Taking another look at native advertising, the National Advertising Division recommended that Internet-based ad company Taboola modify its “recommendation widget” so that consumers can more clearly understand that clicking on links will take them to sponsored content.

Competitor Congoo challenged Taboola’s native advertising practices, calling the image-plus-text ads used by the company confusing for consumers. Labels on the ads, such as, “Recommended videos,” “You Might Also Like,” and “More in the News,” were vague and could result in consumers clicking on ads they believed to contain editorial content, Congoo said.

Taboola tried to dodge the action by taking the position that it made no claims and was therefore not an advertiser, but the NAD rejected that argument and found that the company was engaged in national advertising because it “markets commercial messages and earns revenue from its widgets placed on publisher sites.”

Evaluating Taboola’s widget, the NAD explained that it appears after a consumer reads an article on an online publisher’s Web site. The title or lead appears in bold black font in the upper left corner; the upper right-hand corner, in smaller gray font, features a disclosure such as “Sponsored Content by Taboola.” If a consumer clicks on the disclosure, a pop-up appears, stating, “This content is paid for by our advertiser and publisher clients.”

Taboola argued that the disclosure, combined with the pop-up, clearly lets consumers know they are linking to sponsored – not editorial – content.

But the NAD noted that “many” of Taboola’s leads “reasonably communicate the message that the linked content is editorial and is being recommended to the consumer by the publisher.” Leads such as “From Around the Web” and “More from the Web,” “while not necessarily implying a recommendation from the publisher, can create consumer confusion as to why the links have been placed below the article, without clear and conspicuous disclosure that the links are sponsored, because consumer[s] may be confused as to why the content is linked,” the self-regulatory body wrote.

The NAD found an anology for its conclusions in the FTC’s recent guidance to search engines, where the agency emphasized that natural search results should be distinguishable from advertising results. “Similarly here, consumers should be advised when linked content is sponsored,” the NAD said.

Reviewing the totality of the message conveyed by Taboola’s ads, the NAD expressed concern that the disclosures were not sufficiently clear and conspicuous or easy to notice, read, and understand. The lighter typeface and smaller font made the text less visible, and its placement (on the upper right-hand corner) was in a portion of the Web site that consumers are less likely to notice and read.

The NAD recommended that “Taboola should modify its disclosure to increase the visibility of the ‘Sponsored Content’ or ‘Promoted Content’ disclosure in terms of font size, font color and boldness, as well as its placement on the page, to make clear that the linked content is sponsored.” In addition, “the combination of thumbnail photograph, article title, and name of the destination site “should convey a truthful and accurate message of the content to which consumers are linking.”

The self-regulatory body disagreed with Congoo that the word “advertisement” must be used to inform consumers about sponsored links, but was reluctant to mandate the use of specific words since it lacked consumer perception evidence that consumers do not understand the words “sponsored content” or “promoted content” to mean paid.

To read the NAD’s press release about the case, click here

Why it matters: The self-regulatory body continues to play an active role in considering native advertising issues, having previously reviewed the social media practices of an at-home hair-coloring product as well as Qualcomm’s sponsorship of a series of tech-related articles featured on Mashable.com. “When consumers are linked to sponsored content in a context which consumers may reasonably understand to be editorial, consumers should be advised that the link is sponsored through the use of clear and conspicuous disclosures,” the NAD concluded.