The Federal Trade Commission has released new guidance on native advertising - or advertising designed to look like anything but an ad - including directions for publishers and advertisers as well as a policy statement on its enforcement approach.
The new guidelines are outlined in the FTC’s Enforcement Policy Statement on Deceptively Formatted Advertisements and in Native Advertising: A Guide for Businesses. Native advertising is any ad that looks like non-advertising content, including news and product reviews. The concern is that ads that don’t look like ads may mislead readers.
In Native Advertising: A Guide for Businesses, the FTC states that its job is to “ensure that long-standing consumer protection principles apply in the digital marketplace.”
"The FTC has been battling advertising masquerading as editorial content for decades, so their position is well-known and venerable," said Eric Goldman, professor at Santa Clara University School of Law. "However, this is the first time the FTC has released formal guidance about native advertising as a subset of the broader phenomenon.”
Advertisers are using native ads more often as a way to work around technology that allows consumers to skip or block online advertising. The goal of online native advertising is to make the ad content less distinguishable from regular content so readers are more likely to click on it.
The FTC stated that “knowing that something is an ad will likely affect whether consumers chose to interact with it and the weight or credibility consumers give the information it conveys.”
The guidelines said the FTC considers native ads deceptive when they “convey to consumers expressly or by implication that they’re independent, impartial, or from a source other than the sponsoring advertiser.”
“The legal rule is simple: ads should look like ads, editorial content should look like editorial content," said Goldman. "Anyone who wants to blur those lines should nevertheless try to send adequate signals to consumers that ads are ads.”
Though the new guidelines require greater transparency, the FTC is not completely rejecting native advertising. Some content is so clearly commercial that it is easily recognized as advertising regardless of the format. For content that is less clearly commercial, advertisers will be expected to include prominent disclosures that let consumers know that the content is advertising.
But advertisers themselves are not the only ones affected by the new guidelines. The new policy applies to “everyone who participates directly or indirectly in creating or presenting native ads.” This includes ad agencies and network operators.
The penalties for not doing so, may be great.
“The FTC has regularly brought enforcement actions for misportraying ads as content," Goldman said. "Even if the resulting settlement doesn't require paying any money, the costs of negotiating with the FTC and complying with the settlement terms are time-consuming, costly and onerous.”
The Enforcement Policy Statement on Deceptively Formatted Advertisements was approved unanimously by the FTC. Both the so-called "Guide for Businesses" and the associated policy statement are the product of analysis and discussion that started with an FTC workshop held December 2013 and encompass relevant consumer research as well as analysis of how advertising is used, the FTC said.
But Goldman said the guidelines may be less helpful than the FTC intended.
“What's appropriate in any particular case unfortunately depends on lots of little details, which is why the FTC's guidance isn't really likely to resolve very much.” he said.