FTC Takes Action on Native Advertising

In December, 2015, the Federal Trade Commission issued comprehensive guidelines on the affirmative disclosures needed when using Native Advertising. This includes illustrations of content that it considers to be advertising, as well as how to make “clear and prominent” disclosures that the content is advertising. (Native Advertising, A Guide for Business, FTC, December 2015, www.ftc.gov)

It is clear the FTC expects the ad industry to read, follow, and utilize the guidance. In fact, the Commission has just issued its first consent settlement since publishing its guidelines with Lord & Taylor for lack of transparency in its native advertising in a fashion magazine and on social media.

Lord and Taylor posted a photo of a dress from its Design Lab collection along with company edited caption on its Instagram account and ran an article about the dress collection online. However the Instagram post and article didn’t disclose they were paid advertisements. According to the FTC’s complaint Lord  & Taylor gifted its dress to 50 fashion influencers who were paid $1,000 to $4,000 to post on Instagram a photo of themselves wearing the dress. While they did mention Lord & Taylor’s Instagram account and the hashtag #DesignLab in the photo caption, they were not required to state that they had been compensated. The complaint states that the campaign reached 11.4 million users and resulted in 328,000 brand engagements. “Lord & Taylor needs to be straight with consumers in its online marketing campaigns,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in a statement. “Consumers have the right to know when they’re looking at paid advertising.” (“Lord & Taylor Reaches Settlement with FTC Over Native Ad Disclosures,” by Nathalie Tadena, The Wall Street Journal, March 15, 2016, www.wsj.com)

Native Advertising, also known as sponsored content, has become one of the hottest marketing tactics with 75 percent of online publishers offering it to their advertisers. It is designed to look like the surrounding original or editorial content and therefore better attract consumer attention. However, as the FTC guidelines and the Lord & Taylor case show consumers often are misled into believing they are watching editorial content and not paid advertising. In response the Institute for Advertising Ethics Principle 3 urges: Advertisers should clearly distinguish advertising, public relations and corporate communications from news and editorial content and entertainment, both online and offline.

I believe there is a win-win solution in designing these ads so that the information is related to the website’s original content, including in its design, and also insuring that the consumer understands it is advertising. The FTC in its recent guidelines, states, “Terms likely to be understood include”: “Ad,” “Advertisement,” ” Paid Advertisement,” “Sponsored Advertising Content,” or some variation thereof.

To be successful with Native Advertising will require that advertisers and their agencies and publishers be ethical and follow the law. I like the way Jon Salm of MillwardBrown puts it: ” The key for advertisers will be to partner with the best publishers, and the key for publishers will be to follow the native golden rules – confidently identify native ad content, match the site’s editorial tone, and create content that resonates with the audience.” (“Getting Native Advertising Right,” by Jon Salm, January 2015, www.millwardbrown.com)

About the Author

Wally Snyder

Wally Snyder has devoted his entire professional career to working on advertising development, regulation and ethics. He served as a trial lawyer and as Assistant Director for Advertising Practices at the Federal Trade Commission before joining the American Advertising Federation where he served as president and CEO, from 1992–2008. Currently, he serves as Executive Director for the Institute for Advertising Ethics. Wally was inducted into the Advertising Hall of Fame® in 2009.