December 9, 2013

What's Next for Native Advertising?

Seller Beware: Consumer Protection Insights for Industry,

On Wednesday, the Federal Trade Commission (FTC) held a one-day workshop titled Blurred Lines: Advertising or Content about online "native advertising." The workshop brought together representatives from online publishing, advertising, academia, consumer groups, government, and the private bar to discuss the uses and potential risks of native advertising in digital media. As is usually the case, this FTC workshop was more about fact gathering and issue spotting than providing concrete guidance. But, it did provide valuable insight for advertisers, agencies, and publishers involved in or exploring native advertising.

There is no clear-cut definition of online native advertising, but it can be thought of as advertising or promotional content that is closely integrated into the flow and feel of websites, apps, and other online and digital publications. It can take the form of a company sponsoring a topical section on a website -- like a car company sponsoring the automotive section -- a company sponsoring specific articles, or the "From Around the Web" sections at the bottom of many online articles displaying sponsored content. For advertisers, the attraction of native advertising is providing consumers with valuable content that traditional advertising does not.

Although digital media may present new challenges for regulators, native advertising is not new. The same principles that apply to newspaper advertising in the genre of news articles, TV infomercials that look like talk shows, and paid-for search engine results also apply to the newer forms of online native advertising. The FTC is more likely to have concerns if the omission of information about the sponsor would mislead a reasonable consumer into believing that she was viewing non-commercial, unbiased content or if that information would be important to her purchasing decision.

The workshop highlighted two key questions: (1) When should the sponsorship of content be disclosed? (2) If disclosure is required, how should it be done so that consumers read and understand the relationship?

Based on the panel discussions, advertisers, advertising agencies, and online publishers should keep the following considerations in mind:

  • Is the content commercial or non-commercial in nature? Does it relate to the sponsor's product, product category, or product attribute?
  • Will consumers be able to differentiate -- whether from disclaimers or visual cues -- between sponsored content and editorial content?
  • What is the nature of the relationship between the sponsor, the publisher, and the content? Is the sponsor just underwriting the operations of the online publication, or does the sponsor have substantive input into the content?
  • Will consumers understand the relationship from the disclosure -- i.e., how do consumers understand terms such as "advertisement," "sponsored," "sponsored content," etc.?
  • What are the online publisher's disclosure requirements? The publisher may have requirements that go beyond those required by the law.

As the above indicates, the analysis of native advertising is very context specific. The FTC encouraged the development of best practices by industry, for example those from the American Society of Magazine Editors and the Interactive Advertising Bureau.

This is clearly an area of interest to the FTC. We expect the FTC to continue to look at online native advertising practices and research on how consumers perceive and interact with it. In addition, we might see more FTC enforcement actions, particularly in clear-cut cases.

© 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.


Matthew Shultz
Matthew Shultz
Washington, DC
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