FTC Explores Risks Of Native Deception, Need For Labeling

Companies that run "native advertising,” or ads that mimic editorial material, run the risk of misleading consumers, Federal Trade Commissioner Edith Ramirez said Wednesday at a daylong conference about the subject.

“By presenting ads that resemble editorial content, an advertiser risks implying, deceptively, that the information comes from a nonbiased source,” Ramirez said in her introductory address.

Consumer advocates, publishers and advertisers who spoke at the event generally expressed agreement with the idea that Web sites should make clear when they are running native ads -- at least when the ads directly hawk a product. But there was little consensus on the details -- including which types of native spots should trigger disclosures, and how to word disclosure in a way people will understand.

One of the biggest unanswered questions tackled by speakers on Wednesday centers on what language companies should use to describe native ads. Current common terms include “sponsored by” and “presented by.”

But that language often is confusing, experts said on Wednesday. “Really smart people may come to different conclusions about what 'sponsored' means,” said Chris Hoofnagle, a lecturer in residence at the University of California, Berkeley, School of Law. Hoofnagle added that he thinks “sponsored by” indicates an arrangement -- which was typical on PBS -- where a company pays to have its name associated with a show that was created independently. Online, however, “sponsored by” often refers to content that an advertiser has created.

Mary Engle, associate director of advertising practices at the FTC, asked industry experts why companies didn't simply use the word “ad” to label native advertising. One reason put forward by an industry representative is that not all native advertising hawks products. In some cases, the sponsored content is just an item that advertisers think readers will find interesting.

But some advocates say that even those types of native ads should carry a disclosure, so consumers will know that the article didn't originate with the publisher.

“Consumers also need to understand when publishers are -- and are not -- exercising their independent judgment,” the watchdog group Public Citizen said in a statement issued on Wednesday. “Native ads often mislead consumers into thinking independent judgment is being exercised, when in fact, placement has been purchased.”



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