8 Takeaways From The FTC’s Recent Ruling On Native Advertising

On December 22, 2015, the Federal Trade Commission (FTC) published a policy statement on native advertising (Commission Enforcement Policy Statement on Deceptively Formatted Advertisements) and a follow-up guide for businesses (Native Advertising: A Guide for Businesses).

Ad Tech Industry

8 Takeaways From The FTC’s Recent Ruling On Native Advertising

June 20, 2016 by
Copywriter at Clearcode

On December 22, 2015, the Federal Trade Commission (FTC) published a policy statement on native advertising (Commission Enforcement Policy Statement on Deceptively Formatted Advertisements) and a follow-up guide for businesses (Native Advertising: A Guide for Businesses).


This policy attempts to straighten up the area of online advertising, which, up until that point, had been running quite rampant.

The FTC has addressed various types of what they refer to as “deceptively formatted advertising” for many decades, with examples going back as far as 1967, when advertorials became popular, and recurring during the 1980s with the invention of infomercials. However, this recent ruling marks the first of its kind for native advertising, as a lot of the native ads out there at the moment don’t look like ads, and this is why the FTC felt they had to step in.

  • Key Takeaways From the FTC Ruling on Native Advertising

    The 16-page policy covered a number of misleading or deceptive advertising and native advertising tactics. It begins with the following:

    “The Commission has long held the view that advertising and promotional messages that are not identifiable as advertising to consumers are deceptive if they mislead consumers into believing they are independent, impartial, or not from the sponsoring advertiser itself.”

    The policy goes on to acknowledge the changing business model of publishers, citing the fact that many consumers can now block or skip ads has lead to publishers offering “formats and techniques that are closely integrated with and less distinguishable from regular content so that they can capture the attention and clicks of ad-avoiding consumers.”

    Below are some of the main points that arose from the policy:

    1. Native ads will need to clearly state that they are paid ads if there’s a chance reasonable consumers won’t be able to determine if the ad is advertising.
    2. The disclosure (e.g. the word “ADVERTISEMENT”) will need to be readable, in contrast to the background color, and appear near the ad’s focal point.
    3. If native ads are published by others (e.g. in non-paid search results, on social media, in emails, etc.), they should maintain their disclosure. The FTC recommends adding a disclosure at the beginning of the title tag, at the beginning of the ad’s URL, and in the meta data. An example of this could be: www.example.com/advertising/title-of-article
    4. If a native ad matches the look and feel of a site, but can be clearly identified as an ad by its message or topic (e.g. an ad for a car with the headline, “Test drive this car today!” on a news site), then it doesn’t necessarily need a disclosure.
    5. The terminology used for the disclosure should be easily understood to reasonable consumers as ads (e.g. Ad, Advertisement, Paid Advertisement, Sponsored Advertising Content, or relevant variations) and should not use terms such as Promoted or Promoted Stories, as these terms could mislead consumers. Also, the terminology should be consistent across the whole site (e.g. using the word “ADVERTISEMENT” for all types of display and native ads) and omit technical or industry jargon.
    6. The FTC’s policy doesn’t just apply to advertisers, but to any party involved in creating or distributing ads — e.g. advertising agencies, ad networks, and publishers.

    Points 5 and 6 will no doubt affect content recommendation companies like Outbrain and Taboola, as currently they use terminology such as “More From the Web”, which can be misleading for consumers, especially if it’s placed in the vicinity of the publisher’s “Related Articles” section and carries the same look and feel, as seen below:

    adweek-native-advertising

    The image above shows how Taboola displays native ads on a publisher’s site (Adweek). As you can see, the content recommendation section looks almost identical to the section located directly above it (same font, same style, same size), making it hard for most consumers to differentiate the articles from the publisher with the ads from Taboola.

    What’s Happened Since the FTC Policy Release?

    The aftermath of the FTC ruling has already resulted in brands being fined for deceiving customers. Notably, Lord & Taylor paid 50 online fashion influencers to wear a dress released by the retailer’s clothing collection, Design Lab, and post pictures of them modeling it on their Instagram accounts with a the hashtag #DesignLab.

    The campaign reached 11.4 million users, racked up 328,000 brand engagements, and resulted in the dress being sold out.

    However, Lord & Taylor failed to disclose that they paid the Instagramers to wear the dress, and this lack of disclosure caught the attention of the FTC.

    You may be thinking this is a pretty clever way to utilize the power of social media to boost retail sales, but the FTC saw a few issues with this, primarily the lack of disclosure that the posts were paid promotions — something that was listed in the FTC’s December 2015 ruling. As a result, the FTC brought charges against Lord & Taylor, but says they took immediate action and cooperated fully with the FTC’s inquiry.

    This form of undisclosed promotion is exactly what the FTC is concerned about, and more stories like Lord & Taylor’s will no doubt emerge in the future.

    Do Most Current Native Ads Comply With New FTC Guidelines?

    The FTC’s rulings and guidelines have temporarily shaken up the native-advertising industry, as 70% of sites will now need to change the way they display native ads to ensure they adhere to the new FTC guidelines, according to MediaRadar.

    In the guidelines document, the FTC offers 17 examples of ads or promotional content where it is necessary to provide disclosure.

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    Here are the first 3 examples provided by the FTC in their Native Advertising: Guide For Businesses document:

    Example 1

    The Winged Mercury Company sells running shoes. An ad for the company’s flagship shoe appears on a financial news site. The ad contains an image of the shoe, the headline “Run Fast, Run Smart, Run Winged Mercury,” and a hyperlink to learn more about Winged Mercury shoes’ innovative shock absorption. The color scheme, font, and graphics of the ad look like the format of the financial news that appears on the site. However, the slogan “Run Fast, Run Smart, Run Winged Mercury” together with the message to learn more about Winged Mercury shoes’ shock absorption likely convey to consumers the commercial nature of the content. In addition, the subject matter of the ad differs substantially from the financial news on the site. Therefore, a specific disclosure that the content is an ad is probably not necessary, absent extrinsic evidence to the contrary.

    In short: If the ad’s look and feel matches the site but its message or content is different than the content on the site, then it doesn’t necessarily need a disclosure (e.g. the word “ADVERTISEMENT”)

    Example 2

    Fitness Life, an online health and fitness magazine, features articles about exercise, training advice, and product reviews. An article on Fitness Life’s main page is titled “The 20 Most Beautiful Places to Vacation.” The article displays images in a scrolling carousel of beautiful spots for fitness enthusiasts to visit. The Winged Mercury Company paid Fitness Life to create this article and publish it on Fitness Life’s site. The article says it is “Presented By” Winged Mercury and includes an image of the company’s logo. Although Winged Mercury’s sponsorship of the article is a form of advertising, the article itself is not, as it does not promote any of Winged Mercury’s products. It only contains images of places where readers – including potential Winged Mercury customers – might like to visit. Thus, the article does not need to be identifiable as an ad before or after consumers click into it.

    In short: If a company pays a site to publish an article but doesn’t promote any of their own products, then it doesn’t need to be identified as an advertisement.

    Example 3

    A kitchen cabinet company paid an online lifestyle magazine, Styling Home, to create and publish an article entitled, “10 Must-Haves for a Great Kitchen.” The article, which displays a series of images depicting well-designed kitchens, appears in the same layout as other articles on the Styling Home site. Most of the images in the article depict and promote the sponsoring advertiser’s products. Thus, the article is an advertisement. The ad’s format, however, is likely to mislead consumers to believe it is an ordinary Styling Home article and reflects the independent views of the Styling Home writer, and not those of the sponsoring advertiser. Therefore, a clear and prominent disclosure of the article’s commercial nature is necessary.

    In short: If a company pays a publisher to write an article promoting their products, then it needs to have clear and visible disclosure attached to it.

    Click here to read the remaining 14 examples.

    Where to Go From Here?

    The native-advertising evolution came about as a result of low CTR on banner ads and Internet users becoming more aware of ads.

    It’s no secret online users despise a large majority of ads displayed to them, and native ads seem to only increase deception, but there is a way for ads, even traditional banner ads, to become more effective, and that’s through personalization.

    Ad and content personalization has been a hot topic for a couple years now that many companies are still struggling to achieve. The key to its success lies in data and data-management platforms (DMPs).

  • DMPs help advertisers, marketers, and even publishers collect data from various sources (e.g. CRM systems, analytics tools, marketing automation platforms, etc.). The data can then be segmented into different audiences and used for a wide variety of use cases – the most common ones being ad retargeting, media buying, and content personalization.

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