Advertisers “kinda-sorta” go along with FTC guidelines for labeling of native advertising placements.

In an effort to ensure that readers understand when published news stories represent “earned” rather than “unearned” media, in late 2015 the Federal Trade Commission established some pretty clear guidelines for news stories that are published for pay.

The rationale behind the guidelines is that the FTC wants advertisers to be prevented from presenting paid content in ways that mask the fact that it’s a form of advertising.  Essentially, it wants to avoid leaving the erroneous impression that the advertiser did not create — or influence the creation — of the content, or that it paid a fee in order for the news to be published.

But what native advertising content developer Polar has found is that the explicit disclosures the FTC wishes advertisers to include as part of their stories tend to have a negative impact on readership.

… Which is precisely what native advertising is trying to avoid, of course.

After all, the whole point of these articles is to appear that they’re published due to their inherent newsworthiness, rather than because advertisers wish to push a sales message disguised as “narrative” so strongly, they’re willing to fork over big bucks for the privilege.

In its evaluation, Polar analyzed ~140 native placements across 65 publishers, and found that only ~55% of them used the term “sponsored” as a way to label the content.

As for the term “advertisement” or “advertorial,” the incidence of usage was far lower; less than 5% of the native placements identified their content as such.

Correlated to these findings was that more euphemistic terms like “partner content” tend to perform better in terms of reader engagement than do more explicit disclosures of an advertiser relationship.

“Promoted” was found to be the best performing term, garnering a 0.19% clickthrough rate as compared to “sponsored,” with just a 0.16% clickthrough rate.

[Interestingly, on desktop devices “sponsored” marginal outperformed “promoted,” whereas on mobile devices it was just the opposite.]

More broadly, the Polar investigation also found that nearly one-third of the pay-to-play native advertising placements it evaluated failed to comply at all with the FTC guidelines (as in zip/zero/nada) – which brings up a whole other set of issues at a time of heightened awareness of the “fake news” phenomenon online.

The Federal Trade Commission vs. Native Advertising: Score One for the FTC

ptpbIt’s pretty much a given these days that “native advertising” has it all over traditional advertising when it comes to prompting prospects to try a new product or service. Study after study shows that positive recommendations and ratings from family members, friends, key influencers and even simply fellow users are what prompt people to try it for themselves.

These dynamics mean that suppliers are looking for as many opportunities to publicize their offerings through these native channels as they can.

There’s a bit of a problem, however. Bloggers and other influencers have become wise to this reality — and many are taking it all the way to the bank.  The market is replete with conventions and other events such as the annual Haven Conference, at which these key influencers congregate and “hold court” with suppliers.

While there is no prescribed agenda regarding what’s discussed between suppliers and influencers, generally speaking there’s a whole lot of quid pro quo going on:  Things like receiving copious free samples in exchange for publishing product reviews, receiving monetary payments for mentioning products and brands in blog articles and on social media posts, and more.

One can’t really blame the influencers for peddling their influence to the highest bidder. After all, many successful bloggers and other influential people derive most or all of their livelihood from their online activities.  It’s only natural for someone whose influences ranges widely and deep to expect to be compensated for publicizing a product, a service or a brand — whether or not they themselves think it’s the best thing since sliced bread.

But there’s a growing problem regarding the “pay to play” aspects of native advertising. This past December, the Federal Trade Commission reiterated its opinion that such sweetheart deals are tantamount to advertising, and therefore must be prominently identified as such in online and other informational content.

Of course, including a prominent announcement that payment has been exchanged for an influencer’s commentary significantly lowers the positive impact of native advertising, in that the commentary being valued by consumers precisely because of its inherent objectivity and credibility is no longer much of a hook.

Until recently, it wasn’t clear how strict the FTC was going to be about enforcing its stated policy about disclosing financial remuneration for brand coverage by influencers.

L+TLWell, now we know.  It’s in the form of a settlement reach this month by the FTC with retailer Lord & Taylor over a particular online ad campaign that contained native advertising and social media components.  It’s the first time the FTC has brought an enforcement action since its native ad guidelines were published.

The settlement pertains to a promotional campaign for Lord & Taylor’s Design Lab private-label line of spring dresses. The initiative reached more than 11 million Instagram users, and the particular sundress at the center of the publicity campaign sold out quickly as a result.

The native advertising portion of the promo effort stemmed from an article about DesignLab that appeared in the online magazine Nylon.  That article was paid for by Lord & Taylor, which also reviewed and approved the article’s content prior to publication.

As could be expected, no notification that the piece was a paid ad placement was included when the article was published.

Skating close to the edge even more, the social portion of the promo campaign involved the retailer giving the sundress to approximately 50 top fashion bloggers, along with paying each blogger between $1,000 and $4,000 to model the dress in photos that were then posted to Instagram.

The bloggers were allowed to style the dress in their own way, but they were asked to reference the dress in their posts by using the campaign hashtag #DesignLab as well as @lordandtaylor.

Furthermore, the retailer reviewed and approved these social media posts before they went live, which enabled them to make stylistic edits before-the-fact as well.

Here’s an excerpt from the FTC’s statement about the Lord & Taylor action:

“None of the Instagram posts presented to respondents for pre-approval included a disclosure that the influencer had received the dress for free, that she had been compensated for the post, or that the post was a part of a Lord & Taylor advertising campaign.”

Clearly, the FTC is now putting muscle behind its 2009 opinion (and reiterated last year) that failing to disclose that an endorsement has been paid for is a deceptive practice.

In this particular “test case,” Lord & Taylor is getting off somewhat easy in that there have been no monetary penalties levied against the retailer. However, the company has signed a consent decree that is in place for the next two decades, which would mean “swift and stiff” penalties if the retailer were to transgress in the future.

Other terms of the settlement mandate that Lord & Taylor require its endorsers to sign and submit written statements outlining their obligation to “clearly and conspicuously” disclose any monetary or other material connections they have to the retailer.

Clearly, the Lord & Taylor settlement is a shot across the bow by the FTC, signifying that it means business when it comes to alerting consumers of the financial or other material connections that exist between influencers who are making value judgments on products and services.  In effect, the FTC is saying to the marketing world, “Be very careful …”

It’ll be interesting to see how marketers finesse the challenge of figuring out how to corral the obvious benefits of native advertising while mitigating the dampening effects of “full disclosure.”

Perhaps bloggers and other influencers will need to re-think their own business models as well, seeing as how the “golden goose” of supplier perks seems to have lost some of its luster now.

Stay tuned — this new “lay of the land” is still unfolding.

The FTC Cracks Down on Native Advertising Abuse

But what difference will it make? Only time will tell …

FTIt had to happen: After years of publications uploading native advertising content that’s barely labeled as such, the Federal Trade Commission has handed down new guidelines that leave very little wiggle room in what constitutes proper labeling of paid advertising material.

Published under the title Enforcement Policy Statement on Deceptively Formatted Advertisements, the FTC’s new guidelines, which run more than 10 pages in length, make it more difficult than ever to “camouflage” advertising as “legitimate” news content.

What it boils down to is the stipulation that any sponsored content must be clearly labeled as advertising – using wording that the vast majority of readers will understand instantly.

Here’s how the FTC guidelines describe it:

“Terms likely to be understood include ‘Ad,’ ‘Advertisement,’ ‘Paid Advertisement,’ ‘Sponsored Advertising Content,’ or some variation thereof. Advertisers should not use terms such as ‘Promoted’ or “Promoted Stories,’ which in this context are, at best, ambiguous and potentially could mislead consumers that advertising content is endorsed by a publisher site.”

Another key provision is warning against advertising content mimicking the look and feel of surrounding editorial content – things like the layout characteristics, headline design treatment, the use of fonts and photography.

And here’s another kicker: the FTC lumps offending advertisers in the same pile as the people who create the materials, in that its policy statement doesn’t apply just to advertisers.  So ad agencies, MarComm companies and graphic designers, beware.

Quoting again from the FTC document:

“In appropriate circumstances the FTC has taken action against other parties who helped create deceptive advertising content – for example, ad agencies and operators of affiliate advertising networks. Everyone who participates directly or indirectly in creating or presenting native ads should make sure that ads don’t mislead consumers about their commercial nature. 

“Marketers who use native advertising have a particular interest in ensuring that anyone participating in the promotion of their products is familiar with the basic truth-in-advertising principle that an ad should be identifiable as an ad to consumers.”

Of course, these new guidelines are only going to make it harder for advertisers – and publishers – to be able to utilize advertising techniques that have, up to now, been far more effective than online display advertising.

iab-logoPredictably, we’re hearing mealy-mouthed statements from the industry in response. A spokesperson for the Interactive Advertising Bureau had this to say:

“While guidance serves great benefit to the industry, it must also be technically feasible, creatively relevant, and not stifle innovation. To that end, we have reservations about some elements of the Commission’s guidance.”

What bothers the Interactive Advertising Bureau in particular is the “plain language” provisions in the FTC’s guidelines, which IAB considers “overly descriptive.”

Translation: there’s concern that publishers can no longer label advertising using such euphemisms as “partner content” or “promoted post.”

Others seem less concerned, however. Sites such as Mashable and Huffington Post appear to be onboard with the new guidelines.

Besides, as one spokesperson said, “When the FTC issues guidelines, you’re better off when you follow them than when you don’t.”

… That sounds about right.

The Newest Wrinkle in Social Marketing: Getting Paid to Praise

It had to happen. With the dramatic rise in the popularity and number of blogs and other social marketing sites on the web, sooner or later merchandisers would get wise to the fact that they can use them to pitch their products and services. And for just pennies on the promotional dollar.

How? By offering free merchandise or cash payments to bloggers who will then be favorably disposed to write positive reviews about new products. And with blog postings being indexed by search engines in just a few days or even a few hours, it’s an incredibly cheap way to gain positive exposure for their products and brands in cyberspace.

… Not to mention that many readers will not be wise to the authors’ tidy mercantile relationships with the companies whose products they are reviewing. This despite the efforts the Federal Trade Commission is making to update its nearly 30-year-old advertising guidelines to cover the new new-fangled techniques brought forth by the cyber revolution — tactics few could even have dreamed of just a few years ago.

How long will it be before the FTC has these new guidelines in place? Who knows? For the moment, there are no hard-and-fast rules regarding paid reviews. But there are some moves being made within the industry to provide “full disclosure” to readers. Blog entrepreneur Ted Murphy of IZEA Social Media Marketing requires his “for-hire” bloggers to insert an icon next to each product review that states: “Sponsored Post. 100% Real Opinion.”

“One hundred percent real opinion?” Does anyone seriously believe any sponsored post will be completely free of bias?

Of course, sponsored bloggers could write a negative review … and then watch as it’s the last time they ever have the opportunity to write for that supplier. Practically speaking, that’s not going to happen — and everyone knows it.

A more fundamental concern is what paid pitching is doing to the credibility of the blogosphere in general. If people find out that even one or two product reviews they read turn out to be nothing more than disguised advertising for the merchandiser, it could cripple the credibility of bloggers overall in the minds of those readers.

This whole phenomenon has the risk of turning a highly powerful consumer information resource into a caricature of itself. Those who read product reviews tend to be the more cautious – or the more suspicious – consumers among us. And so, despite providing every assurance that bloggers who are paid cash compensation or receive merchandise freebies for their posts will remain honest in their opinion … that’s not how it’s going to be received by the audience.

Advice to bloggers: If you value your credibility and your reputation, don’t accept quid pro quo compensation from companies whose products you are reviewing. Advice to consumers: As always … be careful of what you read online.

UPDATE: Two years later … and not much has changed. Here’s Honda’s latest shenanigans.