Industry Assessing FTC Native Online Ad Policy, Says Enforcement Not Far Behind

Several other industry associations and companies said they're still reviewing the long-awaited FTC guide, issued a week ago, and weighing its implications. The Direct Marketing Association is canvassing its members "to understand its potential to stifle innovation that benefits the marketplace," General Counsel Xenia “Senny” Boone said by email. She said DMA has "always landed on the side of transparency and clarity" for consumers and it values policymakers' intention "to ensure that responsible guidance applies to new marketing and advertising strategies."

"The litmus question, as always, is whether new guidance is needed simply because new solutions and strategies are being employed," Boone said. "We value the role of the FTC as it seeks to protect consumers, but we are reviewing the guidelines with caution to ensure the FTC does not pursue new content blocking that may hinder protected commercial speech."

Content discovery platform Taboola, which said it provides more than 10 billion native ad recommendations daily, is also reviewing the new FTC guide. "All of our content recommendation widgets are labeled as either ‘promoted’ or ‘sponsored’ links, and with the industry standard ad choices icon which is a clear indicator that the content is an advertisement," Shelly Paioff, deputy general counsel and head of legal, said in an emailed statement. "We continuously invest in disclosure compliance practices, and in light of the FTC's more specific guidelines around native, we are currently reviewing them to see what (if anything) in our current practices need[s] to change."

Lou Mastria, executive director of the Digital Advertising Alliance, said in an emailed statement his group "has already demonstrated that our core principles of notice and choice apply the same way to native advertising as to other forms of ads. This shows how the DAA's robust self-regulatory regime is keeping pace with marketplace changes by providing real time notice and choice in emerging business models, thus helping to finance the ad-funded digital content and services on which we all rely."

The Interactive Advertising Bureau (IAB) "praised" the FTC's work in a statement issued last week, but said more clarification is needed on some provisions "that could impinge on commercial speech protections and longstanding advertising conventions." IAB Public Policy Vice President Brad Weltman said in the Dec. 24 statement that "in particular, the section on ‘clarity of meaning’ in native advertising disclosures is overly prescriptive, especially absent any compelling evidence to justify some terms over others."

The FTC's action may also have an impact -- possibly "increased activity and effort" -- on industry self-regulation, such as that done by the Better Business Bureau's National Advertising Division, Jaffe said. ANA, which has about 700 members that collectively spend $250 billion on advertising and marketing in the U.S. per year, will get feedback from its members about the new FTC policy and then meet with the commission itself about the issue, he said. Native advertising has been around for a long time, but it's becoming a significant issue as many companies try to incorporate it into their digital frameworks, he added.

The DMA's Boone said her group has "intentionally" developed guidance that's "principle-based agile and can be applied to any type of marketing and technology," which drives responsibility and innovation that "overly-prescriptive regulatory guidance and burdensome legislation cannot." She said DMA has received "minimal" consumer complaints on digital native ads. "Our experience is that consumers understand that a native ad is just that, and are more concerned with content and offer terms," she said. IAB cited its own 2014 study, which said "overwhelming majorities of business and entertainment news audiences ... could easily identify in-feed sponsored content."

But Bart Wojdynski and Nathaniel Evans, both assistant professors at the University of Georgia Grady College of Journalism and Mass Communication, published an independent study in the online December edition of Journal of Advertising that said people had a hard time distinguishing regular editorial content from paid or sponsored content, depending on the language and positioning of disclosure labels. "We showed that, in general, the recognition rate is poor. We had some people read some news stories with disclosure labels modeled after what advertisers use and most of the time they weren't able to pick it up," Wojdynski told us. In one experiment, they found that only 7 percent of 242 participants recognized content as advertising. In a second eye-tracking study, only 17 percent -- 11 out of 60 -- identified articles as advertising.

The study said language matters when identifying paid content. For instance, when "advertising" or "sponsored" is used as a label, participants were more apt to recognize it as paid content, whereas "presented by" or "brand-voice," modeled after Forbes' disclosure label, wasn’t as apparent or clear. Label placement is also important. The researchers said that when people read online they don't typically look at the top of the page. The study said only 40 percent of participants glanced at the disclosure label when it was above the headline, 60 percent when it was at the bottom and 90 percent when it was in the middle.

Evans told us the FTC's "blanket statement for disclosure guidelines is a good start. A necessity, I agree, but it may not work in all cases. We need a more nuanced approach." He said the FTC's guidelines issuance doesn't necessarily indicate the industry is doing a bad job of policing itself on native online ads. But he said the industry should do more in-depth, empirical and accurate research about disclosures, and approach consumer understanding in a different way. He and Wojdynski plan to follow up on their study by looking at different types of disclosures, among other aspects, since, as both said, this type of advertising is rapidly changing.