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The FTC Issues Guidance on Native Advertising

InsideCounsel Gregory T. Everts

The Federal Trade Commission (“FTC”) defines native advertising as digital advertising or promotional content “that bears a similarity to the news, feature articles, product reviews, entertainment, and other material that surrounds it online.” Native advertising, in other words, is advertising that is similar to, and often indistinguishable from, independent editorial material and other online content that is not advertising.

Native advertising is everywhere on the internet in the form of articles, blogs, tweets, videos, and other material. The problem, the FTC says, is that when something looks like an article, video, or game, yet it’s really advertising, and consumers are not able to tell the difference, that’s deceptive. The FTC attempted to clarify the rules relating to native advertising with a new Guide, issued in December, along with an Enforcement Policy Statement.

As the FTC’s new Guide on native advertising explains:

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. Why would it be material to consumers to know the source of the information? Because knowing that something is an ad likely will affect whether consumers choose to interact with it and the weight or credibility consumers give the information it conveys.

In determining whether disclosure is necessary the FTC looks to the overall impression created by the advertisement’s text, images and sound. The similarity of the ad’s written, spoken, or visual style or subject matter to the non-advertising content near which it appears, and the degree to which it is distinguishable from such non-advertising content, are important factors. The more that native advertising resembles non-advertising content in the same space, the more likely disclosure is required.

Key Principles
Transparency is the watchword. Advertising and promotional messages should be presented in a way that makes clear they are paid content and not imply they are something else.

In some cases advertising may be so obviously commercial it is unlikely to mislead anyone, even without disclosure. In other cases, however, disclosure is needed to make clear the fact that the content is advertising. Where disclosure is needed, it should be clear and prominent so that consumers will notice and understand it.

The FTC’s new Guide provides illustrations to show how the FTC will apply these principles. Here are just a few:

  • Winged Mercury, a shoe manufacturer, pays Fitness Life, an online magazine, to create an article titled “The 20 Most Beautiful Places to Vacation.” Fitness Life's website tags this article as “Presented By” Winged Mercury. The article is a form of advertising but does not mention or promote any Winged Mercury product; thus, no additional disclosure that the article is advertising is required.
  • Winged Mercury sponsors a different ad on Fitness Life's website, also in the form of an article, with headline “Running Gear: Mistakes to Avoid.” The article is similar in appearance to non-sponsored articles and it also recommends Winged Mercury’s shoes for injury prevention. Here, because consumers are likely to conclude that the article was independently generated by Fitness Life, clear and prominent disclosure of the commercial connection is required. This disclosure is required not only on the site’s main page, but on the click-into page also because consumers might not always go through the main page to access the article.
  • Another website links to the “Running Gear” article on Fitness Life’s site (and to other, similar articles). Such links are formatted to look like news headlines and grouped together with headings like “More Content For You” or “From Around the Web.” Here once again, the similarity of this format to non-advertising content on the same site is likely to mislead consumers into thinking the article at the link is an independent story rather than paid content. Before consumers click this link, then, a clear and prominent disclosure is required.
  • Winged Mercury's “Running Gear” article includes buttons so readers can post a link to the article from their personal social media. When posted, such links look pretty much the same as links to non-advertising articles on Fitness Life, also posted to social media. Here again, disclosure is required so that consumers are alerted to the commercial nature of the article before clicking into it.

Clear and Prominent Disclosure
When required, as noted, disclosure must be clear and prominent. According to the FTC, what’s clear and prominent will be determined by performance—i.e., does the disclosure actually work to inform consumers that native advertising is advertising. The FTC recommends:

  • Using unambiguous language readily understood by consumers.
  • Making the disclosure as close to the ad as possible, in a font and color that’s easy to read, and a shade that stands out against the background.
  • For video ads, putting the disclosure on the screen long enough to be seen, read and understood; for audio ads, using words consumers will understand and a cadence that’s easy to understand.
  • Disclosures should be clear for all of the devices and platforms consumers are likely to use when viewing the advertising.

Even more specifically, the FTC recommends disclosure using terms such as “Ad,” “Advertisement,” “Paid Advertisement,” “Sponsored Advertising Content,” or some variation thereof. The FTC disapproves of “Promoted” or “Promoted Stories” because these terms are ambiguous; consumers may think simply that the content is promoted or endorsed by the hosting website. The FTC also cautions that phrases like “Presented By,” “Brought to You by,” “Promoted by,” and/or “Sponsored by” can be confusing, depending on context. While such phrases may alert consumers to the fact the material was funded by an advertiser, they may not sufficiently alert consumers to the fact that the advertiser also influenced its content.

For more information on when disclosures are required, and on how to make effective disclosures, see the FTC’s Guide (link above), or the FTC’s .com Disclosures guide, https://www.ftc.gov/tips-advice/business-center/guidance/com-disclosures-how-make-effective-disclosures-digital.

Conclusion
Native advertising now appears nearly everywhere, but online advertisers must be careful to avoid deception by ensuring that consumers can distinguish between advertising and non-advertising content. When paid content is used to promote an advertiser’s products or services, and this content blends in closely with non-advertising content in the same space, the fact of this sponsorship should be clearly and prominently disclosed.

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