“Native Advertising” Practices Scrutinized in FTC Workshop

by Davis Wright Tremaine LLP
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The FTC took on the hot topic of “native advertising” in a public workshop Wednesday in Washington, D.C. Called “Blurred Lines,” the all-day event featured panel discussions with regulators, academics, consumer advocates and representatives from the publishing, advertising and consumer products industries exploring the various ways that sponsored content, including native advertising (i.e., editorial-style material that is financed, supplied or influenced by an advertiser), is presented to consumers of digital media.

Although rooted in traditional means of advertiser integration such as sponsored television programming, the magazine advertorial and product placement in television and movies, so-called native advertising is the latest trend in consumer marketing and has become an important revenue stream for online publishers. According to the FTC, recent surveys indicate that 73 percent of online publishers offer some form of native advertising on their sites. Unlike traditional online ad units (such as banners, buttons, leaderboards and pop-ups), which can interrupt the user’s interaction with a website, native ads are meant to work in harmony with the content and aesthetic of a particular site. As several panelists explained, the goal of native advertising is consumer engagement, reach and amplification—meaning actively engaging the consumer for extended periods of time with content that is sufficiently targeted, creative and interesting that consumers will share the content using social media. Some online publishers use in-house staff to write and design native ads, increasing potential concerns about blurred lines between editorial and commercial content. To some who were at the workshop, native advertising enhances the user’s experience. To others, it is inherently deceptive advertising content masking as editorial content. For the FTC, the goal is not so much to reconcile those divergent views as to understand first, whether and when such content should be deemed to constitute advertising and second, what form of disclosure of the nature and source of the material may be necessary to avoid consumer deception.

The FTC’s workshop provided a public forum for interested parties to discuss the development of best practices and consider the ways that publishers grapple with maintaining audience trust while serving up content—both editorial and advertising—that will draw traffic, readership and buzz. Consistent with the FTC’s ongoing goal of ensuring that consumers are able to identify the “source” of digital content, yesterday’s workshop followed on prior FTC initiatives aimed at clarifying the rules of the game in online advertising and distinguishing between “pure” editorial material and material supplied or influenced by advertisers. In March 2013, the FTC released updated guidelines for disclosures in online advertisements (known as the “.com Disclosures”), among other things encouraging advertisers to place disclosures as close as possible to the relevant claim and to minimize the use of claims that require qualification in “space-constrained” platforms and formats (e.g., in Tweets or on mobile device screens). In June 2013, the FTC revised its earlier guidance for search engines that serve up ads on their results pages, recommending that search engines more clearly demarcate advertising content with visual cues, such as borders and shading, clear labeling and disclosures. The search engine guidance, in seeking to enforce a boundary between “natural” search engine results and those influenced by advertiser payment, is reminiscent of the FTC’s 2009 revision of its Guides Concerning the Use of Endorsements and Testimonials in Advertising, in which the FTC emphasized that bloggers who receive payment or other inducement to review a product must disclose to readers that “material connection” between the blogger and product manufacturer.

Opening the workshop, FTC Chairwoman Edith Ramirez noted that “while native advertising may certainly bring some benefits to consumers, it has to be done lawfully.” She warned that “by presenting ads that resemble editorial content, an advertiser risks implying, deceptively, that the information comes from a non-biased source.” Many of the panelists suggested that a commitment to transparency and disclosure is not just good public policy, but also good business practice. They asserted that clearly identifying “ads” not only avoids misleading consumers but is also crucial to maintaining the audience’s trust and protecting the publisher’s brand. But while the speakers generally agreed that disclosure and transparency are essential, there was less agreement about the best way to achieve those goals. Panelists discussed the various identification tools available to publishers, such as logos, disclosure language, labeling, bylines that inform as to the source of the material, differing fonts, colors, borders and shading. The extent of proper disclosures presented a difficult question: Is it enough to note that certain content is “sponsored” or “presented” by a company, or should the publisher also disclose whether the content was written by or for an advertiser? The workshop also reflected uncertainty whether publishers have any obligation to ensure that identifying or distinguishing information “follows” native advertising content when the content is aggregated or re-posted by readers. Moreover, preliminary research presented by one panel suggested that even agreement on basic nomenclature may prove elusive: It indicated that consumers apparently do not understand the advertiser’s role in the publication of content that is labeled using terms such as “sponsored,” “sponsored by,” “sponsor generated,” “presented by,” “brought to you by” and “content provided by.” Another important (and as yet unresolved) issue is the scope of the publisher’s responsibility for vetting native advertising and how that review process should differ (or not) from that implemented with respect to traditional editorial content. 

The FTC emphasized that transparency requires that readers understand the distinction between what is advertising and what is editorial content. The distinction is not, however, a simple one, and there was spirited disagreement as to whether any disclosure is necessary with respect to advertiser-supported content that contains no selling message and is not directly intertwined with the brand. Although some consumer advocates disagreed, most present seemed to believe that merely linking a brand to content (that is, an advertiser “sponsoring” content unrelated to the advertiser’s products or services and/or over which the advertiser has no input or control) does not necessarily convert that content into advertising.

Despite the FTC’s statement that the workshop is not necessarily an indication of impending regulation, industry players have been moving toward self-regulation. In October, the American Society of Magazine Editors issued guidelines for native advertising, recommending that such content should use different fonts and graphics from editorial content and should be prominently labeled as sponsored content. The morning of the workshop, the Interactive Advertising Bureau released a 20-page “Native Advertising Playbook” that evaluates common disclosure language associated with six typical types of native ads and recommends overarching principles for native advertising disclosures. Many news organizations have also developed in-house guidelines for sponsored and native advertising content, in some cases seeking to shore up the traditional wall between editorial and advertising.

Takeaway
Although there is general agreement that “articles” written by and about an advertiser constitute advertising material as to which adequate disclosure is required, the multiplicity of ways in which advertisers contribute, pay for or influence editorial-style content means that the dividing line between advertising material and editorial content is likely to remain blurred for some time to come. The implications for publishers are particularly significant, as a push toward increasingly prominent labeling of content as advertising may satisfy regulatory concerns but may also lessen the availability in the native advertising context of the legal protections traditionally afforded to pure editorial content, such as with respect to the use of third-party intellectual property and right of publicity issues. Publishers and advertisers should stand ready for further regulatory and legal developments in this area as native advertising continues to increase in commercial importance and publishing practices are subject to further scrutiny. As FTC Associate Director for Advertising Practices Mary Engle remarked, “this has raised more questions than it answered.”

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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