Benefits, Drawbacks of Native Advertising Claimed at FTC Workshop
Native advertising was characterized as everything from beneficial to both the consumer and media industry to a violation of ethics that could destroy the media industry “one boatload of shit at a time,” during a daylong FTC workshop on the issue. The former characterization came from panelists representing publishers, content discovery platforms, ad companies and public relations firms. The latter came from Bob Garfield, co-host of On the Media and MediaPost columnist. Legal researchers later presented studies on how users consume and understand various forms of advertising.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
"The practice of native advertising, which imitates the form and style of the media in which it is featured, is not new,” said FTC Chairwoman Edith Ramirez in opening remarks. But new digital marketing techniques are integrating advertising “more seamlessly and inconspicuously” into online content, she said. Seventy three percent of online publishers already allow some form of native advertising, while 17 percent are considering allowing it by the end of 2013, according to a recent survey both Ramirez and Garfield cited. And 41 percent of brands are currently using native advertising, Ramirez added. “By presenting ads that resemble editorial content, an advertiser risks implying, deceptively, that the information comes from a non-biased source,” she said. “Properly designed disclosures can mitigate this possibility."
It’s a “long-standing FTC principle” to look at the “entire mosaic” of what an ad conveys to consumers and ensure there are “clear and conspicuous disclosures,” said FTC Bureau of Consumer Protection Staff Attorney Lesley Fair. She pointed to the FTC endorsement guides, last updated in 2009 (http://1.usa.gov/1gF5GHd), and an FTC staff letter to search engine companies, revised and resent earlier this year (http://1.usa.gov/18mo0PG) (CD Nov 27 p5).
Publishers said they have benefited from smart, transparent native advertising. Adam Ostrow, chief strategy officer for digital publisher Mashable, called sponsored content “our most engaging content on the site in terms of the time people are spending with it.” “With branded content you're talking about more evergreen things” that stay relevant to consumers for longer periods, he said. Such quality sponsored content allows “publishers to generate revenue that they're missing from the newspapers,” said Jon Carmen, senior vice president of operations at Adiant, a digital media technology company. “Content-style ads are the next generation."
The arrangement also works well for the sponsors, Ostrow said. Regular display ad click-through rates are doubled when they appear alongside the company’s sponsored content, he said. On the Mashable homepage, the units reserved for native advertisements get eight to 15 times the click through of traditional display ads on the homepage, according to Ostrow.
Transparency and trust is key for native advertising, said Lisa LaCour, vice president-marketing at Outbrain, a content recommendation platform. Outbrain offers publishers the ability to put “Recommended For You” or “From Around the Web” modules at the bottom of articles. “We put the audience and the audience trust factor at the forefront” of all decisions about what content to recommend, saying Outbrain rejects about 50 percent of the content it gets from customers. The headlines for the recommended content includes where that content is from in parentheses after the headline, which is critical to ensure consumer trust, LaCour said. “If we were to mislabel things we'd quickly lose their trust,” and quickly lose readers, Ostrow added.
"Trust is not meant to be a barter item,” Garfield said. Native advertising “violates the most basic publishing ethics,” he said. “With every transaction publishers are mining and exploiting the rarest of rare resources -- trust.” Even if sponsored content is clearly demarcated at its original source, it can quickly spread around the Internet through social media and syndication without the proper disclaimers, he said. For instance, Garfield cited one article that was syndicated on 162 other sites, many without the similar sponsorship markings, within eight hours of its original posting. “We can try to influence your choice by pre-populating tweets” and mentioning the content is sponsored, said Huffington Post’s Director of HuffPost Partner Studio Tessa Gould. “We can try to steer them the best way forward,” but ultimately can’t control what happens.
Even when sponsored content is labeled, “people often skip over labels” or “don’t know what the word sponsor means,” said University of San Francisco School of Law Professor David Franklyn, who also heads the McCarthy Institute for IP and Technology Law. Franklyn has done research showing two thirds of people “got it wrong” when presented with websites’ home pages and asked to identify which sections were sponsored. “Context matters more than labels,” he said. And the context of native advertising is to resemble editorial content, which leads to confusion for consumers.
But Franklyn’s research also showed a third of people don’t care if content is sponsored or not, he said. Some even said they were more likely to click on a form of content if it was sponsored, which begs the question, he said, “What are we protecting the consumer from?”