If Publishers Fail to Self-Regulate Native Ads, FTC May Step In

Problem of how to define

BuzzFeed is famous for it, Facebook and Twitter embraced it, and The Atlantic got blasted for it. Native advertising may be all the rage, but if brands and publishers aren’t careful, it could trigger some regulatory repercussions, analysts say.

While ads masquerading as editorial content may be more effective than banners, they have the potential to confuse consumers. In cases where the line between editorial and advertising was blurred, the FTC has pushed TV infomercials and food marketers to adopt guidelines or risk enforcement under its authority to protect consumers from unfair or deceptive ads.

“Conventions need to be developed, like they have for newspapers and infomercials on TV,” said C. Lee Peeler, CEO of the Advertising Self-Regulatory Council, a group that establishes guidelines for advertisers so they don’t run afoul of regulators.

As far back as 1967, the FTC has given notice to ads that have resembled editorial content, and over the years it has tried to keep apace with the new digital offerings. It has updated endorsement and online ad guidelines (called dot-com disclosures) to take into account new digital platforms and formats. More recently, the FTC has warned search engines like Google and Bing that they should take better care to distinguish ads and paid search results from regular search results, such as using stronger visual cues and more prominent labeling.

The FTC has clearly laid the groundwork for digital native advertising even if it hasn’t yet issued any specific guidance or enforcement. “Regardless of context, consumers should be able to tell what’s an advertising pitch, whether it’s an advertorial, an infomercial, word-of-mouth marketing or native advertising,” said the director of advertising practices for the FTC, Mary Engle, who wrote the search engine guidelines.

“Certainly, the search engine guidance should serve as an early warning to the industry that at some point in the future, unless the industry self-regulates, the FTC may be knocking on their door,” said Linda Goldstein, who handles advertising law for the firm Manatt, Phelps & Phillips.

The industry has barely begun the process of looking at best practices for native advertising. In some cases, publishers have taken it upon themselves to self-regulate. The Atlantic created native ad guidelines after it got burned by the digerati for publishing a sponsored Web post by the Church of Scientology that was off-brand, then censored negative comments on the post.

The biggest challenge right now is for the industry to define native advertising which can take many forms, from a product promotion to pure entertainment. “Publishers and advertisers need to be extremely transparent; labeling is paramount,” said Pam Horan, president of the Online Publishers Association, who noted that more than half of the OPA’s members were offering native advertising. “This is in the early innings, but ultimately, we should move toward some consistency.”

Meanwhile, the IAB has just begun talking about guidelines. “There’s a huge amount of confusion in the market,” said Peter Minnium, head of brand initiatives for IAB, which formed a native ad task force in June. “There is an urgency for guidelines, but we have to get it right from the start.”

Illustration: Gonçalo Viana