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Will The FTC Soon Rain on Native Advertising’s Parade?

Just as the Wild West eventually reached a saturation point that required more strident law and order, native advertising, in its near-universal application, may be soon facing its own reckoning, in this case from the Federal Trade Commission.

In late March, CUNY journalism professor Jeff Jarvis reached into his own pocket and paid for a Google Consumer Survey, the results of which should concern anyone who works within the journalism or advertising industry. He did so after browsing the viral aggregation site Upworthy and noticing a miniscule “promoted” tag on the righthand corner of one of its posts. You and I know what that word means — that it’s a form of native advertising, which is paid-for content that appears alongside and resembles editorial content — but does the average news consumer?

No. In fact, a majority of those surveyed, 56 percent, had no idea that any money had exchanged hands for the post’s existence (most thought it was some sort of recommendation, either by algorithm or from the site’s editors). “Wouldn’t it be a helluvalot simpler just to call it an ad?” Jarvis asked rhetorically. “Why don’t they? Why doesn’t any publisher of such promoted/native/sponsored/brand content just call it an ad? Because busy people don’t want to click on ads; if the web proves nothing else, it proves that. So they—publisher and marketer, united—want to fool the reader into clicking.”

Jarvis isn’t the first to notice this obfuscation. Last year, Augie Ray pointed to several studies that shed light on the opacity of native advertising, including an Interactive Advertising Bureau survey that found only 41 percent of the general news audience was able to identify native advertising and a 2013 study revealing that over 50 percent of respondents “didn’t know what the word ‘sponsored’ actually meant.”

These studies come to us as we continue to contemplate whether native advertising is the news industry’s “savior,” here to rescue news orgs from ever-diminishing display ad rates. Over the past few years nearly every major news company has launched an in-house “creative agency” that works directly with sponsors to craft promotional content it thinks will appeal to the publication’s readership. Yahoo CEO’s Marissa Mayer has reportedly staked the future of her company on native advertising and the format now makes up 10 percent of the New York Times’s digital advertising revenue.

Thus far, the industry has galloped into this new frontier, treating it as a sort of Wild West where the chief concern is delivering value to the paying advertiser, even if it’s to the detriment of the consumer. As AdAge reported last year, the New York Times “shrunk the labels that distinguish articles bought by advertisers from articles generated in its newsroom and made the language in the labels less explicit,” all because “several marketers have bristled at all the labeling, suggesting it turned away readers before they had a chance to judge the content based on its quality.”

But just as the Wild West eventually reached a saturation point that required more strident law and order, native advertising, in its near-universal application, may be soon facing its own reckoning, in this case from the Federal Trade Commission.

Many mistakenly believe that a piece of advertising meets FTC requirements as long as there’s some form of disclosure, but that’s not true. In fact, the burden is much higher: the disclosure must be sufficient so that the average consumer recognizes it as paid content, and such recognition occurs prior to them consuming it. As I’ve documented previously, the agency has a long history of stepping in and ruling a disclosure insufficient, and it sometimes offers specific guidelines on how the disclosure should be presented.  Barry Cutler, who was director of the FTC’s Bureau of Consumer Protection from 1990 to 1993, recounted to me last year how the agency cracked down on infomercials in the 80s and 90s that purported to show man-on-the-street interviews with satisfied customers and scientists in lab coats endorsing products. As Augie Ray explained, the FTC requires infomercials to include the words “‘THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT FOR [NAME OF PRODUCT]'” at their start.

Over the last decade, the FTC has slowly waded into internet advertising, issuing several guidelines ranging from how a disclosure should be presented in a sponsored tweet to the requirement that bloggers disclose when they’ve received free products in exchange for reviews.

But so far it has remained reluctant to issue any firm guidelines for native advertising. Aworkshop conducted in late 2013 with several major news orgs left the agency “with no clear direction about how to police” the format. Considering that one of its earliest cases, in 1917, was against a vacuum cleaner company that placed misleading newspaper ads, the agency certainly has precedent on its side when wading into such issues, but the 2013 meeting merely led an FTC representative to conclude that “this has raised more questions than it answered.”

Well, it may need to answer those questions sooner rather than later, given that in recent months we’ve seen strong evidence that native advertising is not only making it difficult for consumers to differentiate between editorial and sponsorships, it’s also eroding the wall between the editorial and business divisions of news companies.

In October, a former Vice editor published emails sent from higher-ups in which he, the editor, was repeatedly reprimanded for publishing stories critical of Vice’s native ad partners. And then recently, BuzzFeed, considered to have one of the most successful native ad models in the industry, came under fire for removing a post critical of Dove, a BuzzFeed sponsor. Though editors initially argued the post was removed for other reasons, an internal investigationrevealed several instances in which editorial staffers were pressured by the business staff into removing posts.

Is it possible that this could have happened had the sponsors simply purchased standard display ads? Sure. But it’s not difficult to see how creating sponsored content that so closely resembles editorial content erodes the differentiation not only in consumers’ eyes, but in the eyes of newspaper executives as well. And with these companies facing increasing pressure to make up for lost print advertising dollars, the erosion of that wall may prove too tempting to overcome. While no industry welcomes the oversight and enforcement of the FTC, I can’t help but wonder if many editors and reporters would breathe a sigh of relief if the agency suddenly stepped in and ensured that their journalism would continue to retain integrity in a world where marketers are concerned with anything but.

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