United States: Native Advertisers Face Closer Scrutiny From Industry Self-Regulatory Bodies

With paywalls and premium subscriptions finding only modest success, paid advertisements remain the primary means of generating revenue from online content. Native advertising has emerged as a leader in the competition for ad impressions and brand engagement. Expected to grow from $7.9 billion in spending this year to $21 billion by 2018, native advertising is lauded as the future of online advertising.

Native advertising is paid promotional material that resembles the form and style of editorial content. While native ads can be displayed in numerous ways, they generally subscribe to the same concept: advertisements are more effective when they resemble the form and function of the content that surrounds them. The execution of that principle varies among platforms, but familiar iterations include paid search results in Google, sponsored stories within Facebook, and recommendation widgets corralling related advertising content below news articles.

Earlier this month, an accountability unit of the Better Business Bureau warned native advertisers that they must comply with the Digital Advertising Alliance's Self-Regulatory Principles for Online Behavioral Advertising when engaging in behavioral advertising. The December 9 compliance warning stated that native advertisers must provide greater transparency and consumer control when customizing ads by tracking users as they surf the World Wide Web. Enforcement is set to begin January 1, 2015.

The industry's self-regulatory code is organized around seven principles that seek to foster consumer-friendly standards when tracking users across various websites for advertising purposes:  (1) Education; (2) Transparency; (3) Consumer Control; (4) Data Security; (5) Material Changes; (6) Sensitive Data; and (7) Accountability. The cornerstones of the code are transparency and control.

Regarding the notice principle, the compliance warning directs behavioral advertising participants to ensure that users are given a real-time "enhanced notice" when confronted with any interest-based advertisement. According to the principles, enhanced notice must be available at the time the consumer is delivered the ad, instead of expecting the consumer to wade through a privacy policy. According to the principles, participants should also ensure the notice link is either in or around the native ad, or—in cooperation with the website operator—elsewhere on the webpage where the ad appears. Finally, according to the principles, the link should direct a consumer to where they can learn more about internet-based advertising and "exercise choice through an easy-to-use opt-out mechanism."  While the compliance warning does not mandate a particular way to alert consumers to the notice, it recommended the familiar AdChoices Icon  as a means of informing consumers where they can learn more information and opt-out of tracking across websites for advertising purposes.

In addition to the enhanced notice, native advertisers that track across the web are directed to ensure that their own website privacy policy contains a "clear, meaningful, and prominent" disclosure that describes their data collection and use practices. Further, website publishers that permit third parties to collect data about consumers are required by the principles to provide notice of the collection if the data will be used in behavioral advertising. Finally, under the principles, the privacy policy must clearly provide an option to opt-out of behavioral advertising, and must state that the company adheres to the Digital Advertising Alliance's Principles.

Turning to consumer control, the compliance warning directed native advertisers to ensure that consumers are provided a "functional, easy-to-use way of opting out of the collection, use, or transfer of their data" for purposes of behavioral advertising. This opt-out functionality should be a part of both the enhanced notice and the relevant website's privacy policy. According to the compliance warning, any cookie set to record a consumer's desire to opt-out should be set to expire no sooner than five years from the original request. Put another way: the principles require companies to honor consumer requests to opt-out of IBA.

In addition to requiring native advertisers to comply with the Online Behavioral Advertising Principles, the compliance warning also directs advertisers to consider the FTC's guidance about online disclosures, and to note the National Advertising Division's published cases regarding proper native advertising disclosures beyond those that relate to behavioral advertising.

As native advertising becomes a more prominent feature of the online experience, calls for regulation are likely to grow. The Better Business Bureau's compliance warning is an industry effort to demonstrate the industry's ongoing capacity for self-regulation by adapting its regulations to cover future iterations of this developing business model.

Native Advertisers Face Closer Scrutiny From Industry Self-Regulatory Bodies

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