Native Advertising is on the Rise, and the FTC Has Taken Notice

by Davis Wright Tremaine LLP
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In a press release issued Sept. 16, 2013, the FTC announced that it will convene a Native Advertising Workshop on Dec. 4, 2013 to “examine the practice of blending advertisements with news, entertainment, and other content in digital media, referred to as ‘native advertising’ or ‘sponsored content.’” Given the FTC’s recent enforcement focus on ensuring that consumers are able to identify paid content (including recent updates to the FTC’s Search Engine Advertising guidance, the Dot Com Disclosures guidance, and the Endorsements and Testimonials Guides), it is hardly surprising that the FTC has decided to take a hard look at native advertising.

Consumers are increasingly more likely to be influenced by word-of-mouth than by traditional advertising claims, and are increasingly likely to use digital media as a primary source for information about products and services. Generally speaking, “native advertising” or “sponsored content” is content that “mimics” the digital environment in which it appears. Ranging from sponsored articles or posts and other editorial-style material to overtly branded content, such as recipes incorporating the advertiser’s product, native advertising blurs the line between advertising and editorial content. Advertisers view native advertising as an essential means of reaching and interacting with consumers for a host of reasons—it provides perceived informational or entertainment value associated with the brand; it is a targeted means of reaching consumers; it “feels” current and even cutting-edge; it is relatively cost-effective; and, in many instances, it feels a lot less like advertising than do traditional marketing initiatives.

Many media companies have embraced native advertising as a means of generating revenue, particularly in the face of declining revenue from traditional advertising formats. Native advertising is now one of the fastest growing advertising segments, appearing everywhere from blogs to newspapers to all manner of digital publications as well as various social media platforms, such as Facebook. Further blurring the lines between advertiser and publisher, some media entities now offer the services of in-house writers, editors, videographers and market strategists to assist advertisers in developing sponsored content.

As the FTC has noted, native advertising raises a number of important (and as yet unresolved) issues related to disclosures and content clearance. The FTC is also, unsurprisingly, particularly focused on mobile devices and other “space-constrained” platforms—one of its key areas of emphasis in the revised Dot Com Disclosures. The FTC is actively soliciting panelists, research, suggestions for topics and examples and mock-ups to use as illustrations for the Workshop. Proposed topics include:

  • What is the origin and purpose of the wall between regular content and advertising, and what challenges do publishers face in maintaining that wall in digital media, including in the mobile environment?
  • In what ways are paid messages integrated into, or presented as, regular content and in what contexts does this integration occur? How does it differ when paid messages are displayed within mobile apps and on smart phones and other mobile devices?
  • What business models support and facilitate the monetization and display of native or integrated advertisements? What entities control how these advertisements are presented to consumers?
  • How can ads effectively be differentiated from regular content, such as through the use of labels and visual cues? How can methods used to differentiate content as advertising be retained when paid messages are aggregated (for example, in search results) or re-transmitted through social media?
  • What does research show about how consumers notice and understand paid messages that are integrated into, or presented as, news, entertainment, or regular content? What does research show about whether the ways that consumers seek out, receive, and view content online influences their capacity to notice and understand these messages as paid content?

Takeaway
Publishers and advertisers who create and distribute native advertising are increasingly confronted with the threshold question: Should the content be viewed as advertising material or as editorial material? The answer has numerous legal and business implications. It is unclear what guidance will emerge from the FTC’s Workshop, but the FTC’s posture with respect to native advertising is likely to mirror some of its other recent enforcement efforts, in which the FTC has sought to ensure that digital media properties include clear and conspicuous platform-neutral disclosures with respect to advertising material and that such disclosures travel with the material when it is re-posted or aggregated. It is also likely that the FTC will apply traditional claims substantiation requirements to at least some forms of native advertising. In addition, while likely not a particular focus of the FTC, native advertising also implicates intellectual property and right of publicity concerns that are typically not associated with editorial content. Advertisers and publishers should be mindful of these issues, and the FTC’s interest in this area, as they continue to develop native advertising initiatives.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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