Sometime this year, the Federal Trade Commission (FTC) plans to issue guidance on native advertising that mimics journalism or entertainment. Still, at an event, last week, the FTC’s associate director of advertising practices, Mary Engle, gave an address that hinted at what that guidance may cover. Engle stated that the laws regulating deceptive and unfair acts and practices apply to all publishers, whether they are a broadcaster, print or digital channels. This is especially relevant considering the increasing number of publishers who have established in-house studios for creating native ads.
This announcement signifies that transparency is not just a best practice in responsible advertising but a requirement for the advertising industry.
All companies involved in the media and advertising industry should know that native advertising is booming, and publishers and advertisers must adopt transparent native ad strategies. This will help avoid consumer distrust and possible regulatory action. This approach goes beyond risk management. Companies have the chance to build trust with their customers and create engaging, useful content.
Participant Media commissioned BSR to publish a report on responsibility in advertising. It examined native advertising and its implications for the future of advertising. The report “Transparency and Purpose and the Empowered Consumer: A New Paradigm in Advertising” found that native advertising is a great opportunity for growth. Still, that transparent labelling and policies are crucial for maintaining consumer trust. A survey by Nielsen and The Participant Index Impact Panel on behalf of BSR found that 91 per cent of respondents felt it important to distinguish between advertising and content.
Although native advertising is not new, it has been the subject of increasing public debate, particularly as digital banner and print ads have fallen out of favour. In 2014, native advertising was a major part of the brands’ spending, with a total of US$3.2 billion. This is a 46 per cent increase over 2013. This will rise to US$4.2 billion in 2015, with almost two-thirds of marketers predicting an increase in native advertising spending.
Many media companies are now adopting native advertising. For example, Buzzfeed’s CEO Jonah Peretti stated publicly that 100% of its revenue comes from partnerships and branded content. Like other media companies, Buzzfeed has its creative agency and develops its ads. The Atlantic and The Wall Street Journal are also joining the ranks.
Some outlets enforce strict guidelines between the “church” and the state, while others don’t. Advertising Age reported in 2013 that “The New York Times” would label its native ads. But, at The Guardian, journalists, as well as its digital, multimedia and marketing teams, are involved in creating native content.
Each media company seems to have a different approach to native advertising. This has often led to public confusion. One of the most famous was in 2013 when The Atlantic published a sponsored article by the Church of Scientology. This post angered many readers because it didn’t conform to the publication’s normal messaging and ethos. The company also censored some negative comments that readers posted on the site. The company apologized publicly and established a new native advertising policy. Many other media companies, such as Conde Nat, followed the example and created detailed in-house policies regarding native advertising.
Advertisers and media companies are betting on native advertising’s future. There are several signs that the format is appealing to consumers. A 2013 Nielsen study found that native advertising was the second most trusted advertising format, with 69 per cent of respondents considering branded websites trustworthy. The Quartz Intelligences Global Executives Survey, which surveyed 940 business leaders from 61 countries, revealed that 86% of respondents are interested in branded content and are twice as likely to be remembered by consumers than banner ads.
The International Advertising Bureau’s consumer study of 55,000 consumers in entertainment and business news found that consumers are open to receiving in-feed sponsored content as long as it is trustworthy, relevant, authoritative, credible, and reliable. This paper offered specific guidance for brands and publishers.
- Brands – Match editorial style and quality; Share expertise, don’t sell
- Publishers – Help advertisers to adopt an editorial mindset and be transparent.
Advertising has a poor history of transparency. It is often associated with hidden messages and collecting personal information to target consumers. The FTC announcement offers companies in the industry an opportunity to make transparency a central part of their advertising policies. This is the first step in a journey toward better ads which are more engaging and empower consumers.