ““ but may not sell or copy “” books, recordings, tapes, compact discs and computer programs sent to them for review. Such submissions are considered press releases. But no one may request extra copies of review materials for personal use. Local management may impose a ceiling on the value of review copies that journalists may retain. If not retained by the reviewer, recorded or digital media, such as tapes or disks, must be destroyed or returned to the provider; they may not be given away or left where they could be carried off for illicit copying.

79. Photographers, camera operators, picture editors, film editors, art directors, lab personnel and technology editors and reporters may not accept gifts of equipment, programs or materials from manufacturers or vendors. They may not endorse equipment, programs or materials, or offer advice on product design. (This guideline is not meant to restrict our technical staff from working with vendors to improve our systems or equipment.)

Of course, the Federal Trade Commission (FTC) has already weighed in on this stuff (a bit late, but hey, they are now getting involved) updating their disclosure requirements to include bloggers with “material relationships” with any company. Clearly, the beginning of a market correction.

Where the whole bubble gets bizarre is in the strong arming practices of bloggers who believe that they have authority and leverage to for a company to provide freebies for them (believe me, it happens). Somehow, some bloggers believe that by threatening a company, they can get what they want because they are a blogger or personal brand. Let me make it real simple…. that’s illegal. It’s extortion. If the companies don’t stop buying your crap first, you could end up in jail. Just saying.

Takeaways on this idea are this: Companies face a new world of online public relations and community management and they have, so far, played the game that puts bloggers completely in the drivers seat. At some point, the game is going to change and I think that time is very soon. When the game changes and the market corrects, the bloggers who are in the business for free stuff are going to end up on the outside looking in as the market correction takes business back to business, centers, and all industries involved grow up. At that time, the quality of journalism will increase and the effectiveness of blogger-company partnerships will also increase and mature.

Until then, start the clock ticking. The bubble is about to pop.

6 Replies to “Payola, Extortion and Market Correction”

  1. You raise good points. I am blogger that accepts items for review. We met and talked briefly at Izeafest about this. I don’t feel entitled to these things and I don’t strong arm companies to give me them either.

    I known the the New York Time spells out their guidelines but I wonder how strongly they are enforced. A quick look on Ebay shows tons of movie press release items for sale. I guess they are considered collector items. If it isn’t the journalist selling them then who?

    I don’t feel bought off and would gladly return the item if asked to. I am not sure the point of getting a used toilet brush back from me would be. As far as getting trips, I done the sponsored trip to a conference and I am here to tell you I worked for it. I worked at the conference for the company. It is also the only way I would be able to attend conferences and hear speaker like you and learn things.

    I know that I am going to get some heat about how I feel but it is how I feel. Just saying!

  2. Usually I oppose government intervention in business because they do way too much of it. But I welcome this one. What bothers me most in the information is the fact that there’s no enough clear information on what they consider disclosure.

  3. hi Aaron,
    In my industry (display booths) I see a LOT of “bloggers” write “reviews” when it’s obvious they know absolutely nothing about the product, and are only in it for the “payola” (which I’m guessing, ironically, isn’t much at all). Anyway, I wouldn’t mind seeing the “bubble” burst at all. :) As for now, I’ll take 99% of all blogger reviews with a grain of salt. Scott, aka display booths

  4. I agree with you. If we look from outside the box it will surely happen. Not long ago we realized that bloggers have a voice. Soon we will realize that only important bloggers have a voice.

    I think it’s not the blogger’s fault. In all the fields there are people who “will do it for the money”, ignoring quality. And there will always be people who will try new things and see if they work (those who pay you). If you got any money this way, don’t get excited, it won’t last. Don’t become “big spenders” and get into loans just because you have potential (a mistake made by many real estate agents).

  5. I think you hit the nail on the head with this post! People are already becoming more critical of low quality bloggers and the high quality sources are beginning to grab a large amount of trust and authority. Money is the root of all evil, but truth always prevails!

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