As if breaking open a social media Watergate, The Next Web reports “a small storm rocked the ever tense relationship between tech blogs and the PR industry today, when TechCrunch revealed that one firm was charging a specific amount to clients it successfully got covered there.” But what stuns me is not the disclosure of this deep, dark secret, but The Next Web’s naivete (and/or its estimate of the naivete of its readers) about how the PR industry works and how clients compensate agencies.

The concept of paying a PR agency on the basis of published coverage is called “pay-for-play.” It is a favorite tool of start-ups who see their product/service as so world changing that any agency could get them on Oprah and on the front page of the Wall Street Journal with ease, and would therefore be eager to be paid on the basis of “performance” rather than effort (billable hours). Start-ups love this because it costs nothing up front. Sometimes the agreement between an agency and a client includes both an hourly retainer and performance bonuses.

But here’s the thing. Paying the agency for coverage in a top-tier journal or blog is not the same as paid placement, which The Next Web sort of goes on to imply is going on here. In paid placement, the agency pays the blogger for coverage. That practice, if not clearly disclosed by the blogger, is unethical and can be in violation of FTC guidelines. Pay-for-play, on the other hand, while an undesirable model to most agencies, is simply a performance bonus like those found in so many other professions. Like it or not, it’s a free market economy and many clients demand this kind of arrangement, which they are free to do.

Tags: The-Next-Web, TechCrunch, Pay-for-Play