According to the latest edition of Ad Age (print edition), word-of-mouth marketers could run afoul of longstanding advertising law.
It is indeed illegal to pay people to spread goodwill without disclosing their connection to marketers and agencies.
At issue is a potential catch-22 – that disclosure could undermine the value of buzz marketing. While some marketers may feel that way – the article quotes BzzAgent, one of the most successful players in the space, as a company that found it beneficial to have its workers reveal whom they were working for.
According to the article it is still a nascent business – putting its total revenue at around $40-$60M last year, up 100% over the previous year.
That is one way of looking at it. I am sure that there are many word-of mouth marketing campaigns that just cannot be measured because they were truly grassroots/viral.