The slippery slope of ‘native advertising’ Episode II: The Force (as in FTC) Strikes Back

Native advertising first sailed into the public consciousness in the summer of 2014, the butt of satire on Comedy Central’s “The Daily Show with John Oliver.”
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Native advertising first sailed into the public consciousness in the summer of 2014, the butt of satire on Comedy Central’s “The Daily Show with John Oliver.” This past Christmas, the holiday spirit was anything but jolly as the Federal Trade Commission issued do-and-don’t guidelines just four days before Dec. 25, signaling that so-called “native ads” that are not properly disclosed could be ruled deceptive advertising.

A review of the “guidelines” reminds me of President Reagan’s 1986 warning that “the nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’ ”

For those who have been out to sea for some time, native advertising is a term of art used to describe a practice, especially in digital media, in which content may appear as straightforward editorial, but is, in fact, “sponsored” by an advertiser. Marketers and publishers are increasingly using it as traditional display ad revenues diminish and consumers turn to their mobile devices to access content.

For a hilarious and admittedly jaundiced view of native advertising, watch Oliver’s 10-minute expose at https://www.youtube.com/watch?v=E_F5GxCwizc. For my previous analysis of this topic, see http://www.tradeonlytoday.com/columns/marketing-insight/slippery-slope-native-advertising.

Although most legitimate journalistic enterprises clearly distinguish between editorial and sponsored content with labels, the lines between marketing and journalism are becoming ever more blurred as publishers struggle to keep their corporate heads above water. The question of where and in what manner such labeling is done is what concerns federal regulators, whose task it is to apply established truth-in-advertising standards to the digital marketplace. Simply put, a basic truth-in-advertising principle is that it’s deceptive to mislead consumers about the commercial nature of content.

Shortly after the FTC’s guidelines were published, The New York Times (aka the Old Gray Lady) carried an article under the byline of Sydney Ember, noting, “The long-awaited guidelines function as a warning shot to the online ad industry and lay out for the first time how advertisers and publishers should deploy and label native ads.”

In short, native advertising is likely deceptive when an ad appears in a “news format,” when the source is misleading or when the source is not disclosed. Marine marketers should definitely review the FTC’s “Native Advertising: A Guide for Businesses” at https://www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses. Included in the guide are 17 examples of deceptive advertising and ad copy that toes but doesn’t cross the line.

The FTC says an act or practice is deceptive if “there is a material misrepresentation or omission of information that is likely to mislead the consumer acting reasonably in the circumstances. A misrepresentation is considered material if it is likely to affect consumers’ choices or conduct regarding an advertised product or the advertising for the product.” The bottom line is transparency, says the FTC, noting, “An advertisement or promotional message shouldn’t suggest or imply to consumers that it’s anything other than an ad.”

One giveaway in which an advertisement or promotion may be considered deceptive is if its net impression conveys to consumers — expressly or by implication — that the source of the material is independent or impartial. The FTC believes the consumer has a right to know the source of the promotion because “knowing that something is an ad likely will affect whether consumers choose to interact with it.”

And although the creation of deceptive advertising usually has more than one parent, the FTC makes it clear that everyone involved is potentially liable. “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,” the FTC says.

In determining whether an ad is deceptive, the FTC says it will consider “both what the ad says and the format it uses to convey that information.” Any clarifying information necessary to prevent deception must be disclosed clearly and prominently to overcome any misleading impression.

Disclosures should be in plain language and be as straightforward as possible. The FTC plainly prefers the labels “ad,” “advertisement,” “paid advertisement” and “sponsored advertising content.” It frowns on such terms as “promoted” or “promoted stories.”

In general the FTC says disclosures should be in clear and unambiguous language; near the ad’s focal point; immediately in front of or above a native ad’s headline; as close as possible to the native ads to which they relate; in a font and color that’s easy to read; in a shade that stands out against the background; maintained when native ads are republished by others; for video ads, on the screen long enough to be noticed, read and understood; and for audio disclosures, read at a cadence that’s easy for consumers to follow and in words consumers will understand.

The FTC’s guidelines drew a mixed reaction from the usual suspects. The National Law Review was emphatic, saying, “Companies that use native advertising in digital media should review the FTC’s policy statement and related guidance to ensure that their advertising policies cover this issue, and that their digital advertisements are not formatted in a manner that the FTC would consider deceptive.”

Meanwhile, Advertising Age ran a headline that read, “The IAB (Interactive Advertising Bureau) is ‘concerned’ about the FTC’s new native advertising rules, but publishers play it cool.” Asked whether his members were worried, IAB vice president for public policy Brad Weltman said, “I don’t think they’re scared ... but when the FTC issues guidelines, you’re better off when you follow them than when you don’t.”

He did, however, point out that some of the FTC’s guidelines are “overly prescriptive.”

“It remains to be seen if the IAB will lobby the FTC to change any of the language in the documents,” Weltman said.

Not everyone was so reticent. MaryGail Pezzimenti, vice president of content creation at Huffington Post, says the Post believes “it is good that the FTC has released guidelines because there is a lot of inconsistency in the market about native ads. The key for us now, and always has been, that you must be utterly transparent and authentic with native advertising.”

The importance of such transparency was echoed in a FastCompany review of how savvy marketers view the FTC guidelines. In the article, “Here’s What Top Ad Agencies Think of the FTC’s New Native Advertising Rules,” writer Jeff Beer reports, “Executives at some of the world’s top ad agencies say that, more than anything else, these rules simply make official a rule of thumb marketers should’ve been following all along. Native ads should be good enough to stand on their own, no matter how clearly labeled. If deceit is required, you’re doing it wrong.”

Michael Sciulla is president of Credibility & Company Communications, as well as vice president of the Marine Marketers of America and a member of the board of directors of both Boating Writers International and the Marine Marketers of America. During a 28-year career at BoatUS he built the association’s brand as membership grew from 30,000 to 650,000 and testified more than 30 times before a number of congressional committees.

This article originally appeared in the February 2016 issue.

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