The FTC has issued new guidelines on native advertising, ads designed to appear like surrounding editorial content. Native advertising is a lucrative income stream for publishers and a powerful marketing outlet for brands. Major publishers such as The New York Times accept native ads. Early this year, almost two-thirds of advertisers surveyed said they plan to increase spending on native advertising this year, according to the Association of National Advertisers.

Critics say native ads, or sponsored content, can confuse and deceive consumers who may believe the ads are the editorial content produced by the publisher.

Here are the guidelines in a nutshell: The FTC requires marketers to clearly disclose that native ads are indeed advertising.

The FTC said it “affirms the long-standing consumer protection principle that advertisements and promotional messages that promote the benefits and attributes of goods and services should be identifiable as advertising to consumers.”

“The FTC’s policy applies time-tested truth-in-advertising principles to modern media,” stated Jessica Rich, director of the Bureau of Consumer Protection, in the FTC announcement. “People browsing the Web, using social media, or watching videos have a right to know if they’re seeing editorial content or an ad.”

The Native Advertising Guide

The FTC also released its Native Advertising: A Guide for Business to help companies understand its policy. The keys to avoiding accusations of deceptive practices are:

Transparency.  An advertisement or promotional message shouldn’t suggest or imply that it’s anything other than an ad.

Disclosures. If it’s not clear that the ad is commercial in nature, a disclosure may be necessary to ensure consumers understand that the content is advertising.

Clear disclosures. If a disclosure is needed, it must be clear and prominent. Consumers must be able to see and understand them. The FTC says clear disclosures are:

• in clear and unambiguous language,
• as close as possible to the native ads to which they relate,
• in a font and color that’s easy to read and
• in a shade that stands out against the background.

In video ads, they must be on the screen long enough to be noticed, read, and understood. For audio disclosures, they must be read at a cadence that’s easy to understand.

Don’t Say “Promoted”

Advertisers should not use terms such as “Promoted” or “Promoted Stories,” which the FTC calls ambiguous, with the potential to mislead consumers. The agency also recommends avoiding technical jargon, unfamiliar icons and company logos or brand names without a clear text disclosure.

The guidelines also specify placement of the disclosure.  Native ads on the Web reached by scrolling down a news feed must carry the disclosure at the top of the ad.

Some marketers and publishers worry that the guidelines may suppress the advertising strategy that become so beneficial to them.

The Guidelines are Questioned

“As soon as you start to standardize things and put guidelines around things, you limit the level of creativity and innovation that is able to occur,” Mark Howard, chief revenue officer of Forbes Media, told The New York Times. “If you put out stringent guidelines, are you going to put people back in the box?”

However, research shows that both publishers and brands sponsoring native ads risk losing credibility if disclosures are unclear and consumers confuse the ads with editorial content. For instance, research from the Reuters Institute for the Study of Journalism earlier this year reported that about a third of viewers surveyed have felt disappointed or deceived after reading an article they later learned was sponsored.

Research strongly suggests that brands gain nothing by failing to disclose sponsorship of native ads. Full and clear disclosure, on the other hand, can improve trust that viewers have in the sponsor.

Bottom Line: New FTC guidelines on may change how web publishers display native advertising. The guidelines are especially detailed on disclosures. Marketers would be well-advised to understand the guidelines to avoid the agency’s unwanted attention and any negative publicity that may result.

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William Comcowich

William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.