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Native Advertising: The Pros and Cons

In a day-long workshop, the Federal Trade Commission mulled the blurred lines that arise from native advertising.

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The debate continues to rage over so-called native advertising in the digital world — and the Federal Trade Commission wants to be part of it.


In a day-long workshop entitled “Blurred Lines: Advertising or Content?” the FTC amassed experts from the fields of journalism, advertising, law and publishing to examine ethical questions associated with native advertising, or content that is paid for by an advertiser. 


Although the day wound up somewhat open-ended — FTC director of the bureau of consumer protection Jessica Rich seemed uncertain if her agency should provide “additional guidance” — she underlined the importance of native advertising. 


“Today the interest in native advertising is stronger than ever,” she said, noting that it’s a multibillion-dollar industry. “The goal is that consumers can distinguish native advertising from editorial content.”


Based on the FTC’s revised endorsement guides from 2010 that decry such transparency above all else, panelists examined topics ranging from the form sponsored content has taken in digital publications to consumer recognition and understanding of native advertising to transparency in such advertising.


No one present at the FTC’s workshop denied the need for new forms of advertising, nor did they refute the need for disclosure of native ads. Disclosure in some form or another — be it through shaded text, logos or disclaimers — must exist to prevent the ad from being deception, panelists agreed.


Calling his company’s publications “legacy” brands, Todd Haskell, senior vice president and chief revenue officer at Hearst Magazines Digital Media, said “trust” is paramount when delving into native advertising.

“Above all else, our readers trust us for information, for entertainment and for ideas,” he said, as he showed a native ad on Harper’s Bazaar’s Web site from Nordstrom on its Ugg boot offering.


Haskell emphasized that in choosing an advertising partner, publications must remain true to their brand’s DNA, or else the reader will be turned off.

 

“One of the critical facets of native advertising is, as someone said very famously, it shouldn’t suck,” he also offered.


Mashable Inc. chief strategy officer Adam Ostrow echoed Haskell’s theme of trust and added that publications should have a set of uniform policies when it comes to native ads. “You need to have editorial checks and balances,” he said, noting that often advertisers try to make their content look more similar to editorial content by asking for labeling to be altered.


Steve Rubel, Edelman’s executive vice president and chief content strategist, took a more democratic view of native ads, explaining that while creating content is a “kind of arrow in our quiver” it shouldn’t “trump so-called earned media” placement.


“The two can sit together and nicely complement each other,” he added.


Lisa LaCour, vice president of global marketing of Outbrain Inc., a company that helps promote native ads, went further, declaring that the “industry isn’t the only one pushing” for native advertising and sponsored content, but that the “consumer” is asking for more sponsored content so it can “interact” with brands.

That statement was left untouched, as the FTC moved to the topic of consumer recognition.


According to “On the Media” cohost Bob Garfield, the real danger with native advertising lies in what goes undetected by consumers. The onslaught of native advertising goes beyond the deception of consumers and, with every transaction they make, publishers are jeopardizing and exploiting the public’s trust, he contended.


Red Barn Media creative director Jamie Cole noted that the less is disclosed, the more people tend to respond to the content — which is the aim of the advertiser.


Michelle De Mooy of the National Priorities Consumer Action countered, “Basically, you’re tricking people,” a statement that Cole did not dispute.


Speakers also discussed some of the pros and cons for various terms that mean native advertising such as “paid content,” “sponsored by” and “commercial advertising.” Chris Pedigo, vice president of government affairs at the Online Publishers Association, said there is not a magic bullet term that will work across all digital mediums primarily because each audience varies from the next. What works for a 16-year-old Seventeen magazine reader will not necessarily suit a House & Garden reader.


Having surveyed 10,000 people in several countries about native advertising, David Franklyn, director of the McCarthy Institute for IP and Technology Law at the University of San Francisco School of Law, said that more than 50 percent of respondents did not know what sponsored advertising meant. “Some people don’t even know what advertising means,” he said. In addition, more than half of the respondents could not recall whether they had seen any native advertising in the last year or two, he said.


Research has indicated that senior citizens and minorities sometimes do not recognize native advertising as such, panelists said.


A somewhat philosophical conversation ensued in the final panel over the way publishers refer to paid content.


“Why do people prefer the word sponsored to advertisement? The whole point is to avoid the disclosure that ought to be made,” said Robert Weissman, president of Public Citizen, who complained that there is a “softness” to the phrasing “sponsored by,” as it doesn’t indicate an advertiser created the content.


Robin Riddle, global publisher of WSJ Custom Content Studios, said that at The Wall Street Journal, they use the terminology “sponsor generated content” to avoid confusion.


Lawyers and policy wonks on the panel spoke about the meaning of words and whether it “harms” or “confuses” the consumer, while Sid Holt, chief executive officer of the American Society of Magazine Editors, took a straightforward, plainer view of the issue.


“Native advertising ought to be clearly labeled as advertising,” Holt said. “The content should not look like editorial content. If it’s paid media, it’s an ad in my perspective.”


Buzzfeed Inc. president and chief operating officer Jon Steinberg opened up another can of worms when he addressed the issue of social media and how native ads are shared. Facebook, for instance, does not allow users to disclose the sharing of sponsored content, meaning it isn’t apparent that a user is sharing an ad with his or her friend.


Panelists were conflicted over the ethical dilemma of social media and left the question open.


For many struggling print publications, native advertising has been a lifeline way to bring in revenue. The practice, however, has in many ways muddled the once strict barrier between editorial content and ads and, to some, changed editorial standards.


Controversy derived from advertising isn’t exactly new, explained Columbia University Graduate School of Journalism professor Nicholas Lemann, who spoke at the workshop Wednesday.


“In the beginning, journalism was not a commercial endeavor,” he said. “It was only after the Civil War that journalism began to develop.”


Over time, as the business side of journalism advanced, news organizations were charged with distinguishing advertising from editorial copy. “These separations were regarded as absolute,” Lemann said, underscoring that there was “trust” in the content produced by news publications, and both advertisers and readers knew this.

 

In the digital age, advertisers are less concerned with having ads in “legacy” publications such as The New York Times or The Washington Post, he said, noting that instead they want to target specific audiences. Those audiences live in multiple corners of the Internet. Messages can be disseminated from a variety of organizations, for instance.


“Google alone — one company — is on track to surpass the entire newspaper industry in advertising revenue within the next few years,” he said, explaining that, as a result of widespread competition in the digital world, news organizations are severely pressured to find innovative ways to sell ads.


“This creates a sense bordering on desperation in folks who are creating editorial news content,” meaning native advertising and sponsored content are “inventions mothered by necessity,” he said.