FTC asks whether rules needed for some Internet advertising

McClatchy Washington BureauDecember 4, 2013 

US NEWS FTC 3 MCT

The Federal Trade Commission building in Washington, D.C., is seen on Wednesday, August 14, 2013.

CHUCK MYERS — MCT

— This article is NOT paid for by the Federal Trade Commission.

Readers may assume that. But changes in the media and the way people get their news drove the federal agency Wednesday to weigh the issue of disclosure about Internet stories that look like real news stories. The workshop’s title said it all: “Blurred Lines: Advertising or Content”?

Responsible for policing deceptive business practices, the agency’s leaders are concerned that technology, innovation and the rapid spread of social media as platforms for information sharing are turning traditional advertising on its head.

What concerns the agency is “native advertising,” designed to look and feel to a reader like a news article or the content of a website.

“Native advertising is taking a lot of different shapes and forms online,” Mary K. Engle, the FTC’s associate director of the advertising practices division, told McClatchy.

When newspapers commanded the advertising dollars, the FTC policed for deceptive ads. In fact, three of the first five cases after the FTC’s creation in 1914 involved newspaper advertising. In recent decades, “advertorials” that looked like newspaper articles were the rage, and the FTC monitored them to ensure that readers knew the difference.

In the digital age, newer players such as Mashable and The Huffington Post command huge numbers of page views and are pushing the envelope for online ads.

The FTC is trying to determine whether specific rules or guidance are needed for online advertising. Wednesday’s daylong public meeting was designed to hear from all sides of the issue: online publishers, middlemen and advertisers.

“It’s a learning experience for us, and the question is do consumers understand what is happening?” asked Engle, whose agency gave guidance for providers of paid search-engine results in 2002 and again this year, when lines began blurring again.

The result of the hearing might be a more exhaustive study of the industry.

“I think we haven’t decided that yet,” Engle said.

One key issue is transparency, to ensure that consumers can distinguish whether an article on a social media site is original content or some form of paid advertisement.

“There is clearly benefit to having some consistent principles on how we do this,” said Todd R. Haskell, the senior vice president for digital media at Hearst Magazines, part of the Hearst Corp. and the publisher of 20 U.S. magazines that range from Cosmopolitan to Country Living.

Also in favor of clearer guidelines is Ash Nashed, the CEO of Adiant, an Internet ad company.

“Look at the growing segment of bottom-of-article ads with thumbnails and text that look like content. A majority of these units hold ads, but they are not always labeled as such,” Nashed wrote recently in the industry publication Advertising Age. “Networks and publishers use vague labels such as ‘from around the Web’ or ‘recommended.’ Others toss around the word ‘content’ as if there is no need to distinguish between sponsored posts and editorial content – a major problem when the consumer’s trust is at stake.”

One frequently mentioned problem is that as sponsored posts or stories get shared across the Internet, the sponsorship link is often broken. Sometimes that’s deliberate, as advertisers hope to reach the largest number of eyeballs globally.

The marketing director in charge of brand operations for consumer goods giant The Procter & Gamble Co. said his company thought transparency was the only way to go. It wants to ensure that the name of its product travels with a story or content wherever it moves on the Internet.

“I would view it as a brand-building imperative, not as a requirement,” Chris Laird said, citing examples of how oil-spill videos of birds being cleaned with Dawn detergent went viral.

What makes native ads different from traditional newspaper or magazine ads is that in the digital world they’re considered “experiences.” Hearst’s Haskell said the magazine’s digital division worked with third parties “to drive people into these ‘experiences.’ ” That was seconded by Lisa LaCour, the marketing vice president of Outbrain Inc., an Internet content syndicator, who said research showed that consumers wanted to “engage” with a product, not just be sold one.

The use of outside forces, however, makes regulators squeamish about lines being crossed that leave readers ill-informed about paid ad relationships.

New players in the digital advertising world may lack the understanding of where the line between editorial and content should be, Nicholas Lemann, a professor at the Columbia University Graduate School of Journalism, told the packed meeting room.

The result, he said, is “the chaotic situation that existed in the days when the FTC was created.”

Email: khall@mcclatchydc.com; Twitter: @KevinGHall

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