Native advertising continues to experience remarkable growth. Business Insider reports that native advertising spending increased from $4.7 billion in 2013 to $7.9 billion in 2014, and is expected to surpass $20 billion by 2018. With this type of growth, it is not surprising that the Federal Trade Commission (FTC) recently released an official policy statement on deceptive "formatted advertising" accompanied by a native advertising guide for businesses, which outlines why, when, and how disclosures should be made when disseminating native advertisements and sponsored content.
(Native advertising is the practice of blending paid or sponsored content with editorial reports or news; for example, placing paid content and/or entertainment in the context of other editorial content in print, digital or other media.)
These guidelines have important implications for public relations firms and all communications professionals and companies.
FTC issues guidelines
In the new guide, the FTC insists that marketers add clear and prominent disclosures, such as verbiage that reads "advertisement" or "sponsored advertising content," to prevent consumers from being misled about the nature or source of a sponsored message. The FTC has also made clear that it will not be satisfied by "ambiguous" terms such as "promoted," which could lead consumers to believe that content is endorsed by a publication.
The FTC also followed the prior decision from the National Advertising Division of the Better Business Bureau that disclosures such as "you may like" or "more from the Web" may mislead consumers to believe that the content is editorial, and not sponsored or advertising. The FTC has also stated that the adequacy of disclosures such as "presented by…" will be determined in light of the context, the marketer’s role in the content creation, and the extent to which the marketer’s products or services are promoted.
The FTC will take all these factors into consideration in order to determine, among other things, if consumers may interpret certain disclosures to mean that a sponsoring marketer funded the post, but did not actually create or influence the content. Disclosures need to appear in close proximity to (in front of or above) the native advertising headline, accompanied by visual cues such as shading, font, formatting, or borders.Additionally, the disclosures should not be buried at the end of the content.
The FTC’s guidelines also provide detailed examples of when disclosures may or may not be required (and the form those disclosures should take). Here are four takeaways from the examples in the guidelines:
- If the sponsored content has the potential to mislead consumers about the commercial source of the message, regardless of medium, a clear and unambiguous disclosure will be required (including in audio or video formats).
- If the source of the sponsored content is clear, consumers can make informed decisions about whether to interact with the marketer and make their own decision about the weight to give the information conveyed in the sponsored content (including the decision to purchase a product or service).
- The more similar sponsored content is to its surroundings (a sponsored DIY video placed on a home improvement TV show website or an in-app ad such as a sponsored game icon, for example), the more clear and conspicuous the disclosure must be.
- Disclosures should be reposted whenever native ads are republished via social media, email, search results, or other media.
In evaluating whether a marketer’s format is misleading, the FTC will examine the "net impression" of the sponsored message, reviewing factors such as:
- Its overall appearance, including the similarity of its written, spoken, or visual style to non-advertising content offered on a publisher’s site.
- The degree to which it is distinguishable from other content – for example, by using different fonts, colors, and shades.
As native advertising continues to grow in importance, we will likely continue to see more FTC enforcement actions in which marketing communication agencies, brands, or publishers have failed to clearly and conspicuously disclose that sponsored content is in fact sponsored. Best practices include separating native advertising from editorial content in a manner that clearly distinguishes each (with reference to the specific examples and practices recommended by the FTC), clearly disclosing and ensuring your partners are disclosing native advertising as paid advertising or sponsored content.
Michael Lasky is a senior partner at the law firm of Davis & Gilbert LLP, where he heads the PR practice group and co-chairs the litigation department. He can be reached at email@example.com.