This article was originally published in the March edition of E-Commerce Law and Policy.
Native advertising - promoted content that is more seamlessly integrated into publishers' offerings online - has generated significant interest as an alternative to standard forms of advertising.The practice triggers regulatory concerns however, such as around the clear disclosure of the nature of the content.
Dan Smith, Director and Head of Advertising and Marketing Law discusses the regulatory concerns and how new guidelines from the UK's Internet Advertising Bureau ('IAB') could help preserve trust in publishing.
Online publishers are reliant on advertising to monetise their content. But critics have attacked the 'standard' forms of display advertising - web banners, skyscrapers etc. - pointing to low creative standards, poor clickthrough rates, and high levels of fraud. If consumers are not clicking on display ads - and potentially aren't even seeing them - then advertisers are likely to reassess the level of their digital media spend.
So, it's not surprising that publishers have been quick to embrace 'native advertising' - promoted content that is more seamlessly integrated into their offerings and which they hope users will want to read and share. But have the businesses involved in native advertising been tempted to dupe consumers, by cloaking advertising content in editorial clothing? Is it clear that a native ad is an ad? And if consumers are fooled, what is the risk to the publishers' reputations?
The IAB has recently published guidance to help ensure that a lucrative new revenue-raising opportunity doesn't turn into a serious regulatory headache.
The problem with display
There is a question mark over how much attention the average site visitor pays to display ads - have we become conditioned to disregard banners etc. as merely the frame around the content we are actually interested in? Critics can point to low click-through rates (reported to be around 0.1%). Meanwhile, the market is plagued with fraud, with advertisers potentially paying for clicks on their ads that originate from bots, not genuine consumers.
The digital advertising industry is looking to address these issues. But, at the same time, publishers are looking to new, native advertising propositions as a highly marketable alternative.
What is 'native advertising'?
There is no settled definition of native advertising. The IAB, in its Native Advertising Playbook, defines the aspiration behind native advertising as 'paid ads that are so cohesive with the page content, assimilated into the design, and consistent with the platform behavior that the viewer simply feels that they belong.'
So, essentially, native ads are designed to be effectively integrated into the page on which they appear, and to fit with the rest of the page content in both design and function. Unlike a banner, a native ad should not sit outside of the main content on the page, seeking to distract the user's attention away from that content. Instead the ad will typically appear within the main stream of activity on the page (e.g. in the news feed) so that the user browses through it naturally.
So, BuzzFeed, a site largely built on native advertising, currently has '16 Marvellous Breaks That You Wish YouWere On' (promoted content, created for KitKat UK), sitting in its main news stream, in between '33 Reasons You Should Never Read A Book' and '11 Times Drake Looked Like A Dinosaur.' Like a lot of other native advertising content, Buzzfeed's stories are put together in the expectation that readers will engage with them and share them with their friends.
Obviously the idea of 'advertorial' - advertising features which resemble editorial content - has existed for a long time in print media. Certain types of native advertising are essentially 'advertorial' reinvented for the digital sphere. But whether native advertising is just rebranded 'advertorial' or something more, as a product it is growing fast.
The value of the native advertising market in the US is expected to reach $2.85bn this year. Last year, in the UK, the Guardian announced a seven figure partnership to distribute Unilever branded sustainable living content. Last month, Forbes put a native ad on its front cover.
The legal issues with native
The regulatory concerns surrounding native advertising can be reduced to the need to make it clear to the consumer that a native ad is still an ad (and not editorial content). In the UK, the Consumer Protection from Unfair Trading Regulations 2008 include, as a 'blacklisted' practice, which will always be treated as unfair: 'Using editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer (advertorial).'
The Committee of Advertising Practice's ('CAP') non-broadcast code - part of the UK's self-regulatory system of advertising standards - states, in rule 2.1: 'Marketing communications must be obviously identifiable as such.' In rule 2.4, the code states: 'Marketers and publishers must make clear that advertorials are marketing communications; for example, by heading them "advertisement feature."'
So the rules are designed to ensure that consumers can clearly differentiate advertising from other content. It is clearly undesirable for consumers to be confused into believing that a brand or product reference has been included in an article by a journalist, acting independently, when, in fact, it has been paid for and signed off by an advertiser.
The problem with native advertising is that its whole purpose is to blend seamlessly into a webpage, among editorial content. Creating advertising which is consistent in form and function with non-advertising content, which may even be created by the same journalists at the publication, increases the risk of consumers becoming confused.
The Outbrain adjudication
In digital media, the Advertising Standards Authority ('ASA'), which enforces the UK self-regulatory system, likes to put out the occasional 'landmark' decision relating to new advertising practices.
For native advertising, that adjudication came in June last year against Outbrain. The ASA ruled that Outbrain was in breach of the CAP code - it had not made it clear that the content it recommended (a form of native advertising) was advertising. The content appeared under the heading 'You may also like these,' and the words 'Recommended by Outbrain' were included in the bottom corner of a panel of articles, but this was insufficient to ensure that the content was obviously identifiable as marketing communications.
The reputational risk
Mixing advertising and editorial is not just a question of regulation. Consumers' relationships with publications are built on trust. Many newspaper brands have spent decades building up a reputation for editorial independence and integrity. And if that independence is placed in even a small amount of doubt, then it tends to attract attention - witness the headlines devoted to the recent allegations that the Daily Telegraph declined to run stories showing HSBC, a key advertiser, in a negative light.
If consumers are fooled into reading even one article, which they only later realise is an ad, they are unlikely to walk away with positive perceptions of either the advertiser or the publication concerned. And if they start to think that there may be an advertising subtext to all of that publication's content, then the impact, for a previously trusted news or magazine brand, could be catastrophic. IAB research, which informed the new guidance, confirmed that consumers' trust in a brand would diminish if they felt the provenance of content was unclear.
The IAB guidance
So native advertising presents an inherent risk of regulatory issues and a potentially serious threat to reputation. In that context, the IAB's new guidance is to be welcomed. Its eminently sensible recommendations are that publishers and advertisers:
- 'Provide consumers with prominently visible visual cues to enable them to understand, immediately, that they are engaging with marketing content that has been compiled by a third party in a native ad format and is not editorially independent.
- Ensure that the publisher or provider of the native ad format uses a reasonably visible label. The language of the label must demonstrate a commercial arrangement is in place.'
The guidance does not mandate the form of visual cues or labelling, so players in the native advertising marketplace retain some flexibility. However, the document does suggest clear brand logos and the use of different design formatting for ads. It is recommended that publishers test consumer interpretations of different labels, as readers' expectations in terms of language will differ according to the individual platform/publisher. The guidance also includes some helpful best practice examples, showing how native advertising might be signposted in newsfeeds, with recommendation engines such as Outbrain or Taboola etc.
As new native advertising propositions are developed, the IAB anticipates that the guidance will also evolve. In the meantime, it is likely that issues will still arise - consumers do not yet have a sophisticated understanding of native advertising and variations on the theme of advertiser branded content may lead to publishers not always being sufficiently clear in their labelling. However, the IAB's guidance is a step in the right direction and a necessary move if native advertising is to justify the hype.