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Advertising, Marketing & Promotions Alert >> Three Recent Developments in Native Advertising from the FTC, MMA & OBA

January 4, 2016

Most recently, the Federal Trade Commission (FTC) released an Enforcement Policy Statement on Deceptive Formatted Advertisements, and the FTC’s policy was supplemented by a Native Advertising Guide for Businesses (Native Advertising Guidelines) outlining why, when and how disclosures should be made when disseminating native advertising and sponsored content. In addition, the Mobile Marketing Association (MMA), issued best practice guidelines for native advertisers, and the Online Interest-Based Advertising Accountability Program (OBA), a self regulatory enforcement regime of the Digital Advertising Alliance, published its first cases requiring the AdChoices icon or its equivalent when native advertisements are geared to consumers’ personal interests based on their browsing history.

Background
The terms "native advertising" and "sponsored content" are commonly used to describe the practice of blending advertisements with news, entertainment, and other editorial content in digital or other media.

Native advertising continues to experience remarkable growth. Business Insider reports that native advertising spending has jumped from $4.7 billion in 2013 to $7.9 billion in 2014, and is expected to surpass $20 billion by 2018.

Naturally, this has attracted the attention of government agencies and the industry's self-regulatory groups and trade associations. Two years ago, the Federal Trade Commission (FTC) held a workshop on native advertising, indicating that it has historically and will continue to review native advertising as part of its general enforcement under Section 5 of the FTC Act – an approach confirmed by its recent release of official guidelines on the topic. Recently, the National Advertising Division of the Better Business Bureau (NAD) has issued a number of decisions exploring the prominence and transparency of native advertising disclosures and has found (and the FTC reiterated the position in its Native Advertising Guidelines) that suggested content appearing with statements such as "You may like" or "More from the Web" may confuse consumers as to why the content is linked, so, the disclosure must be made more appropriately and more prominently – for example, in terms of font size, color, boldness, and placement on the page distinguishing editorial from advertorial content.

FTC Issues Guidelines
The FTC's recent Native Advertising Guidelines spell out its current stance with respect to native advertising and shed light on its renewed approach going forward. The Enforcement Policy Statement tracks closely the FTC's key principles of transparency, disclosure and monitoring, advising that consumers may be misled about the nature or source of an advertising message. If a misleading impression may affect the consumers' conduct regarding the advertised product or services, clear and prominent disclosures need to be included, such as "advertisement" or "sponsored advertising content" (as opposed to 'ambiguous' terms such as "promoted," which could lead consumers to believe that content is endorsed by a publisher site). The FTC echoed the NAD's position that disclosures such as "More from the Web" may mislead consumers about the source of the content. In addition, the FTC also stated that disclosures such as "Presented by [Advertiser]" should be evaluated for appropriateness given the context, the advertiser's role in the content creation, and the extent to which advertiser products or services are promoted, as consumers may interpret these disclosures to mean that a sponsoring advertiser funded the post but did not actually create or influence the content. These disclosures need to appear in close proximity to (in front of or above) the native advertising headline, accompanied by visual cues such as shading or borders, and not buried in an end link. The FTC’s Native Advertising Guidelines provide detailed examples of when disclosures may or may not be required (and the form those disclosures should take). For example, if the advertising content has the potential to mislead consumers about the commercial source of the message, regardless of medium, a clear and unambiguous disclosure would be required (including in audio or video formats). If the source of advertising content is clear, consumers can make informed decisions about whether to interact with the advertising and the weight to give the information conveyed in the ad (including the decision to purchase a product or service). The more similar a native ad is to its surroundings (e.g., a sponsored DIY video placed on a home improvement TV show website or an in-app ad such as a sponsored game icon), the more crucial the disclosure. Further, echoing recent NAD decisions including ESalon (ESalon.com LLC, NAD Case Report No. 5645 (Oct. 17, 2013), the FTC has stated that disclosures should be re-posted whenever native ads are republished via social media, email, search results or other media.

In evaluating whether an advertisement’s format is misleading, the FTC will examine the "net impression" of the ad – reviewing factors such as:

  • Its overall appearance. The similarity of its written, spoken or visual style to non-advertising content offered on a publisher's site, and;
  • The degree to which it is distinguishable from other content – for example, by using different fonts, colors, and shades.

The FTC is only more likely to scrutinize these practices and bring enforcement actions related to the Native Advertising Guidelines moving forward into 2016.

The MMA Speaks
The MMA's newest guide on best practices for native advertising is the third of a three-part series on native advertising. It follows on the heels of its guidelines for mobile native ad formats and its white paper on the effectiveness of native advertising.

After offering some suggestions for publishers (e.g., native advertising should complement a publisher's organic content), the MMA paper proposes four steps for advertisers to take to improve the efficacy of their native ad campaigns:

  • Identify the environments and publisher contexts that are most relevant for their campaign and customize the messaging and format accordingly;
  • Spice up the ad and headline to catch the eye of the user with creative content;
  • Maximize exposure by leveraging social and viral trends for advertising in social feeds; and
  • Identify the direct response metrics and the end conversion metrics that impact their business and optimize campaigns towards achieving them.

OBA Cases
The key principle related to native advertising to be derived from the OBA cases, which involved Gravity, Inc., and Outbrain, Inc., two companies specializing in native advertising, is that advertisers must tell consumers when sponsored content is tailored to their specific interests.

Gravity had disclosures on its website regarding its interest-based advertising (IBA) technology practices but it did not provide an enhanced notice link to alert consumers about Gravity’s data collection and use practices or its IBA opt out. After Gravity learned of the OBA's concerns, it voluntarily came into compliance with the Digital Advertising Alliance's Self-Regulatory Principles for Online Behavioral Advertising, or the "DAA Principles."

Similarly, the OBA said, Outbrain was not fully compliant with the DAA Principles because it did not have the required enhanced notice link on any page where data was collected by third parties engaging in IBA. The OBA also said that it could not find a disclosure of third-party IBA activity on the Outbrain website or a compliant opt-out link or links.

Because Outbrain had begun to bring its operations into compliance before the OBA’s formal inquiry, the OBA closed this case as an administrative disposition rather than a decision.

Bottom Line

As native advertising continues to grow in importance, we will likely continue to see both more self regulatory guidance including possible further clarifications based on the recent FTC guidance, more self regulatory enforcement by organizations such as the NAD and OVA, and likely enforcement actions by the FTC where advertising or marketing communication agencies, brands, or publishers fail to clearly and conspicuously disclose that native advertising is in fact advertising.

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, and, as, the recent OBA enforcement cases provide, ensuring that proper notices and opt-out mechanisms are included from a privacy perspective when targeting consumers with native ads.