Is legal and honorable to get paid to write testimonials — for books, candidates, products or causes — so long as the relationship is disclosed? I hope so because I think that frank endorsements by regular folks is the sincerest brand of advertising. But how do we police that sincerity and keep the blogosphere from becoming a medium of shills.

The question arises from an article by MediaPost’s Shankar Gupta who a December article about PayPerPost a service that hooks up bloggers with marketers willing to pay for product placement. Gupta notes that the firm had beefed up its disclosure requirements but said the fix drew fire from Andy Sernovitz, president of the Word of Mouth Marketing Association: “It’s nice that they’re requiring disclosure, but there’s still this giant loophole,” he told MediaPost. “it’s not clear what’s being disclosed.”

Apparently PayPerPost left bloggers too much leeway to disclose — or obscure — the relationship. But Ted Murphy, CEO of PayPerPost, suggested there was no one-size fits all requirement. He told MediaPost:

“If a blogger wants to disclose on a per post basis they are free to do so, and advertisers can request per post disclosure as well . . . It is up to the advertiser and blogger to decide what form of disclosure works best for them.”

The MediaPost piece mentioned that a Pacific Northwest public interest group, Commercial Alert, had set in motion the chain of events that led to PayPerPost’s new disclosure rules. As Washington Post’s Annys Shin reported:

 “In October 2005, Commercial Alert, an advertising and marketing watchdog group in Portland, Ore., petitioned the Federal Trade Commission to consider taking action against word-of-mouth marketers. The group called for the FTC to issue guidelines requiring paid agents to disclose their relationship to the company whose product they are promoting, including any compensation.”

The Post article goes on to say how FTC official Mary K. Engle said paid blogging was covered by existing rules regarding commercial endorsements: “If you’re being paid, you should disclose that.” Violations would be investigated on a case by case basis with penalties to include fines of thousands to millions, according to the Post which also reported that “Engle said the agency had not brought any cases against word-of-mouth marketers.”

Not as much as Commercial Alert had hoped but certainly better than being ignored. The conclusion to the group’s petititon to the FTC described this emerging practice of “buzz marketing . . . (as a) . . . “$40 to $6o million business that grew at a rate of 100 percent in the last year.”

I’ll look for more on Commercial Alert later.

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Meanwhile, once I tripped over PayPerPost, I noticed second piece in which MediaPost’s Gavin O’Malley writes about how it purchased the blog marketplace called Performance Exchange. I drilled down into the Performance Exchange’s classified ads and found an interesting help-wanted posting written by George Fleming:

“We are currently looking for individuals with sector knowledge for six new sector sites focused on Green/Green Biz/Environmental Blogs, Tech Blogs, Medicine and Medical Blogs, Celebrity Gossip Blogs and blogs about or discussing New York City . . . Please contact us at jobs@inveslogic.com for more information. . . . InvesLogic is something new. It’s the first company to organize expert financial and business blogs worth reading into a new form of market intelligence different from anything being provided by the mainstream investment media . . .  If you want to know what’s going on in the hot areas of the economy and stock markets, bloggers are talking about it.”

What a great idea: a financial intelligence network based on monitoring the blogosphere. Buy on the rumor; sell on the news. That’s the Wall Street way. What better way to collect rumors than by scouring the blogosphere?

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And finally, a few kind words for the daily newshounds who work for not much more than that esteem of their peers. In scanning Unmediated.org I came across a reposting that led me back to the blog of New Yorker writer Malcolm Gladwell who recently wrote:

“I think we should also recognize what the Enron case tells us about the value of newspaper journalism. Maybe, in other words, we have underestimated the value of impartial, professionally-motivated, under-paid and overworked generalists in tackling the kind of information-rich, analysis-dependent “mysteries” that the modern world throws at us.

“All of which, of course, points out the irony of what’s happening in the newspaper business right now. We are dismantling the institution of newspaper journalism precisely at the moment when it seems to be of greatest social value.”