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FTC probes online 'masquer-ads'

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The Federal Trade Commission's one-day look into what's variously called "native advertising" and "sponsored content" – ads and videos deceptively designed to mimic genuine editorial website content – ended inconclusively December 4.

The repercussions are just beginning.

The FTC's "Blurred Lines: Advertising or Content" workshop, Advertising Age reported, "focused on whether publishers and advertisers are doing enough to keep consumers from mistaking native ads -- which are meant to closely resemble non-sponsored content -- [for] the content itself."

Columnist and former AdAge editor Bob Garfield, wasn't quite so diplomatic, calling the practice "A conspiracy of deception. A hustle. A racket. A grift."

Old scam, new problem

Advertising masquerading as editorial content isn't new to the FTC. They've been combating it since 1917, their third year in existence, when they brought a case against a newspaper ad for an electric vacuum cleaner. But today, notes Adweek, "digital media has [sic] put what the FTC once termed 'masquer-ads' on steroids."

As Bureau of Consumer Protection attorney Lesley Fair explained,

It used to be pretty clear. The entertainment portion of a show ended and the commercials began. The two-column article ran on one side of the newspaper and the ad ran on the other. Or the webpage had the content in the middle with a banner ad running across the top. Things are more complicated now. Some call it “native advertising” or “sponsored content.” Whatever the name, it’s for sure ads in digital media are starting to look a lot like the surrounding content. What are the consumer protection implications now that those lines appear to be blurring?

Federal Trade Commissioner Edith Ramirez went further, warning that ads that "seamlessly and inconspicuously" mimic editorial material run the risk of misleading consumers. “By presenting ads that resemble editorial content, an advertiser risks implying, deceptively, that the information comes from a nonbiased source,” she said in her opening remarks.

Even the label's misleading

"Masquer-ads" run on more websites than you might realize – as everything from commercials that look just like the videos on Failblog.org to ads that look like articles on Forbes.com.

On Buzzfeed’s site, sponsored content is shaded differently and accompanied by the phrase “Presented by” with a brand’s logo. The Wall Street Journal online calls it “Content from our Sponsors;”... Slate puts such content in a box entitled “Sponsored Content.”

The language is confusing, perhaps deliberately so. Research conducted by University of San Francisco Law School Professor David Franklyn shows that 50 percent of consumers "don't even know what the word 'sponsor' means."

“Really smart people may come to different conclusions about what 'sponsored' means,” Chris Hoofnagle, of the University of California, Berkeley, School of Law, stated. What's more, he thinks, “sponsored by” indicates a PBS-like setup where the sponsor pays for the sales message but has nothing to do with the content of the show it appears on. With online "sponsorships," though, “sponsored by” means the advertiser created the content.

Mary Engle, FTC associate director of advertising practices, asked industry representatives why they don't just use the word "ad" to label their native advertising. But the answer's really simple; if they did, people would know it's advertising – and, for the most part, just skip it.

Heading them off at the pass

In the hope of forestalling FTC regulation that would corral their $3 billion-a-year cash cow, executives from Hearst, Mashable,The Huffington Post, Outbrain, Sharethrough and other publishers packed the standing-room-only session, armed with lame excuses. "Over the course of [the day]," wrote Ad Age, "every imaginable defense of the medium surfaced, from the standard 'native advertising is transparent enough' argument to a claim that consumers want more native ads."

Native ad-tech vendor Adiant's svp-operations Jon Carmen even pleaded poverty. The economy's rough, he claimed, and "At the end of the day, we're all trying to make money."

Just two days earlier, the Interactive Advertising Bureau issued "the digital community's first pass at defining best practices" in the hope of heading off FTC action at the pass. It

classifies native ads into six broad product types: In-feed, like Facebook or Yahoo; search; promoted listings (Yelp, Amazon); recommended content (Outbrain, Tabula); custom (Hearst, BuzzFeed); and native ads inserted into standard ad positions [and includes] general principles for setting guidelines for each format with the overarching principle that a reasonable consumer should be able to distinguish native ads from editorial product.

In October, the American Society of Magazine Editors issued its own guidelines, recommending "clear labeling, a 'What's This?' rollover message at the top of each native ad, and visual separation from edit[orial content] by way of different fonts and graphics.."

But online publishers are resisting such standards. "There's a benefit to having some consistent principles," admitted Todd Haskell, svp and chief revenue officer for Hearst Magazines digital media. "But ultimately," he weaseled, "you're talking about thousands of different brands, different experiences, and different practices, so it's critical that publishers have the flexibility to do what is right for their brands." You'll notice he didn't say a word about doing what's right for the readers.

Only the beginning

While everyone in the industry agrees that there should be some sort of standards, there's no agreement on what those standards should be – except that they should avoid the dreaded a-word ("ad") and that the FTC shouldn't impose them.

"The FTC has stated the primary goal of the workshop is to help it better understand native advertising," says AdAge. "But the commission's power to bring lawsuits to protect consumers seemed to be the impetus for the hearing's strong arguments."

It may have to, because although many participants "argued that transparency would take care of itself because it is in the best interest of brands and publishers not to trick readers," they're still going merrily along, tricking readers.

"The December workshop could be a first step before the FTC issues guidelines for native advertising the way it has for other digital ad practices, platforms and formats," Adweek predicted.

In doing so, they may be protecting not only consumers, but the industry from itself.

As Chris Laird, a Procter & Gamble marketing director, put it, "If it's not transparent, and it erodes consumer trusts [sic], the ROI falls and we just won't invest in it anymore."

Garfield put it more strongly, comparing online publishers who sell native advertising to miners who sell guano until the supply of the natural fertilizer runs out. "With every transaction," he said, "publishers are mining and exporting a rare resource: trust. Those deals will not save the media industry. They will, in a matter of years, destroy the media industry: one boatload of shit at a time."

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