It’s been a big week for premieres. And if you thought you sensed a disturbance in the Force then the Force is indeed strong with you as the FTC just released their Enforcement Policy Statement on Deceptively Formatted Advertisements and Business Guidance on Native Advertising.

A long time ago, in a conference room far, far away, the FTC held a workshop on Native Advertising with a promise that some form of industry guidance would follow.  As it turns out, the premieres in both cases were worth waiting for.  Bearing in mind the Master’s admonition — “Do.  Or do not.  There is no try,” our take on the Enforcement Statement and Business Guidance is below.  And like many a typical blockbuster movie there was just too much good stuff to leave behind on the cutting room floor so our apologies ahead of time for the length of this blog.

The Enforcement Statement itself does not break much new ground. Indeed, it works hard to convey that new ground is not being broken and that today’s native advertising fits comfortably within a long line of marketing efforts that the Commission has regulated in the past including infomercials, deceptive door-openers and online search results.  The Statement notes that the FTC has been busting ads that don’t look like ads dating back to 1967 when a restaurant review appeared in a newspaper that was paid for by the restaurant but looked like an impartial review.  To cure this misimpression, the FTC suggested a disclosure like –ADVERTISEMENT.  Today, however, advertisers are more sophisticated and the new breed of sponsored content is far from shameless self-promotion dressed up like objective news.  While commercial in nature, much of this sponsored content is, well, content, and not just a product review.

Regardless, the Enforcement Statement reminds advertisers that, as in the past, advertisements must be clearly recognized as such by consumers, and that any necessary disclosure that content is “advertising” must be made at the outset rather than later — once you’ve gotten your foot in the proverbial door. Of course, in today’s marketing world there are a myriad of ways to both design and target advertising.  The Enforcement Statement makes it clear that in interpreting whether an advertisement is clearly recognizable as such the Commission will look to the overall impression conveyed by the ad (including images and the interaction of all the advertisement’s elements).  And the Commission will evaluate the net impression from the perspective of reasonable members of the advertisement’s target audience.  This, in turn, can be good news or bad news.  Bad news perhaps if your native advertising is targeting younger children, but perhaps good news if you’re targeting millennials who likely will have a better handle on the source of content than your great aunt Trudy who really might join the Facebook this year after someone explains what a hashtag is again.

However, as the FTC has helpfully done several other times in the past, the Business Guide provides a number of specific and helpful examples of the Enforcement Statement in action. In particular they focus on when disclosure is required and how to properly make any disclosure.  We’ve pulled together some highlights below.

Is It Even Advertising? In an early native case involving Qualcomm, NAD suggested a rather broad reading of what constitutes advertising.  In a case that involved a series of sponsored articles that made no mention of the sponsor or its products NAD stated: “[i]f the content simply conveys information about an issue with which the advertiser wants to be associated, the advertiser may still have an obligation to identify itself as the sponsor because consumers generally will attach different significance to articles that are sponsored than those that are not sponsored and purely editorial. As a result, failing to disclose the sponsor of an article may deprive consumers of insight into why a particular article was published, including the motivations of the author.”  The FTC parrots this language in several places; for example, the business guidance asks “Why would it be material to consumers to know the source of the information?  Because knowing that something is an ad likely will affect whether consumers choose to interact with it and the weight or credibility consumers give the information it conveys.”

However, reading the examples suggests that the FTC is not yet ready to follow NAD and expand the scope of advertising to sponsored content that does not mention the advertiser or its products. The agency uses an example of an article on great vacation spots for fitness enthusiasts presented by a running show company.  Because the article does not promote (or mention) any of the sponsor’s products the FTC says that the article does not have to be identified as an advertisement.

Product Placement

The FTC has been consistent that not all product placements need to be disclosed with a large “advertising” warning. In some cases this is because there is no discussion of the product or product category attributes or benefits or other objective claims.  See the FTC’s 2005 staff letter.  The Business Guidance includes another example involving product placement in a video game where game characters wear a particular clothing brand or drink a beverage but similarly do not make objective product claims. That being said, line drawing between whether content is mere product placement or promotes the benefits and attributes of goods and services may be a risky exercise. Stay tuned to see if the FTC makes its intentions clearer through the cases they bring.

However, the Business Guidance asserts that some types of product placements do trigger disclosure requirements. For example, the FTC provides an example where an “expert” on a home improvement show appears in a video and uses a particular product but does not expressly recommend it. In this case the FTC recommends disclosure of the paid inclusion, as consumers may mistake the expert’s use of the product as having been based on his or her own independent evaluation.

Context is King

The Business Guidance makes clear that whether consumers understand that native advertising is advertising depends upon context. For example, an “article” on running shoe shock absorption that appears in a financial news site is unlikely to be confused with true editorial content. Similarly, in the video game discussed above, billboard ads that appear in the game are likely to be understood by consumers as paid content and so no disclosure is necessary.

Re-Purposing

The Business Guidance provides several examples involving the repurposing of content. In the first example an advertiser wants to republish an independent favorable review. Because the advertiser did not solicit the review, the review itself does not have to be labeled as an “ad” but its placement by the advertiser in other third party media is an “ad” and should be disclosed.

Similarly, advertisers sometimes want content to appear in consumer’s social media feeds. If the link appears in such a manner that is not typical for an advertisement (for example, if it looks like your “friend” has just posted a link to an article in a magazine) then you must be certain that the “reposting” conveys that the link will take you to advertising content. The same advice holds true if the article can be found through non-paid search engine results.

How and Where to Disclose

Magic Words for Disclosure

The Enforcement Statement endorses “Advertisement” or “Paid Advertisement” but the Business Guidance suggests more flexibility so long as some variant of “ad” appears.  Their top choice examples are “ad,” “advertisement,” “paid advertisement” and “sponsored advertising content.”  The FTC frowns on “promoted” or “promoted stories” saying this could confuse consumers into believing that the content is endorsed by the publisher site rather than a commercial message from a marketer.  Also the FTC does not believe that company logos or names alone without more are adequate to signal commercial content.  Then the FTC gave a nod — but clearly not a warm endorsement — for other terms.  They said “Furthermore, depending on the context, consumers reasonably may interpret other terms, such as “Presented by [X],” “Brought to You by [X],” “Promoted by [X],” or “Sponsored by [X]” to mean that a sponsoring advertiser funded or ‘underwrote’ but did not create or influence the content.”  The FTC also signaled that it will be more comfortable with such terms if they are used consistently on the platform on which such content appears.

This opens up a world of grey when advertisers send suggested talking points or perhaps just taste and decency guidelines but otherwise rely on the creators to write and produce the content.  Is this “influencing” the content such that a label like “sponsored” is not appropriate?  Content makers, however, are not likely to embrace a broad use of the word “ad” as it implies the marketer who paid them also gave them a script.  Perhaps at this stage a “paid for by [X]” might be the safest compromise.

Where to Place Your Disclosure

The Business Guidance addresses two placement issues. First, when any kind of link is involved do you have to disclose once or twice? The FTC makes clear that when the content itself is advertising then the disclosure has to appear twice – once with the link and then a second time with the content. This insures that the consumers know before clicking that they are going to view advertising and also makes sure that the disclosure travels with the article.

Second, the Guidance helps to answer specifically where to place the disclosure.  On a site’s main page, near the headline is best, while in the article itself, top left is safest above the byline or otherwise near the ad’s focal point.  If the focal point is an image or graphic then you may have to place the disclosure on the focal point itself. Finally, all of the existing rules around what is clear and conspicuous on the web continues to apply.  This means that the importance of the disclosure is heightened the more native the placement is.  In other words, if commercial content is shaded or otherwise visually separated from the non-commercial content that surrounds it, readers are more likely to appreciate that the content is commercial and so the disclosure itself may not be as critical.  The more the content is seamlessly woven into pure editorial content, the more important the upfront disclosure becomes.

Bottom Line

If history is any guide, we will see enforcement activity ramp up soon. Although the FTC has already brought cases like the action involving Machinima, we expect more resources will be devoted to surfing for potential cases to investigate.  If you have been awaiting the FTC’s official guidance before adopting a native advertising policy, training and compliance plan, make sure your padawans put this on top of their New Year’s Resolutions list.