Native Ad Workshop Leaves FTC Perplexed

A day-long examination of native advertising left regulators with no clear direction about how to police what has become digital media's hottest ad format. The Federal Trade Commission, which organized the workshop, has been bringing cases against ads masquerading as editorial content since 1917 (the first case was against a newspaper ad for an electric vacuum cleaner). But digital media has put what the FTC once termed "masquer-ads" on steroids. Worried that consumers might be confused by native ads, the FTC was looking to the workshop to help figure out if the agency should issue additional guidance to help advertisers and publishers steer clear of enforcement action. But after hearing from all parts of the industry, from academicians to publishers and ad networks, FTC officials said they would have to think about the next steps. "This has raised more questions than it answered," said Mary Engle, the FTC's associate director of the advertising practices division. In the final panel of the day, Engle got mixed opinions when she queried a panel that included representatives from BuzzFeed and the Wall Street Journal, the Interactive Advertising Bureau, and the American Society of Magzine Editors, about whether a set of hypothetical native ads were deceptive or required more disclosure. That doesn't mean publishers and advertisers should play fast and loose with native ads and make it tough for a consumer to determine if they're looking paid content or editorial. The FTC has plenty of experience and past cases enforcing deceptive ads that blur the lines between advertising and editorial. "There could be enforcement based on existing law and existing enforcement," said Jessica Rich, the director of the FTC's bureau of consumer protection. The only consensus among the panelists and speakers was that transparency and disclosure are important, but finding a single solution (whether it be through labels, or color, borders or other treatment) seemed elusive. Among the big questions raised on Wednesday: do publishers need to disclose that the content was also created by or for the advertiser? What is the best label language to use? How much graphic separation should there be between native ads and editorial? "There's a benefit to having some consistent principles. But ultimately, you're talking about thousands of different brands, different experiences, and different practices, so it's critical that publishers have the flexibility to do what is right for their brands," said Todd Haskell, svp and chief revenue officer for Hearst Magazines digital media, echoing the approach taken by the Interactive Advertising Bureau's initial native advertising guidance released Wednesday. Even the recent studies on how consumers react to native advertising proved inconclusive. Research conducted by Prof. David Franklyn of the University of San Francisco School of Law found that a growing number of consumers simply don't care if the content is paid or unpaid; 50 percent don't even know what the word "sponsor" means." "The market has overwhelmingly blurred the lines in a way consumers have accepted because search is free and the Internet is largely free. If consumers had to pay, they might get more annoyed. The consumer has been conditioned to acquiesce to anything people in this room can think of to make money," said Prof. Franklyn. "It's going to be very hard to regulate," he added. Anticipating pressure from the FTC, the industry has already moved to advance its own guidelines. Coinciding with the workshop, the IAB released its native advertising "playbook," outlining a framework for advertising practices based on six types of native ads. Both the IAB and native advertising guidelines recently issued by the American Society of Magazine Editors got shout-outs from the FTC. The industry itself was mixed on the IAB guidelines. Jonathan Perelman, vp of agency strategy and industry development at BuzzFeed, said more discussion of how to label native ads was needed. “I think some standards around how you call out [native ads] are vital for the industry, because transparency is so important from the user’s point of view,” he said. Chris Cunningham, cofounder and CEO of appssavvy, an ad platform, said the guidelines were a good first step towards defining native advertising, but that he wished there had been more emphasis on native's applications on mobile devices. "People’s time is shifting dramatically quicker to mobile," he said. "So the groundrules, are they going to be as relevant in 2014?" "There is considerable interest from the industry in developing best practices and we are interested in encouraging that," said the FTC's Rich. "We're going to think about our next steps and determine if additional guidance from us will be useful."

Brand Marketing

Native Ad Workshop Leaves FTC Perplexed

Next enforcement steps unclear

Katy Bachman

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Katy Bachman