The Risks of 'Native Advertising'

This post was written by Frederick Lah and Sulina Gabale.

Kim Kardashian is notorious for setting Twitter trends with her fashion-forward tweets. But would a consumer buy the same product knowing she was paid up to $20,000 for tweeting it?

The term "native advertising" refers to when an advertiser masks ads as editorial content in an effort to market more seamlessly to consumers. The intent behind this practice is to make advertisements less intrusive and to associate a brand with an experience.

For example, BuzzFeed, a popular blog notorious for hosting viral content, commonly features articles such as "24 Reasons Why 3D Street Art Is The Best" that look just like any other blog post, but are actually paid advertisements. In these instances, BuzzFeed clearly identifies the advertiser in the face and body of the post by indicating the article is "Presented by Canon."

But what about ads that don’t feature clear disclosures? Twitter has now become a hotbed for such activity, especially within the context of celebrity endorsements. A New York Times blog investigated a tweet by pop singer Miley Cyrus to her 12 million followers, thanking a private jet company for a flight. Although Ms. Cyrus declined to comment, the company admitted that she was given some consideration for her tweet. Nowadays, it is becoming increasingly unclear to consumers whether celebrities are genuinely plugging a product they admire or if they are just paid to tweet about it.

With this concern comes a push for both publishers and marketers to meet ethical standards in native advertising so consumers aren’t duped by ads posing as editorial content. The National Advertising Division ("NAD"), part of the Council of Better Business Bureaus, establishes the policies and procedures for self-regulation in the advertising industry. In an editorial for Ad Age, Laura Brett, staff attorney for NAD, mentions that this debate has been longstanding ever since the FTC ruled back in 1968 that sponsored content "which purports to give an independent, impartial and unbiased view ... [must] clearly and conspicuously disclose that it is an advertisement."

Three months ago, the FTC once again addressed this concern within the context of native advertising by issuing its latest version of the "Dot Com Disclosures" guidance, which explains how to make sponsorship disclosures clear and conspicuous to avoid misleading consumers. While such guidance does not have the effect of binding law, if a company fails to comply with the guidance, the FTC could potentially bring an enforcement action alleging an unfair or deceptive practice in violation of the FTC Act.

Whether featuring a suggested story on Facebook, branding a playlist on Spotify, or hiring a celebrity to throw you a shout out on Twitter, companies should consider the risks of native advertising before diving in head first.

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