Hepler Broom, LLC

Going Native: The Federal Trade Commission Enters the Native Advertising Jungle

January 26, 2016

The Internet, like so many things in life, is not free. The content we consume must be paid for and that usually means viewing advertisements.  But as our software and browsers become increasingly adept at blocking pop-ups and banner ads, advertisers have found themselves going native.  “Native advertising” refers to paid advertisements that are designed to look like a publisher’s own editorial content.  Native advertising is attractive to both the publishers and the advertisers.  Native ads frequently command a hefty premium over traditional ads (a boon to the publisher) and are more likely to be viewed by consumers than more traditional ads (the advertiser’s objective).

Native advertising comes in many forms. A travel blogger may glowingly post about a vacation he takes (while omitting the role of the city’s visitor’s bureau).  A YouTube fashion star may describe her latest clothing purchases (without mentioning that the wardrobe was provided by that brand).  Even a video game app may feature branded items within the game.

Another form of native advertising is the “sponsored content” found on newspaper and magazine websites. These advertisements resemble the editorial content in layout and style, to the point where they may be virtually indistinguishable from the native content. Netflix, for example, created features on U.S. presidents and their wives for The Atlantic (to promote House of Cards), on the economics of cocaine in Colombia for the Wall Street Journal (to promote Narcos), and on women in prison for the New York Times (to promote Orange is the New Black). The Atlantic also featured a native ad for the Church of Scientology, which it classified as “sponsor content.”  Following user outcry, the magazine withdrew the advertorial feature.

These native ads have been both lampooned and vilified. In August 2014, John Oliver seriously questioned the premise that native advertising did nothing to erode the public’s trust in journalism or that it compromised the historic wall between editorial and advertising. The New Yorker, which has itself accepted native advertising, envisioned a paper where a third of the staff had “changed their names to ‘Sponsored Content’ as part of a sponsorship deal with the Sponsored Content Association of America,” leading its readers to wonder whether a byline was “editorial content by a reporter named Sponsored Content, or sponsored content by one of [the] sponsors . . . .”

The spread of native advertising has been no laughing matter for the Federal Trade Commission. This past December, the agency entered the fray, publishing a set of guidelines that aimed to prevent deception in online advertising. The FTC’s guidelines suggest advertisers adhere to a “basic truth-in-advertising principle” – namely, that consumers should be able to know whether something is an advertisement or not.  The watchword, according to the FTC, is “transparency.”  “An advertisement or promotional message shouldn’t suggest or imply to consumers that it’s anything other than an ad.”  To promote this goal, the FTC’s guidelines state that advertisers “should not use terms such as ‘Promoted’ or ‘Promoted Stories,’” because such terms tend to mislead consumers into thinking that the advertising content has been endorsed by the publisher site.  The FTC noted that terms like “Presented by [X],” “Brought to You by [X],” “Promoted by [X],” or “Sponsored by [X]” also have the potential to mislead, depending on their context.

The new FTC guidelines encourage the use of clear and prominent disclosures. Disclosures should be in clear language and in a style and format that are easy to read.  In addition, these disclosures should be “as close as possible to the native ads to which they relate.”  This means “immediately in front of or above a native ad’s headline.”  For video ads, the disclosures should be featured onscreen long enough to be noticed, read, and understood.  For audio ads, disclosures should be read in a manner that is easy to follow and with easily understood language.

Beyond these specific directives, the FTC’s guidelines featured seventeen examples of native advertising, with the agency’s interpretation of whether the hypothetical conduct required additional disclosures.

The FTC’s guidelines do not just target the advertisers. In a final note, the FTC warns that it has previously taken action against those parties who helped create the deceptive advertising content, such as ad agencies and operators of affiliate advertising networks.  “Everyone who participates directly or indirectly in creating or presenting native ads should make sure that ads don’t mislead consumers about their commercial nature.”

Run afoul of these guidelines and advertisers may soon find that they are paying for more than product placement.