Friday, August 15, 2014

New York Times Admits Its Native Advertising Violates FTC Rules

Photo Credit: Me!
Two weeks ago, John Oliver's bit on Native Advertising went viral--at least in marketing circles--but it was hardly the most disturbing thing to be published that week on the alarming and growing practice of sponsored content in mainstream media. While I enjoyed the humorous (and accurate) critique on Oliver's "Last Week Tonight," featured an even more troublesome item, entitled "New York Times Tones Down Labeling on Its Sponsored Posts."

The New York Times, long considered a U.S. national "newspaper of record" due to its professional ethics and reporting standards, has decided to appease advertisers desperate to bypass consumers' natural aversion and avoidance of advertising. The newspaper "shrunk the labels that distinguish articles bought by advertisers from articles generated in its newsroom and made the language in the labels less explicit."

What is so disappointing about The New York Times' action is that studies demonstrate a substantial level of confusion on the part of consumers about sponsored content. Consumers do not recognize Native Advertising as paid media, nor do they understand what "promoted content" means:
  • The IAB published a study last month that found business and entertainment news audiences could generally identify sponsored content, but "the general news audience had more trouble, with less than half (41%) recognizing that the material was advertising."
  • A 2013 study by David Franklyn, law professor at the University of San Francisco, found that people “didn’t remember seeing ‘sponsored by’ posts when asked to read a web page and the majority (over 50 percent) also didn't know what the word ‘sponsored’ actually meant.”
  • A recent study by Contently found that "while a plurality (48 percent) of respondents believe that 'Sponsored Content' means that an advertiser paid for the article to be created and had influence on the article’s content, more than half (52 percent) thought it meant something different." The study further found that:
    • Two-thirds of readers have felt deceived upon realizing that an article or video was sponsored by a brand.
    • 54 percent of readers don’t trust sponsored content.
    • 59 percent of readers believe a news site loses credibility if it runs articles sponsored by a brand.
    • Every single age group would prefer news sites stick to banner ads versus sponsored content. (This may be the first study in history to find a preference for banner ads, which makes evident consumers' perspective on Native Advertising.)
Advertising ethics and Federal Trade Commission (FTC) disclosure rules demand more disclosure, not less. The FTC does not set standards for disclosures but determines the effectiveness and legitimacy of the disclosure based on whether or not it succeeds in informing consumers. Simply put, if consumers cannot distinguish that content is sponsored nor understand what the disclosure means, it is illegal under the FTC Act, which prohibits "unfair or deceptive acts or practices."

This is made explicit in the FTC's ".com Disclosure" guide, which the agency created to help marketers and media outlets understand the law in the digital world. It states, "The ultimate test is not the size of the font or the location of the disclosure, although they are important considerations; the ultimate test is whether the information intended to be disclosed is actually conveyed to consumers." Today's Native Advertising undeniably fails to meet this standard (and it is a shame the FTC is burying its head in the sand rather than enforcing the rules it has established.) 

While it is sufficiently disturbing that The New York Times would diminish disclosures to make them less "clear and conspicuous," it was this line in the Ad Age article that left me dumbfounded:
"Several marketers have bristled at all the labeling, suggesting it turned away readers before they had a chance to judge the content based on its quality."
If this were a legal drama, that statement would cause the courtroom to erupt as the judge bangs his gavel demanding "Order in the court." That sentence is is an admission of guilt; a confession that The New York Times is violating both FTC guidance and advertising ethics.

The entire point of the FTC's "clear and conspicuous" disclosure rules is to ensure consumers recognize content as sponsored before engaging with it so that they can make an informed decision to read, watch or listen to the brand-sponsored media. In the old days of printed "advertorials," those fake "articles" were surrounded by a special border with the word "advertisement" repeated so as to provide a clear and conspicuous disclosure to consumers before they began to read the ad. On television, the FTC requires infomercials to "clearly disclose that 'THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT FOR [NAME OF PRODUCT]' at the beginning of an infomercial." (The italics are mine, but the capitalization is the FTC's.) 

The admission that The New York Times and its advertisers are actively attempting to deceive consumers into engaging with paid content before disclosing it is sponsored content is startling. It is also upsetting, because this demonstrates the wholesale failure of the news industry, marketers and regulators to uphold well-established, long-standing ethical advertising guidelines.

Some may argue I am overreacting--that Native Advertising can be done legally and ethically. I agree it can--with clear and conspicuous disclosure that plainly informs consumers the content is paid media. If the readers choose to proceed after seeing and understanding the disclosure, everybody wins! But absent that level of disclosure, Native Advertising is dangerous for all parties. It undermines the trustworthiness and independence of the news media; causes brands to look deceptive, untrustworthy, desperate and disrespectful of customers; deceives consumers who may not realize the content is influenced or written by a brand; and makes the FTC look toothless and opens the door to further violations of its rules.

To appreciate the potential damage caused by Native Advertising, put yourself not in the shoes of a marketer with sales or market share goals to deliver; instead, consider this from the perspective of a parent, spouse or customer. We can forgive David Ogilvy for a bit of sexism given the era in which he said it, but his famous admonition to advertisers demands we see our practices from both sides: "The consumer is not an idiot. She is your wife." How would you feel if a "respectable" news site buried a disclosure and encouraged you or your family to read:
  • "The Five TV shows You Can't Miss This Season" (sponsored by a production company that only included its own shows)
  • "Danger: Eating Tainted Chicken Sickens Children" (sponsored by the beef industry)
  • "Researchers: Fracking Completely Safe for Environment" (sponsored by a petroleum lobbying group)
  • "US Falls Behind As Regulation Stifles American Competitiveness" (sponsored by a bank trying to get Washington to loosen banking regulations)
  • "Human Rights Abuses Mount in Fill-In-The-Blank-Country" (sponsored by a top Pentagon contractor that will make billions if the US intervenes with military action) 
"First NYTimes frontpage (1851-9-18)"
 by The New York Times - ProQuest
Database. Licensed under Public
domain via Wikimedia Commons.
Native Advertising (without clear and conspicuous disclosure) is not a slippery slope; it is a single step onto a banana peel. I certainly understand the appeal of this new form of advertising to The New York Times, whose stock has declined 70% in the last decade (while the Dow has risen an equal percentage); nevertheless, the future of the Times (and of news, in general) is not improved by violating FTC rules, undermining trust and raising suspicions in consumers' minds that what they read was written by the highest bidder.

The current leadership of The New York Times would be wise to head the message that was printed in its inaugural issue in 1851:
We shall be "Conservative", in all cases where we think Conservatism essential to the public good;—and we shall be Radical in everything which may seem to us to require radical treatment and radical reform. We do not believe that "everything" in Society is either exactly right or exactly wrong;—what is good we desire to preserve and improve;—what is evil, to exterminate, or reform.
It is hard to imagine how obfuscating paid media is in the "public good." In fact, actively minimizing disclosures to deceive readers is clearly evil, and the Times' leaders would be well advised--not just for ethical reasons but for its own future--to "exterminate" or "reform" its Native Advertising practices. 


Ted Rubin said...

Great post and insights Augie.

BE Authentic, don’t just ACT it. #RonR

Shane Shirley said...

What a wonderfully laid out post that certainly should be read by every consumer.


Augie Ray said...

Thanks Ted. I appreciated the dialog on the panel last night and also your support of the blog post today. I think the four of us panelists should take our show on the road! :)

Shane, thanks so much for the comment. To me, the issues (and rules) seem so clear, so I wanted to make sure they seemed the same way to readers. I'm glad you found it informative!