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FTC Guidance on Native Advertising Provides Clear Boundaries for Publishers

FTC provides sponsored content labeling guidelines in ‘Native Advertising: A Guide for Business’

The Federal Trade Commission (FTC) guidance on native advertising for publishers, released late last year, greatly helps publishers by defining the boundaries of what is acceptable in their eyes.

Why is the FTC involved? In general, under the FTC Act, 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 under the circumstances. It’s easy to see how native advertising, when labeled incorrectly or in a manner meant to deceive, could be seen as misleading.

The FTC actually issued two separate documents. One is an Enforcement Policy Statement on Deceptively Formatted Advertisements,” and summarizes the Commission’s justifications for enforcement actions, advisory opinions and other guidance as it applies to deceptively labeled advertisements.

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The second document, really a much more important document for publishers, is Native Advertising: A Guide for Business. This second document provides the concrete examples of what the FTC considers acceptable and unacceptable. The document contains many examples of different types of businesses – publishers and not – and how they should label native advertisements.

This document also contains the specific guidance on the proximity and placement of disclosures so that consumers will notice them and can identify that the label applies to a specific piece of content.

As an example, the FTC states that native advertising disclosure appear “in front of or above the headline,” and in the case of an image or graphic, that “disclosures need to appear directly on the focal point itself.” This is a key point for publishers with pictures or graphics on their site that are used as links to content pages.

This is also an important point when publisher content and sponsored content are mixed in the same content stream. In addition, the disclosure must continue to appear when the user clicks on the content, or when content is used by someone else at another website.

Another important point is that the FTC considers not just what the ad says, but the format it uses when determining whether an ad is deceptive. “Advertisements or promotional messages are deceptive if they convey to consumers expressly or by implication that they’re independent, impartial, or from a source other than the sponsoring advertiser – in other words, that they’re something other than ads,” the guidance states.

At Mequoda we have always recommended clear disclosure of native advertising as “Sponsored content.” We prefer that term since we specifically recommend that publishers create the content themselves as part of any sponsorship package that includes content.

We feel very strongly about this. Why?

The publisher knows what readers like and want. Too often sponsors will produce copy that reads like one long ad. That doesn’t serve the reader and publishing that kind of content hurts the publisher’s brand. The consequences of doing this badly are too great in terms of reader trust. The truth is that publishers are in the best position to produce content valuable to the audience that also meets sponsor goals.

If nothing else, we ask our clients to remember one rule of thumb: Don’t publish any sponsored content that you wouldn’t have published if you didn’t have a sponsor. If it doesn’t meet that standard, you shouldn’t publish it. End of story.

How to label native advertising

The FTC guidance also goes into some detail about how to label this content. Unsurprisingly, the FTC prefers terms like “Ad,” “Advertisement,” “Paid Advertisement,” “Sponsored Advertising Content” or some variation.

The guidance also states that terms such as “Promoted” or “Promoted Stories” are “at best ambiguous and potentially mislead consumers that advertising content is endorsed by a publisher site.”

However, the guidance also states that, “depending on the context, consumers reasonably may interpret other terms, such as ‘Presented by X,’ ‘Promoted by X,’ ‘Brought to you by X,’ or ‘Sponsored by X,’ to mean that a sponsoring advertiser funded or “underwrote” but did not create or influence the content.”

This fits directly into the Mequoda recommended best practice – content created by the publisher, not the sponsor. Importantly, the publisher shouldn’t allow the sponsor to influence the content. They can reject the article as not meeting their needs, but a publisher should not allow an advertiser or sponsor to change copy significantly. That would cross the line into content created by a sponsor and not the publisher.

The Internet Advertising Bureau (IAB) has expressed concern with this part of the guidance. In a statement issued soon after the guidance was published, the IAB said this section was “overly prescriptive, especially absent any compelling evidence to justify some terms over others.”

Additionally, the FTC guidance clarifies that this guidance applies to content transmitted by email, animation and infographics.

Sponsored content should be identified in any social media shares

Also, the guidance suggests that sponsored content should be identified in any social media shares. The guidance specifically cites an example of a native ad appearing in a running magazine and written by the sponsor that is shared through a social media button. When the link is posted, it appears in a format that closely resembles the format of links for regular magazine articles posted to social media.

“In this situation, the ad’s format would likely mislead consumers to believe the ad is a regular article published in [the magazine]. Advertisers should ensure that the format of any link for posting in social media does not mislead consumers about its commercial nature,” the guidance states.

The guidance also pointed to some additional issues publishers should consider. For example, the guidance had a specific warning for advertisers about non-paid search results. Advertisers are warned that they should “take steps to ensure that any non-paid search listings for a native ad do not suggest or imply to customers that is it something other than an ad.”

To summarize, the FTC doesn’t consider native advertising itself to be deceptive so long as there are clear signals to the consumer about what it is. It does caution, however, that this material should not be indistinguishable from news, feature articles, product reviews, editorial, entertainment and other regular content.

Of course, we will have to see what the FTC actually does in the future. To date they have not taken actions against any publishers over native advertising disclosure.

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