United States: Native Advertising Sweeps Industry Regulatory Landscape

In the modern media landscape, companies often blend advertisements with news, entertainment, and other content, a practice sometimes referred to as "native advertising."   When consumers do not realize that they are viewing advertising or sponsored content – in other words, when the format of the content isn't obviously an ad –both the media and the advertisers generally have an obligation to disclose to consumers that the content is, in fact, sponsored content.  What consumers understand about native advertising, and the responsibility of the parties involved, has been a recent focal point for regulators and the advertising self-regulatory community.

The Federal Trade Commission (the "FTC") announced plans to host a workshop on December 4, 2013 in Washington, DC to examine the practice of native advertising and "to explore changes in how paid messages are presented to consumers and consumers' recognition and understanding of these messages." (No word yet on whether the workshop will be need to be rescheduled as a result of the federal government shutdown.) According to the FTC, attendees will likely include publishing and advertising industry representatives, consumer advocates, academics, and government regulators.

To facilitate a broader discussion on these issues, the FTC has proposed the following discussion topics for the conference:

  • What is the origin and purpose of the wall between regular content and advertising, and what challenges do publishers face in maintaining that wall in digital media, including in the mobile environment?
  • In what ways are paid messages integrated into, or presented as, regular content and in what contexts does this integration occur? How does it differ when paid messages are displayed within mobile apps and on smart phones and other mobile devices?
  • What business models support and facilitate the monetization and display of native or integrated advertisements? What entities control how these advertisements are presented to consumers?
  • How can ads effectively be differentiated from regular content, such as through the use of labels and visual cues? How can methods used to differentiate content as advertising be retained when paid messages are aggregated (for example, in search results) or re-transmitted through social media?
  • What does research show about how consumers notice and understand paid messages that are integrated into, or presented as, news, entertainment, or editorial content? What does research show about whether the ways that consumers seek out, receive, and view content online influences their capacity to notice and understand that these messages as paid content?

Native advertising has also been an important issue in the current self-regulatory sphere, and one that the National Advertising Division ("NAD") promised would loom large in coming months.  As part of its routine monitoring program, NAD recently reviewed articles sponsored  by Qualcomm, Inc. appearing on the website www.mashable.com, in an effort to determine whether it was clear to consumers that the content they were seeing was "sponsored" and not simply editorial.  See Qualcomm, Inc. (Snapdragon Processors), NAD Case #5633 (September 20, 2013).  Qualcomm had entered into a sponsorship agreement with Mashable.com for a series that explored "What's Inside?" many electronic devices.  The series carried the tag "Sponsored Content" for the period of Qualcomm's sponsorship, but when the sponsorship period ended, the articles remained on Mashable.com without any indication that they were sponsored.  NAD found that Qualcomm contracted for a sponsorship for a limited time period, the content in question was created by Mashable.com before the sponsorship began, and Mashable.com was solely responsible for planning, creating and posting the content.  On this basis, NAD determined it while it was appropriate for Qualcomm to be identified as the article series' sponsor during the sponsorship period, it was unnecessary after the sponsorship period ended.

The Qualcomm case, along with the announcement of the FTC workshop, highlight the growing popularity of native advertising, and show regulators' interest in ensuring that consumers are aware of the origin of digital content they read.  

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Authors
Jeffrey A. Greenbaum
Terri J. Seligman
Hannah E. Taylor (Frankfurt Kurnit Klein & Setz)
 
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