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The FTC Has Not Done Enough to Make Native Ads Clear

On December 22, 2015, the FTC dropped a Christmas surprise: guidelines an enforcement policy statement and a business guidelines to regulate native advertising on publisher sites.

Media critics heralded the move, with most reporters focusing on one section that plainly stated that native ads should be labeled as advertisements, and not with ambiguous terms such as “promoted.” What most people missed, however, is that the rest of the FTC’s guidelines are a bundle of contradictions.

In the guidelines, the FTC provides 17 different practical examples of how native advertising and how they should be labeled Several of these examples plainly contradict the broader guidelines that come later. Example 2, for instance, states that if a native ad does not explicitly promote the products of that brand, it does not need to be labeled as advertising at all. In other words, the FTC is giving publishers an out, allowing them to simply not label an ad that a brand paid for as such.

It’s no surprise, then, that a MediaRadar audit of publishers in 2016 found that 70 percent of websites are not compliant with the FTC’s broader guidelines. Our independent analysis at Contently came to similar conclusions—major publishers use dozens of different labels, none of which are “advertising.” They’re not defying the FTC. The FTC’s guidelines consistently give them permission to continue labeling native ads with disparate euphemisms destined to confuse consumers.

We also conducted an in-depth study of native advertising with CUNY released last week, and found that 54 percent of consumers have felt deceived upon realizing that a native ad was sponsored by a brand.

Through focus groups and an in-depth survey of over 1,200 consumers, we were able to pinpoint some key ways that the FTC can fix their guidelines and do a better job of regulating native advertising online. Here are three solutions they can implement right away:

1. Push “sponsored” as an alternate standardized label for native ads

It’s logical that the FTC’s main recommendation calls for publishers to label native advertising as advertising. After all, that’s what it is.

But it’s nearly impossible to find a major publisher or social media platform that labels native ads as advertising. They uniformly reject doing so, perceiving native differently than display.

“A great display ad will divert people’s attention from what they sought out to do,” Mike Dyer, president of The Daily Beast (which uses the label “Sponsored Content”), told Adweek. “Content is the thing people are seeking out. It is the end of the behavior chain.”

Instead of pushing for the label of “Advertising”, the FTC would be wise to consider also advocating for “Sponsored”, which early half of respondents thought was the least confusing (versus 25 percent who thought “Advertisement” was the least confusing). Publishers would likely adopt it, and consumers would only have to become accustomed to one label for the format, instead of dozens.

2. Require publishers to include both the sponsor brand’s name and logo when disclosing native advertising

By an overwhelming margin, consumers believe that the sponsor of native advertising should be disclosed with both the brand name and logo on both publisher sites and social media sites.

Currently, logos are an afterthought in the FTC guidelines. The only mention of them notes that logos should not be used on their own without text disclosures.

Yet, in our focus groups, logos were consistently the trigger that helped respondents realize a piece of content was sponsored.

“Without the logo there, we wouldn’t have even known,” said Patrick, the 22-year-old focus group respondent, after viewing the native ad for Wendy’s on The New York Times.

The FTC should also recommend that brand names and logo remain at the top of the page as the reader scrolls down.

The New York Times executes all three of these elements (name, logo, placement) well. By a large margin, consumers were most likely to identify the Times’ native ad as advertising and to recognize the sponsor (83 percent).

3. Regulate the placement of native ads on publisher homepages

As our focus groups progressed, a surprising trend emerged: Consumers consistently struggled to locate the native advertising on BuzzFeed’s homepage, despite the fact that there are sponsor labels throughout the content feed in the left rail. Instead, respondents guessed that the non-advertising content in the right rail was advertising since the right rail is where they expect to see advertising.

When we asked consumers what design element would help them identify native advertising more accurately, the most popular response was the location on the page. In other words, there should be a dedicated area on every homepage to promote native advertising.

“I don’t like where they have the ads. I like it with the ads on the right and more of the published articles on the left-hand side,” said Lynn, the 60-year-old focus group respondent.

Simply put, consumers are used to dedicated spaces and visual marketers for advertisers. The FTC should recommend that publishers create such a dedicated space on their sites.

These three changes won’t solve every problem, but they’ll make a big difference, especially if they’re communicated through new, simplified guidelines. As currently constructed, the FTC’s recommendations are disastrously confusing and match the worst stereotypes of bureaucratic documents. They’d be wise to get it right in 2017, before it’s too late.

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