FTC Issues Native Ad Enforcement Policy: Disclosure Must Precede The Click

FTC Native Advertising EnforcementAdvertisers, ad tech companies and publishers pay heed: The Federal Trade Commission (FTC) released an enforcement policy Tuesday that outlines which forms of native advertising it deems acceptable and which it deems deceptive.

A key thread in the guidelines is that the user needs to know if content is an ad before she clicks and/or consumes content. It outlines in detail the types of placement, size, contrast and language that avoids consumer confusion.

This marks the first time the FTC has issued guidance for online native advertising outside of search advertising.

“Businesses are rapidly adopting or using native advertising, but there seems to be a lot of variation in how well this advertising communicates to consumers that it is advertising,” FTC associate director of advertising practices Mary Engel told AdExchanger.

That wide adoption led the FTC to issue this guidance, she said.

The FTC’s native advertising guide makes it clear that while the primary responsibility lies with the advertiser, it will hold accountable “everyone who participates directly or indirectly in creating or presenting native ads,” a group that would include ad tech companies and publishers.

“The advertiser is primarily responsible, but there are other parties who may potentially be responsible,” Engel explained.

Now that the FTC has released guidelines, the door is open to enforcement.

“This guidance signals that the FTC is very concerned about native advertising deceiving consumers and is interested in bringing cases against those who fail to treat consumers fairly,” said Jeff Chester, executive director of digital consumer right group Center for Digital Democracy.

Engel agrees that the FTC will bring cases against companies that do not comply, but it emphasized that it will start with educating the industry first, then move on to enforcement where needed.

For many in the industry, these guidelines are not a surprise. The FTC held a native advertising workshop for the first time in December 2013, and many expected that it would release guidelines this year.

While the FTC didn’t have any data about how compliant the advertising sector is now, some common practices clearly don’t pass the sniff test.

For instance, the FTC took issue with a few of the common terms used to declare that advertising is paid. “Sponsored content” is okay, but “sponsored by” is not, because it’s not clear if the brand influenced the content produced. The FTC also feels that “promoted” or “promoted stories” are misleading, as well as “brought to you by.”

Interestingly, the FTC takes into account the intended audience when determining if an ad is misleading or not. For example, if a home improvement show does a paid video for a paint company, there must be disclosure before the video plays.

But if that same video is repurposed and used in the paint company’s Facebook feed, it doesn’t need a disclosure. In that case, users are aware that a video for a paint company would be unlikely to show up in their feed unless it was sponsored, making the notification moot.

Industry reactions to the announcement seemed positive or muted.

The IAB, which has worked with the FTC over the past two years as it built these guidelines, agreed with the premise of disclosure.

The “IAB has been telling our members for years that disclosure is not optional for native advertising, it is a requirement,” said Brad Weltman, VP of public policy for the IAB. But the publisher-focused organization said it planned to evaluate the recommendations to ensure they are “technically feasible, creatively relevant, and do not stifle innovation.”

TripleLift, a native ad tech company, “welcomed” the news, according to co-founder Ari Lewine. He noted the company currently “goes above and beyond,” often using multiple forms of disclosure. But the guidelines may help less scrupulous players fall in line.

Polar, which sells software to premium publishers to track sponsored posts, likewise took the news in stride.

After negative events like John Oliver’s rant against native advertising, Polar CEO Kunal Gupta sees the industry transitioning to a position of “transparency and disclosure” that will benefit native in the long term.

The FTC’s guidelines may help save the industry from itself. “The greatest risk the industry faces is losing trust from consumers due to lack of guidance,” Lewine said.

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