Feds Clarify When & How Advertisers Need To Reveal They Paid For Sponsored Stories

Full Disclosure: Neither Butterfinger nor Simon & Garfunkel paid to be advertised in this story. (photo: Renee Rendler-Kaplan)

Full Disclosure: Neither Butterfinger nor Simon & Garfunkel paid to be advertised in this story. (photo: Renee Rendler-Kaplan)

If you’re reading a website about business travel and you read an interesting news story about saving money on hotels, does it matter to you if that “article” was paid for by an advertiser? If so, how should that sponsorship be communicated to the reader?

Known by a variety of names — “native advertising,” “sponsored stories,” “advertorial content,” or as we call it “pure garbage” — this sort of bought-and-paid-for content has become increasingly popular in recent years now that everyone agrees that traditional online ads are less useful than posting a photocopied flyer on a coffee shop bulletin board. It’s gotten to the point where major publishers now have in-house “studios” staffed with talented editors dedicated to crafting only the finest sponsored content.

The Federal Trade Commission has been looking into this type of advertising for years, and today released a policy statement [PDF] aimed at clarifying just how transparent companies need to be when running ads in news clothing.

In its guidance for businesses interested in native advertising, the FTC breaks down a number of hypothetical examples and what disclosures would be required.

In the first example, a shoe company runs a “story” on a financial news site about one of its shoes. Even though the design of the not-an-article is made to resemble the legitimate news stories on the site — using the same layout, color scheme, and fonts — the headline is the company’s slogan and the main image is for the shoe being advertised. Additionally, the text includes a link out to the shoe company’s site where people can learn more about the product.

According to the FTC, these differences — along with the fact that the content is so different from the rest of the stories on the site — are substantial enough to convey to the reader that this is a commercial message without the obvious need for any specific disclosure that this is an advertisement.

As we’ve shown before, a number of sites will wrap these sorts of ads with a border or label them as “sponsored” or “partner” stories to make it clear that this is an ad. The FTC guidance has us a bit concerned that these cautious publishers will now strip away these indicators if they believe the content of the story is sufficient to indicate that it’s an ad.

A more reasonable example in the FTC guidance involves a slide show of travel destinations that is “presented by” this same shoe company. While it doesn’t advertise the shoes directly, the company’s logo and product photo are used in the display. To the FTC, this adequately demonstrates that the slideshow was paid for.

This is less problematic for us, as the slides are not being used themselves to sell a product. Instead, the shoe company is just hoping to associate itself with sunny images of travel destinations in a highly shareable piece of content.

It’s much like what TV and radio advertisers have done for years, especially on live sporting events — “Today’s starting lineup brought to you by Some Cola,” or “The Jimmy’s Cut-Rate Insurance halftime injury report.” It’s an annoyance to some, but it’s largely understood and shrugged off that money has changed hands.

Where it does become a problem is when the advertiser’s product is stealthily included in the slideshow. The FTC gives the example of a lifestyle site running an article called “10 Must-Haves for a Great Kitchen,” that is not only paid for by a kitchen cabinet company, but includes their designs and products in the roundup. This is not a case of someone merely sponsoring a story that may be of interest to readers, but of an advertisement dolled up to look like editorial content. As such, the FTC says a “clear and prominent disclosure of the article’s commercial nature is necessary.”

So to go back to the hypothetical that we used to open this story: If the article about saving money on hotels is merely “presented by,” say… a fast food chain that is not featured in any way in the content and does not directly benefit from any of the information provided, that’s not an ad in need of further disclosures. But if that same story is brought to you by a travel-booking site or app that could benefit directly from the tips provided in the article, then it would seem like that’s crossed the line into advertising.

Things can get even trickier if there is an indirect benefit to the company. The FTC revisits the example of the shoe-sponsored travel slideshow, but this time with the additional info that one of the resorts featured in the article paid to be included. In that case, according to the guidance, the slideshow would still not be considered, in its entirety, an ad but the slide featuring that particular resort would need to carry with it a disclosure about paying for inclusion in the article.

There are some 17 different hypotheticals in the FTC guidance, so we can’t get through them all, but one that did stick out to us involves ads placed within video games.

Say a hockey video game features ads for various companies around the boards of the rink, just like you’d see in real life. Because we all generally understand that these are ads and not some sort of editorial content, there’s no need for the game publisher to include any sort of disclosures about the sponsorship. But just as in the real world, these advertisers are still held to the same standards for making false or misleading claims about their products.

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