The FTC has released an enforcement policy statement on so called “native” advertising. This development signals that the FTC is about to take cases against advertorials. The FTC probably has even selected characteristics of native ads it wants to bring its first cases against. Expect the first cases to contain violations of all the sections of the statement.
With the memo, it will be difficult for respondents to argue that they lacked notice (whether fair or ascertainable certainty) of the FTC’s position on advertorials.
Much of the memo recounts existing cases and law. The language on disclosures however is new and interesting. In its guidance to businesses, the FTC advises:
Terms likely to be understood include “Ad,” “Advertisement,” “Paid Advertisement,” “Sponsored Advertising Content,” or some variation thereof. Advertisers should not use terms such as “Promoted” or “Promoted Stories,” which in this context are at best ambiguous and potentially could mislead consumers that advertising content is endorsed by a publisher site. Furthermore, depending on the context, consumers reasonably may interpret other terms, such as “Presented by[X],” “Brought to You by [X],” “Promoted by [X],” or “Sponsored by [X]” to mean that a sponsoring advertiser funded or “underwrote” but did not create or influence the content.
The IAB is upset about this guidance, even invoking the i-word—innovation—as reason to not force advertisers to use clear terms. My own research suggests the “sponsored content” disclosure does not work. However, the IAB counters that its 2014 study conducted by a PR firm found, “that overwhelming majorities of business and entertainment news audiences (82% and 85% respectively), could easily identify in-feed sponsored content.”
In this the IAB misstates the standard for deception, omits negative data, and probably did not use good methods. First, the standard is whether a significant minority of consumers is deceived, not whether a majority understands the disclosures. Thus the IAB’s own findings may indicate that 15–18 percent—a significant minority—did not understand the commercial provenance of native advertising.
Second, the IAB’s own study found that only 41% of general news site readers understood its commercial nature. Thus, a clear majority of general news site readers did not understand that the content was paid for by a company.
Finally, on methods, the IAB’s question was “Q31: How clear is it that this content is paid for by a brand company?” This is a strange question. What is a “brand company” after all? But it is problematic for other reasons—it was asked too late in the survey. And it clues the respondent into the possibility that it was an ad. To properly ask this question, one cannot tell the respondent that it might be an ad.
The literature on advertorials suggests that in addition to labeling, the actual content of the advertorial should signal its commercial provenance. But the FTC did not think it could go that far in its enforcement statement. This is too bad, because some publishers have long used in-text signaling to indicate to the consumer that material was commercial.