The Federal Trade Commission delivered the advertising industry an early holiday present in mid-December in the form of a staff report entitled “Blurred Lines: An Exploration of Consumers’ Advertising Recognition in the Contexts of Search Engines and Native Advertising.” The report is a summary of research conducted by the agency from 2014 to 2015 (following the agency’s public workshop on native advertising in December 2013) to determine the extent to which consumers are able to recognize “an ad as an ad”, specifically in the context of search advertising and “native advertising.” The study also explored how “modest” modifications to advertisement disclosures, consistent with the FTC’s previously-issued guidance, may improve consumer recognition of advertisements.

The report was a mixed bag. While the FTC claimed that certain elements of the study yielded statistically significant results supporting the argument for more robust disclosures, other areas of the study appeared to be less conclusive. Moreover, while staff concluded that the adoption of all of the tested modifications resulted in greater ad recognition, it was unable to determine how much each individual modification affected such recognition. Interestingly, the report found that even with the tested modifications, some consumers could not identify that content was paid advertising while other consumers thought that everything was an ad. Overall, the report concluded that more robust disclosures are more effective in communicating that a search result or ad is paid for, though when it comes to evaluating the effectiveness of disclosures for this purpose, ultimately “context matters.”

Study Methodology. The study presented to participants eight web pages or “scenarios” consisting of (1) four search engine results pages and (2) four web pages containing native advertising. Half of the web pages in each category were viewed on desktop computers while the other half were viewed on a smartphone. The web pages viewed by the participants were either copies of the actual web pages or slightly modified versions with FTC-enhanced advertisement disclosures. To determine whether a participant recognized an advertisement, the FTC analyzed each participant’s comments, computer mouse movements, eye movements, and responses to interview questions.

Modifications. The modified web pages contained “common sense” changes to the ad disclosure language and placement, text color, use of borders, and other visual devices used to differentiate advertisements from other content, such as the following:

• Disclosure placement. The modified advertisements positioned disclosure language immediately above or to the left of the advertisement, where it was more likely to be viewed, rather than below the advertisement or in the top right-hand corner.
• Text color. Whereas the practice of some search companies is to use lighter colored text on a darker background for the disclosure language, the modified advertisements used darker colored text on a lighter background.
• Borders and backgrounds. The FTC added borders or different colored backgrounds to visually separate the advertisements from the surrounding non-advertising content.
• Familiar disclosure language. The modified advertisements substituted terms such as “Ad” or “Advertisement” for less direct terms such as “Sponsored” or “Brand Publishing.”

By way of example, one of the web pages modified by the FTC was a Google search results page for “tablets” for desktop viewing (p. 5 of the Report), which compared the efficacy of currently used ad disclosures and location using white type (e.g.,  ) against darker type (), as noted below:

ORIGINAL

MODIFIED

Study Results. While the study has a number of limitations as acknowledged by the authors, it nevertheless revealed that the FTC’s modifications to the web pages generally increased a study participant’s ability to properly recognize advertisements by 21 percentage points. This effect was largely consistent for both search and native advertisements, as well as advertisements displayed on desktop computers and smartphones.

Another notable finding from the study was that even with enhanced disclosures, a significant portion of the participants was still unable to recognize advertisements, particularly in the case of native advertising that bears a closer similarity to native content or incorporated in “publications with a strong journalistic brand.” Further, a number of participants disclosed during the course of the study that they believed any search result that promotes a business or its goods or services to be an advertisement, even if the result was an organic response to a search query and not paid advertising.

Finally, the FTC discovered that improving advertising disclosures reduced the time that participants spent looking at the advertisements by 21 percent, although this was not correlated with increased ad recognition. The FTC’s study was unable to identify the reason for this reduction in time, but any causal factor would understandably be of interest to advertisers.

As with prior FTC statements and guidance in this area, this study supports the agency’s position that greater disclosure in search and native advertising are necessary to ensure consumer understanding that this content is paid for. It is not uncommon for the FTC to follow up reports such as this with warning letters, an industry enforcement sweep or a formal rulemaking, just to make its point clear to industry. While only time will tell whether any of these outcomes will occur, until then, companies that utilize these marketing techniques need to be mindful of the FTC’s strong interest in this area and ensure that all paid content is sufficiently identified in order to avoid regulatory scrutiny.