What does the FTC's new native advertising guidance mean for brands?

Sellers have vied for consumer attention ever since the birth of commerce when people began buying and selling goods for profit, and the transition from the physical marketplace to a digital one has only intensified this battle.

Matthew B. Crawford, an American writer and research fellow at the Institute for Advanced Studies in Culture, once wrote, “attention is a resource—a person has only so much of it.”

He was referring to the concept of “attention economics”—an approach to the management of information that treats human attention as a scarce commodity.

As content has grown increasingly abundant and immediately available, the struggle of brands and advertisers’ continues to grow as the currency of “attention” becomes increasingly valuable—and native advertising is the latest solution in this quest for consumer eyeballs.

Perhaps best described as a form of advertising that integrates quality content through ad units that conform to the design and feel of the sites on which they display, native advertising purports to produce click-through rates similar to that of editorial content.

And the numbers are hard to argue with: Research has shown that consumers look at native ads 52% more frequently than banner ads, native advertising generates 85-93% more clicks than banner ads, and purchase intent is 53% higher for native ads.

But native advertising isn’t without its controversy. The very concept intentionally blurs the lines between a publisher’s editorial content and advertising content, which is why the general consensus of both critics and proponents alike is that there must be clear regulations regarding the disclosure of native ads.

That’s why in late December 2015, the Federal Trade Commission (FTC) issued an enforcement policy statement and guidance for businesses, detailing how sponsored content can be utilized by brands without crossing the line into deceptive advertising.

The guidelines at a glance

Two documents have been released by the FTC. First, there’s the Enforcement Policy Statement on Deceptively Formatted Advertisements, which establishes the Commission’s policy on deceptive advertising and chronicles the long history of cases over the years where advertising formats have been deemed deceptive.

The second document, entitled Native Advertising: A Guide for Businesses, was created to provide a set of practical guidelines to identify which practices are acceptable and differentiate them from those that aren’t. The guidance contains several examples outlining when brands should label content as being “sponsored” and how to go about making clear and prominent disclosures. It also offers recommendations about the “proximity and placement” of disclosures so that consumers will notice them and easily identify the content to which the disclosure applies.

Here are some highlights from the FTC’s new native advertising guidance:

  1. Disclosure should be front and centre.

The new regulations state that disclosures should be visible enough for readers to notice them, and that publishers and advertisers should take into account different screen sizes and colour contrasts. It also expresses that a single disclosure might not be enough in instances where there are multiple ads in a grouping, and that multimedia ads should be accompanied by a disclosure before consumers receive the advertising message to which it relates.
Dos and Don'ts of Native Ad Disclosure

  1. Plain and simple language.  

The guidance also addresses the language which should be used in disclosures, stating that they should be written in plain and simple language. It also singles out specific terms that are likely to be clearly interpreted by users, such as “ad”, “advertisement”, “paid advertisement”, “sponsored advertising content”, and so on.

  1. Labelling an ad as “promoted by…” isn’t enough.

Interestingly, it also suggests that terms such as “promoted” and “promoted stories” are ambiguous and should not be used in native advertising, and that terms like “presented by…”, “brought to you by” and “sponsored by” are also at risk of misleading consumers, as it could be interpreted by users that the advertiser endorsed or funded the content, but didn’t create it.

  1. Disclosures should appear in front of or above headlines on news sites.  

In short: disclosures must appear in locations where the reader will see it. The guidelines state that “if a publisher site is read left to right, consumers are less likely to notice disclosures positioned to the right of the native ads to which they relate”. Additionally, it states that if native ads are inserted into a vertical content stream, “placing a disclosure below a native ad increases the risk that consumers will click on the ad without seeing the disclosure.”

  1. If the native ad is an image or graphic, a disclosure should appear on the image itself.

Similarly, in the case of native advertising videos, the disclosure should appear before the viewer receives the advertiser’s message.

  1. Disclosures must be made even when content is republished externally.

Even when other publisher sites republish sponsored content, it still must be labelled as such. This also applied to URL links, which should also include a disclosure at the beginning.

What types of native ads does the guidance apply to?

It’s important to note one very important detail: Not all native ads are the same.

Native ads come in many different guises. In fact, in its Native Advertising Playbook, the IAB lists six core types of native ads, but I believe that these can be further broken down into just three categories.

Here’s the lowdown on each of them:

Types of Native Ads

So we now know that there are several different types of native ads, which begs the question: Which kinds does the new guidance apply to? 

Whether it’s an in-feed native ad, sponsored content or a recommendation widget, all of the ad units listed above are considered by the FTC to be forms of native advertising, which means that the new guidelines will apply to each variety.  

So, what does all this mean for brands?

The goal of these guidelines is, of course, to safeguard consumers against deceptive advertising practices while still allowing room for brands to experiment with native. But the application of these guidelines doesn’t just apply to advertisers. The entire industry—including publishers, agencies and anyone else who “participates directly or indirectly in creating or presenting native ads”— also has a responsibility to follow the letter of the law and honour the new guidelines.

That said, guidelines are, of course, exactly that: guidelines. While they may at first seem somewhat prescriptive, they should still allow for reasonable experimentation and originality when it comes to the approach brands take to native advertising.

What it all boils down to is quality. If brands put all their efforts into making genuine, value-adding content and building meaningful relationships with consumers, they’ll fall in line with the FTC’s guidelines with no need to alter their current practices.

For progressive brands like General Electric and Netflix who have nailed the art of content marketing (and by extension, native advertising), abiding by the new regulations will likely be a breeze.