It's Ad-ing Up: Native Advertising Comes Front and Center

The Federal Trade Commission (FTC) and National Advertising Division (NAD) have both recently expressed interest in online "native advertising" or "sponsored content"—online advertising that consumers might mistake for non-commercial editorial content. Native advertising includes, for example, online advertisements that resemble news articles, sponsored links that are placed near search engine results, and blogs or social media accounts created to promote products. The FTC is hosting a one-day workshop on native advertising called "Blurred Lines: Advertising or Content" on December 4, 2013, and it has issued updated guidance on related issues during the past year. Also, the NAD recently issued a decision that addressed an advertiser's alleged failure to identify online messages as advertising.

The FTC's December 4, 2013 workshop will feature discussions about what advertisers and companies should do to ensure that consumers can distinguish online advertising from other content. According to the draft agenda, the workshop will include panels with representatives from the advertising industry, websites, academia, consumer advocacy organizations, and self-regulatory organizations. The workshop is free and open to the public. We expect that as a follow-up to the workshop the FTC will issue a report providing guidance for native advertising.

This workshop comes a few months after the FTC issued letters to search engine companies in June 2013, updating its 2002 guidance on distinguishing paid search results from "natural" search results. The letters reiterated the FTC's position that it is a deceptive practice to display search results in a way that makes it difficult for consumers to distinguish sponsored links from organic or "natural" search results. In recent years, the FTC noted, it had "observed a decline in compliance" with the 2002 guidance as "the features traditional search engines use to differentiate advertising from natural search results have become less noticeable to consumers." In the letter, the FTC suggested methods for search engines to distinguish paid and natural search results clearly and prominently, including visual cues and text labels.

In a recent decision, the NAD addressed a company's alleged failure to disclose that certain messages on blogs and social media were advertisements. eSalon operated a blog that promoted its products, but the blog's connection to eSalon was only disclosed at the bottom of the page, where the user had to scroll to view it. The NAD recommended several changes to make eSalon's sponsorship of the blog clearer and more conspicuous to consumers. In addition, the NAD recommended that eSalon disclose any incentives that it has provided to reviewers of its products (such as compensation or free products) before re-posting or re-tweeting those reviews. Finally, citing the FTC's Endorsement Guides, the NAD advised eSalon to stop using pictures of celebrities on its websites because this could lead consumers to believe incorrectly that the celebrities had endorsed eSalon's products.

The requirement that advertisements should be distinguished from editorial content reflects principles from the FTC's 2009 Revised Endorsement and Testimonial Guides. Endorsements are likely to lead consumers to believe that the message "reflects the opinions, beliefs, finding, or experiences of a party other than the sponsoring advertiser."; Accordingly, the Endorsement Guides provide guidelines designed to help consumers better evaluate the advertising message conveyed through endorsements. For example, advertisers must clearly and conspicuously disclose any material connections between themselves and endorsers, and advertisements with actors portraying "actual consumers" should clearly and conspicuously disclose that actors have been used.

Native advertising is also in the news due to Wikipedia's recent announcement that hundreds of user accounts were affiliated with Wiki-PR, a company that allegedly creates or revises Wikipedia entries to advertise or promote its clients' interests. The Wikimedia Foundation, which operates Wikipedia, responded by banning over 250 user accounts and issuing a cease and desist letter demanding that Wiki-PR stop editing Wikipedia. In the letter, Wikimedia explained that its Terms of Use prohibit users from "misrepresenting your affiliation with any individual or entity" and discussed the potential for legal action. Wikipedia's policy echoes the guidance from the FTC and the NAD—paid-for messaging should not be presented as non-commercial content.

© Arnold & Porter Kaye Scholer LLP 2013 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.