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The FTC Goes ‘Native’

8 Oct, 2013 By: William I. Rothbard


Unless the government is still shut down, the Federal Trade Commission (FTC) plans to go “native” on Dec. 4, hosting a public workshop on the latest – some say disingenuous – innovation in digital advertising: so called “sponsored content,” a.k.a. “native advertising.”

What, you may ask, is native advertising? It’s a fancy label for describing paid advertising that is blended with original – or “native” – content so that it ideally feels less intrusive and will result in more clicks.

One example, discussed previously in this space, is Facebook’s “Sponsored Stories” campaign, which incorporate users’ “Likes” for a product or brand into a paid ad that runs in the news feeds of their friends. “Sponsored Stories” are popular with advertisers because consumers are more likely to recall and respond to an ad if it came with a plug from someone they know. And, because they blend into the news feeds, they don’t seem like traditional ads, which can increase their effectiveness.

Each of the mega stars in the social media firmament – not just Facebook – have embraced the concept (and monetization potential) of native advertising, whether it be “Promoted” tweets, trends or people on Twitter, “Sponsored” search ads on Google, “True View” video ads on YouTube, or “Promoted” posts on Tumblr. Even LinkedIn is now joining the fray, becoming a daily destination not only for professional job opportunities, but also news that can be blended for profit with native ads.

While the term is fresh, “native advertising” is only the most recent in a long list of clever (if not always kosher) ad “disguising” techniques to attempt to overcome consumer aversion to saturated media advertising. Whether it’s been an infomercial, an advertorial, “fake” news sites, sponsored product reviews or supposedly unpaid celebrity product plugs in “novel” contexts like talk shows or social media (now addressed in the FTC’s Endorsement Guides), the idea has always been the same: attempting to gain the consumer’s attention by packaging ad content within a seemingly non-commercial environment. The issue for the FTC, of course, with each of these methods – and surely now with native advertising – is whether the consumer recognizes the content as advertising, and if not, what “alerts” will put the consumer on notice so she is not misled about its true nature and purpose.

Just as the FTC has developed and enforced disclosure guidelines to protect consumers from the potentially misleading effects of these predecessor forms of “sponsored content,” so, too, it will for native advertising. First, however, it has to understand it, which is the purpose of the December workshop. You could learn more about the event at www.ftc.gov, but since the site is currently shut down along with the agency (and the author is still open), you can learn here. Topics that may be covered include:

  • What is the reason for the wall between regular content and advertising? What are the challenges in maintaining that wall in digital media, including mobile?
  • How are paid ads integrated into, or presented as, regular content, and in what contexts does this occur?
  • What business models support the monetization and display of native advertising? What entities control how the ads are presented to consumers?
  • How can ads be distinguished from regular content, such as through labels and visual cues, and how can the differentiation be maintained when, for example, the ad is recirculated through social media?
  • What does research show about how consumers notice and understand ads that are blended in with news, entertainment, or other native content? 

Requests to participate as panelists are due by Oct. 29. For those of you using or considering using sponsored content, the workshop – and the report likely to follow sometime after – will be an opportunity to gain insight into the commercial benefits and compliance risks of native advertising. That insight could pay dividends down the road when the FTC feels it finally knows enough about this new digital advertising practice to begin taking enforcement action against uses of it that mislead consumers.

William I. Rothbard is a former FTC attorney and practices in Los Angeles, specializing in advertising and marketing law. He can be reached at (310) 453-8713, Rothbard@FTCAdLaw.com, and www.ftcadlaw.com.


About the Author: William I. Rothbard


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