The increased prevalence of online native advertising – commercial content designed with the look and feel of editorial comment – has sparked significant debate among regulators, publishers, advertisers and ad agencies as to the necessity and appropriate methods of disclosure to consumers. On Wednesday, December 4, the Federal Trade Commission hosted a public workshop titled “Blurred Lines – Advertising or Content?” at which presenters discussed various legal and business issues surrounding native advertising.

The workshop, which lasted a full day, featured a number of panelists, including regulators, academics, consumer advocates, online publishers, advertisers and agencies. The panelists provided various perspectives on the circumstances in which a disclosure obligation arises, and the types and methods of appropriate disclosure, much of which caused spirited debate. As the day came to a close, however, it was clear that the discussions produced more questions than answers, as was noted by FTC attorney Mary K. Engel, Associate Director of the Division of Advertising Practices.

Native advertising, of course, is not new. As FTC staff attorney Lesley Fair explained, the FTC has been monitoring various forms of it since the early 1900s when a door-to-door salesman could literally get his foot in a consumer’s door by professing to be conducting a survey, when in reality he was selling a vacuum cleaner. Although native advertising has continuously permeated the advertising landscape, primarily in direct mail and print publications, it has certainly morphed over the years.

New questions, however, have arisen as online native advertising, with its capacity for wide and virtually instant dissemination via social media, has become commonplace. The potential for such dramatic amplification of a message, and the ability to reach so many consumers in a way that powerfully resonates, has produced questions that, so far, remain largely unanswered. While the FTC workshop did not result in detailed guidance on how publishers, advertisers and agencies can successfully navigate the minefield of regulatory scrutiny, a few themes emerged.

An important distinction exists between native advertising that actively promotes a product or service and messaging that simply presents information with which an advertiser wants to be associated. Most panelists agreed that where a paid native advertising message either promotes a product or service or disparages a competitor’s product or service, disclosures must be made, regardless of whether the brand participated in the creation of the content.

As the title of the workshop suggests, the line becomes blurred where the content does not contain a message that promotes a product or service, but simply contains information relevant to the brand’s target audience. For example, if an outdoor equipment company disseminates an advertorial that reviews and rates various companies’ camping equipment, and concludes that its camping equipment is superior, a disclosure obligation seems fairly obvious. If that same company pays to be associated with an article describing the best places to camp in the northwestern United States, the existence of a disclosure obligation is less clear, even if the company participated in generating the content.

Also, whether a disclosure should be made seems to be as much a business consideration as a legal one. The publishers and advertisers who spoke seemed to agree that consumer trust and confidence are of paramount importance and, as such, suggested that the best practice is to err on the side of transparency. Certainly, in the example above, the outdoor equipment company that paid to publish the article about the best campsites would want credit for delivering relevant content to its target audience, and might also be concerned that its target audience would feel duped if its participation in generating the content were not disclosed. What remains unclear is whether there is a legal obligation to disclose the advertiser’s role in delivering that content – whether through paying to have it placed or influencing the messaging itself.

Some panelists expressed the opinion that consumers are entitled to know whether an advertiser paid to deliver content or participated in its creation, but these opinions seemed to stem from journalistic ethical considerations rather than the law. Other panelists and participants questioned how this information would influence a consumer’s purchasing decision, and thus could be considered “material” pursuant to Section 5 of the FTC Act. FTC Chairwoman Edith Ramirez’s welcoming remarks may have shed some light on the FTC’s thinking when she noted that native advertising may contain an implied message that the information comes from an “unbiased source” and that disclosures may be necessary to alleviate any such misleading message.

There was significant discussion as to whether specific terminology to label native advertising should be required. Most panelists agreed that consumers do not fully understand what “sponsored” means, and therefore, that term is inadequate to disclose in and of itself. However, most panelists also suggested that there is no one-size-fits-all term that all publishers and advertisers should be required to use. Hence, more questions than answers emerged.

Regarding appropriate methods of disclosure, context appears to be as important as terminology. Panelists reported research suggesting that consumers may not see disclosures if they are not visually presented in a way that the consumer expects. As such, flexibility is not only imperative to enable publishers and brands to disclose in a way that is natural to the brand but also necessary to ensure that consumers actually view disclosures. More than one online publisher explained that, as a part of their overall disclosure approach, they supplement explicit disclosures that content is advertiser sponsored by surrounding native content with traditional ads for the brand. While there was no suggestion that this approach is required, or even adequate, it demonstrated that publishers and brands are creatively crafting methods to ensure that consumers understand the source of native content.

Why it matters: Online native advertising is a powerful tool and has emerged as the preferred way to connect with consumers online. While many questions remain unanswered, one theme of the workshop came through loud and clear – the FTC will scrutinize all players in this space. The FTC’s remarks clearly communicated that the agency expects not only advertisers but also publishers, ad agencies and other syndication services to take necessary steps to ensure that consumers are not deceived or mislead. While it is unclear whether the FTC will issue formal guidance on this topic in the near future, this type of advertising is without question on the regulatory radar.