Blurred Lines: Advertising or Content? An FTC Workshop on Native Advertising

Blurred Lines: Advertising or Content? An FTC Workshop on Native Advertising

Welcoming Remarks:  Edith Ramirez, Chairwoman, FTC

Advertising integrated into digital content. Recent survey of online publishers: 73% offer native advertising opportunities and 17% considering. 41% of brands and many ad agencies currently use it and more hope to do so. Hope to capitalize on publishers’ reputations.  Critics argue this improperly exploits consumers’ trust or deceives them outright. Proper disclosures can manage this risk.

A Historical FTC Perspective: Advertorials, Infomercials, and Paid Endorsement

Lesley Fair,  Staff Attorney,  Bureau of Consumer Protection, FTC

Settlement: FTC settled with Munsen Specialty Co., in vol. 1 of FTC decisions, 1917—deceptively promoted high tech product through content that didn’t look like ads.  This is not a new phenomenon.

Act or practice is deceptive if it’s likely to mislead consumers acting reasonably under the circumstances and it would be material to a buy/use decision.  Deceptive door openers: salesmen literally got in the door by claiming to be surveyors, but were actually selling encyclopedias. This is an example given in the 1984 deception policy statement: when the first contact is made deceptively, this leads to a violation.  FTC 1968 advisory opinion on ads in news format: e.g., local restaurants with a promotion that interviewed the chef and discussed the specials/prices.  FTC concluded that where the column had the appearance of impartial, independent and unbiased view, but was in fact paid by advertiser, disclosure must be clear and conspicuous.  FTC considered not just what promotion said but impression conveyed to consumers by visuals: examines net impression.  Also deceptive mailings: “Prize Notification Bureau” with “State of California Commisioners of Registration” seal—FTC v. National Awards Service Advisory, 2012—tricked people into paying $20 to claim the alleged prize.  Yellow sticky note post-its that appeared to be handwritten and directed specifically at the recipient, but mailed to millions of consumers—again, FTC action. 

Infomercial formats too.  “Consumer Challenge” compared to 60 Minutes and 20/20; the pitch was given during snippets of the purported show with “investigative reporters” that claimed to investigate “popular” products. Commission did not challenge the underlying product claims, but the false representation of independent investigation when it was really just an ad.  FTC has challenged format as deceptive in both TV ads and alleged radio call-in shows.

Materially falsifying header information in spam email is illegal and even sometimes a crime.  Still fighting websites that appear to be news—“Health 5 beat” or “News 6 News Alert”—allegedly falsely claimed to be reports that appeared in ABC News or even Consumer Reports; reporter sometimes claims to have lost weight herself.  FTC has filed two dozen suits against people selling the pills, the people who put together the fake news sites, and the affiliate networks that use them.

Material connections between advertiser and endorser should be clearly and conspicuously disclosed where the audience wouldn’t expect it, as always. Thus, settlement from 2010 over PR firm that had people post reviews of a game on iTunes on behalf of the game company.

Staff letters sent to search engines on this issue.  Staff recommends sites ensure any paid ranking search results are distinguished from non-paid with clear and conspicuous disclosure; no affirmative statement is made that might mislead consumers about the basis on which the search result is generated.  Reiterated: 2013, paid search results have become less distinguishable, but consumers ordinarily expect that natural results appear from relevance, not based on payment—including a site in whole or in part because of payment is advertising; consumers should be able to distinguish paid and natural.  Specialized search should also be reviewed. Disclosure should keep pace with delivery of information.

The Wall Between Editorial and Advertising: Its Origins and Purpose

Nicholas Lemann, Professor of Journalism  Columbia University Graduate School  of Journalism

Street sales as a business model required timely and attention-getting content.  Advertising became important to revenue in late 19^th century (after political sponsorship declined). Large audiences gave papers argument that they could help advertisers sell. As early as the 1870s there were discussions of distinguishing editorial from advertising content. Complaints about “puffs” touting advertisers’ products without revealing connections.  Colliers magazine published expose about patent medicine industry, including advertising practices.  “The Patent Medicine Conspiracy Against Freedom of the Press”—the standard ad contract between patent medicine companies and newspapers declared it subject to cancellation if any material detrimental to company’s interests is permitted to appear anywhere in the paper. Helped lead to formation of FDA’s predecessor agency.

1912 Newspaper Publicity Act, still on books. Used threat of taking away lower postal rates as leverage, required newspapers and magazines to publish accurate information about ownership, management and circulation and to label ads designed to look like editorial matter. 1913 decision: upheld under First Amendment.  1914: FTC born.  Big publishers wanted to make advertising respectable, and saw advantage compared to small, less reputable local publishers.  Longterm subscriptions were beginning to replace single-copy sales as primary direct source of revenues, at least for affluent/educated audience. Sustained trust was the key to subscription revenue, which meant editorial sobriety and a potentially profitable ad strategy for prestigious brands. This required standards for content/general ickiness for ads. Partly professional pride/vanity and partly self-interest. The value proposition of the publication was trust in editorial content, and that was what they were selling to advertisers.  Vitiating that would hurt themselves.

Codes of Conduct exist against the relentless daily pressure to give advertisers something special for their business, and are generally only produced by established, big institutions, and there isn’t much like that online.  Newspapers/traditional news sources are seeing alarming declines in revenues—Newsweek was sold for $1, while the Washington Post was sold for $250 million, a fraction of former value; the WP building was worth nearly as much. Legacy organizations initially believed that established websites building on their brands would give them nearly as much revenue as before; that’s not true because advertisers can pay lower rates to reach more targeted groups of potential customers, often using sites like Facebook that have more users but produce no editorial content.

In the past, being close to WP editorial content could itself signal trustworthiness, but that world has been blown apart online.  WP thought it could go to the same advertisers with the same cost per thousand readers, but the horrible surprise has been advertisers refusing to do that online.  Why?  Don’t have to buy the whole audience; social media and search sites are competitors, offering very targeted audiences. Also, turns out WP readers online spend 10 seconds per visit as opposed to an hour with the paper; buying less attention.  This creates a sense bordering on desperation in people creating editorial news content. New publications aren’t socialized in church/state division, creating a chaotic situation similar to that when the FTC was created.

Online news organizations have begun a wide variety of advertising practices. Inventions mothered by necessity where fewer than half the entities are operating profitably online (at most).

Panel 1: Sponsored Content in Digital Publications: The forms it takes and how it operates

Moderator:  Laura M. Sullivan, Staff Attorney, Division of Advertising Practices, FTC

Panelists:

Adam Ostrow, Chief Strategy Officer, Mashable, Inc.: think of ourselves as most social media publisher; more than 1/3 of traffic comes from Pinterest, Twitter, etc. and average sharing of item is 2500.  Monetize the site by marrying themes/topics relevant to brands with editorial content that isn’t promotional but aligns with their themes.  AmEx wanted to reach female small business owners, so we created Female Founders series, profiling women in technology, presented by AmEx. Qualcomm makes chips for devices; made a series “What’s Inside,” looking at Nike Fuelband and Google Glass.  Marriott: didn’t write about why to stay at Marriott, but did a series on the future of travel—apps and devices.

Disclosure: branded content that has look and feel of standard Mashable article, but above the article, below the lead image, is the Lenovo logo and text “presented by Lenovo.”  Story stream: generally advertisers do five or more articles, and again there’s a disclosure. Display ads: banner ads for Lenovo surround the content—part of value to advertisers but he thinks it helps disclose further.  On right, below display ad, see “social widget”—promotion for Lenovo’s FB and Twitter accounts—also adds transparency.  On mobile devices, also see Lenovo logo below lead image of article, and bottom of article has display ad.

Tessa Gould, Director of HuffPost Partner Studio, Huffington Post

“Superviral” platform, most shared publisher on FB. Native ads since 2008. Sposnored listicle for Sony: article preview says it’s presented by Sony; article page says “presented by Sony” and explanation within article text.  (And at least three ad units from Sony.)  If you do social share, automatically identifies HuffPost Partner as author.

Another example: Brand blog for L’Oreal: brand/representative creates content, not HuffPost Partner Studio.  Article preview, “presented by L’Oreal.”  Original author (person) directly attributed through name and photo (though not ID’d as from L’Oreal) and we edited and published it.  Article page = “presented by L’Oreal.”  At least 3 L’Oreal ads on the page.

Another example: socialization/social promo.  Listicle for Netflix.  Dedicated HuffPost accounts on FB, Twitter, StumbleUpon, Pinterest: we identify the partner’s social media account/hashtag. When you click to share, the Netflix holiday hashtag appears.  Has to be retweeted so that it is clear that it comes from HuffPost Partner Studios.

Todd R. Haskell, Senior Vice President and Chief Revenue Officer, Hearst Magazines Digital Media, Hearst Corporation

20 magazine brands such as Popular Mechanics, all with a presence on the web. Brands built on reader trust. Harper’s Bazaar did partnership with Nordstrom, asking us to create original content on how to transition from city to country—Harper’s Bazaar widely followed on Pinterest, so we created custom Pinterest boards allowing them to explore Nordstrom/Uggs’ collection—readers could browse through shoes, share them through their own social media; click through to fully functional ecommerce experience. Our readers come to us for what to wear; how to be clear that this comes from advertiser but assist action?  Says Uggs/Nordstrom on every page.

Another advertiser wanted us to curate existing content—Tyson Nudges, a dog treat.  Took Country Living etc. which have high dog owner concentrations; clearly embedded advertising messages as part of the “best of” collection of content relating to dogs.  Same idea as Mashable/HuffPo of taking DNA of why people interact with our editorial but doing it in a way that’s transparent to readers.

Seventeen on mobile: underlying assumption is same, clarity for reader.  Keds: best kicks for back-to-school.  At the bottom, says take a look at new shoes for the season, presented by Keds. Always clearly labeled. Consistent with our values.  Reader feedback has been positive.

Jon Carmen,  Senior Vice President of Operations, Adiant

Native ads are a subset of content-style advertising. Our creation: Newsbullets: resemble a headline and displayed in the content well of news sites (hey, I learned a new term). Work with advertisers like LowerMyBills and AmEx.  Reach: approximately 80-90% of news sites in US.

Lisa LaCour, Vice President of Global Marketing, Outbrain Inc.

Content recommendation platform.  Presented mostly on the bottom of article pages of major web publishers.  “Recommended for you” for online audience—editorial or paid.  We only allow content in our network—strict editorial guidelines.  Reject about 50% of content that comes in. We don’t necessarily claim to do native advertising, but we are natively placed within the consumer environment, in the content well.  “Recommended for You:” Mix of editorial and sponsored content—when they link to the third party site, the site is listed in grey after the black headline.  “From Around the Web” has a mix of publisher and advertiser content, which discloses third-party advertiser.  Third component: “More from [X],” e.g., more from ABC News or whatever site you’re on.  On mobile very similar, same disclosures.

Chris Laird, Marketing Director, Brand Operations, The Procter & Gamble Company

Sponsored content at places like Buzzfeed—Secret Clinical, focused on people who may be overconfident. Brand travels with content through social channels—that’s why we do it. You see “confidence” in the headline.

Pantene partners with Studio One, content producer/distributor. Studio One produced the Style Glossy—associate Pantene with “style” and “getting the look you want.”  Studio One hires arms’-length writers to create and syndicate that content in other publications/media channels.  So the story shows up on Newschannel5.com and carries the bradn with it.  Native advertising is more shareable; huge percent of reach is not from direct access but sharing.

Tide: link branding to current event. Nascar race with an oil spill on track; Tide was used to clean up the oil spill, and we created content around that (15-second TV ad and long tail of content). Pushed that out through syndication.

Steve Rubel, Executive Vice President and Chief Content Strategist, Edelman

World’s largest PR firm.  How does this fit into PR? We now think of sponsored content as it relates to paid amplification. Used to amplify either earned messages we secured (pay for discovery) or to create or cocreate new content that would sit on media company channels.  We do not feel that sponsored content should trump “earned” media and journalists’ own voices; not a replacement. The two complement each other and make sure our clients’ messages/POV is communicated as broadly as possible around themes they want to be known for.

Sullivan: do traditional publishers see new opportunities in digital?

Haskell: we have the ability when we create an experience on behalf of an advertiser, we have much more ability to cross-promote it across multiple brands. Historically, Good Housekeeping couldn’t have traffic driven to it by Women’s Day. Ecosystem now allows cross-promotion into sponsored experiences—allows greater scale.  Partners like Outbrain: 3d parties can drive people from outside our own ecosystem into them. On the opposite side, when they’re created well, readers want to share them; our readers become more important as they share/give their own stamp of approval.

Gould: compared to traditional media, digital is unique around engagement: sharing sponsored content/advertorials was not easy in traditional magazines.  More eyeballs!  Increased sophistication that comes from tech—good idea who opens up your content and whether they really read it. Target to relevant demographic; track who viewed it. Timelines are shorter; brands can participate in more realtime environment.

Sullivan: concerns about transparency.  Why is or isn’t transparency important?

Ostrow: Mashable: transparency is front and center. Our readers are savvy. If we mislabeled we’d lose their trust.  Branded content is the most engaging content on the site. It’s more evergreen; we’re not creating news on behalf of the advertiser but are creating thematically related content.  The units on homepage get higher clickthroughs than display ads, 8-15x in some cases.  People are living in social streams on mobile devices, so clients come to us to be relevant there.

Sullivan: you mean that your readers understand the distinction between advertising and editorial?

Haskell: Incumbent on publisher is exercise of discretion and judgment in who we work with.  Salespeople aren’t known for this, which is why it’s important for organizations think about how to structure that into the sales process. Scientology kerfuffle with the Atlantic—Hearst wants to make sure we partner with the right brands, appropriate context. Ask will the reader feel exploited? Will it be jarring?

Laird: On risks of lack of transparency—if you lose trust with the reader/consumer, you’ll hurt your equity over time.  Transparency is brand building imperative. You want to link your brand to the content, all the way through every channel consumer might consume.  Dawn is a dish detergent, all about grease fighting. Also used to help save birds in oil spills to get grease out of feathers—great brand building because it communicates both efficacy and gentleness. Dawn has beautiful content around this concept, linked to the brand.  (This is an intriguing conflation of “linked to the brand” with “disclosed that it was placed by the brand.”)

Sullivan: what if you’re not as worried about brand equity?

Carmen: comes down to trust of reader, as well as financial aspect. We place our ads on publisher’s website and publisher gets a revenue share. If not stated as ad, clickthrough rates will be higher, but the result on the other end (he seems to mean post-click) is worse than when we do put “ad,” because the user knows they’re clicking on an ad.

LaCour: Outbrain: no links to ads, just links to content, which can be paid.  Audience within the content well is in content consumption mode. If they click on content, their mindset is that they want to read more content.  There are ads that we’ve seen that are not the same as paid content.  The difference between a landing page “buy something” v. another piece of content, whether sponsored or not, is real.  Audience and advertiser and publisher can all be happy. The industry isn’t the only one pushing for sponsored content.  Consumers are asking for it. Consumers want to engage w/brand, get more information—don’t just want brand to sell things to them.

Some discussion: display ads aren’t dead; they’re background/they work in conjunction with sponsored/branded content.  Ostrow says clickthrough on banners next to sponsored content is 2x as high as when it’s just on the site generally.

Rubel (I think, maybe wrong attribution): we think a lot about trust. Transparency plays a role. We hear a lot from publishers, marketers, and people who connect marketers to publishers. We’d like to see the audience have a voice.  They have a voice through clicks.  But less than 1/3 of US population is aware of media’s financial difficulties.  We’d like to see audience to have way to engage.

Haskell: Readers are not shy in reacting to innovation in no uncertain terms.  There has been debate about death of the banner ad; native will not kill display ads, but one supports the other/more complex ecosystem.  Readers who lose trust will move elsewhere, “vote with their fingertips.”  We go in with the idea that readers are smart and know what they’re doing.

Laird: what we love about this version of sponsored content is that we can immediately measure impact on our business result—we are on our owned asset; does she download a coupon, request a sample, post a review, place an order on Amazon.

Sullivan: ok, so you can measure this really well. But we were talking about transparency.  Are you also using that audience feedback to measure whether your readership understands how these new forms of ads work and whether they understand that they are ads?

Gould: we treat transparency as a given.  Our readers are smart and sophisticated and they’ll tell you what they don’t like.  Feedback is more a gauge of the quality of the content than the transparency, since transparency is a given.  (Or you have assumed that it worked …)

Sullivan: so what do you do to make ads transparent?

Haskell: it’s different on each one of our brands. Use advertiser’s logo everywhere. Type slug someplace can be background noise.

Carmen (I think): we have policies on asking to make sure it’s clear.

Sullivan: who makes the decision?

Gould: HuffPost has a one size fits all policy to make things as clear as possible. When we pitch ourselves to brands, we have a rigorous review process with client/team/legal review.

Ostrow: similar.  Stand firm with your policies. Advertisers always ask for exceptions.  Important that we treat branded content as editorial content—as with Qualcomm, where we talk about what’s inside, much of the content was written by our tech reporters.  Need editorial checks and balances.

Carmen: it’s a mix of publisher control—but we always insist that there be some labeling.  If nothing’s said, then we always put “advertisement” or “sponsored links” somewhere visible in the box to make clear it’s a paid ad.

Gould: we’ve been doing this for years but just now starting to talk about best practices. There are people who aren’t doing any disclosure—that’s more important than deciding what labels should be used by the disclosures.  Should distinguish news publishers from aggregators/recommenders—needs vary.

LaCour: we are a guest on a publisher’s site and want to accommodate their look and feel. We are in agreement that disclosure is required but we will talk to publisher about how it should be labeled and how it should look. 

Carmen: we have a self-service ad platform; we receive over 100 ads/day some days.  Wide variety of advertisers—small affiliates and large brands. We reject half of them. We make sure they aren’t trying to do something shady.  Our job as gatekeeper is to be hard-nosed. They can resubmit until it’s right. 

Sullivan: what about on the publisher website: if it has the same look and feel as editorial content, do you work with the publisher?

Carmen: depends on the publisher. Some say “you have to say advertisement,” while some say “don’t get us in trouble.” By default we say “advertisement” or “sponsored link.”

Rubel (I think): one way to look at it is that a common language would be clearest, and there’s a case for that. But competition is a click away. It’s better to have a more open marketplace where all different kinds of ideas around disclosure come to the forefront. Some will be exceedingly transparent.  HuffPo does a lot of testing with headlines.  In the end it’s possible that the most transparent, with the clearest language, will have a competitive advantage with the audience and therefore with the marketers.  Industry innovation/testing.  Good ideas will win out instead of having them all say the same thing. Internationally too, it varies country by country.

Sullivan: what tools are available to advertisers for transparency? Do you rely on publishers?

Laird: different review processes are available, depending on intermediary/publisher.  LaCour says that Outbrain offers publisher/advertiser control. Just like in Google, link copy is approved by brand.  Publisher then gets to determine formatting and what other words or formatting will be on the site to distinguish it as sponsored content.

LaCour: widget/container is up to publisher, then paid links within are controlled by advertiser.

Ostrow: publishers can only do so much to control tweet text, etc. So our main focus is transparency when the reader arrives.  PR agency/media agency/advertiser may buy Outbrain traffic to a Mashable article, but that’s outside our control.

Gould: we can’t control but can suggest/prepopulate tweet text.

The moderator asked a couple of times, but I didn’t hear an answer.  We have some empirical evidence about how users perceive sponsored ads on search engines and how they do or don’t understand the organic versus paid separation.  What evidence is there in publishers’/advertisers’ hands about how users perceive the kind of sponsored content they provide?  Do they know whether consumers know it’s advertising?