As online content providers become increasingly desperate to find new sources of revenue, many have turned to so-called “sponsored content” or “native advertising.” Sponsored content is paid-for content made to look like a website’s actual content. It can appear in-line in a news article or as links above and below site content. While no regulations tailored specifically to online native advertising are currently on the books, numerous existing Federal Trade Commission regulations prohibit advertisers from placing ads in a manner likely to deceive consumers. Despite these regulations, the growing ubiquity of native advertising has prompted the FTC to undertake efforts to engage content publishers, advertisers and the regulatory community in a discussion regarding appropriate limits and the need for, and scope of, new regulations.

1. GAMAByte:
Regulation Around Native Ads & Sponsored Content
As online content providers become increasingly desperate to find new sources of revenue, many have turned to so-called
“sponsored content” or “native advertising.” Sponsored content is paid-for content made to look like a website’s actual content. It
can appear in-line in a news article or as links above and below site content.
While no regulations tailored specifically to online native advertising are currently on the books, numerous existing Federal Trade
Commission regulations prohibit advertisers from placing ads in a manner likely to deceive consumers. Despite these regulations,
the growing ubiquity of native advertising has prompted the FTC to undertake efforts to engage content publishers, advertisers
and the regulatory community in a discussion regarding appropriate limits and the need for, and scope of, new regulations.
FTC
Workshop
on
Na/ve
Adver/sing
On Wednesday, December 4, 2013, the Federal Trade Commission hosted a workshop, Blurred Lines: Advertising or Content? An
FTC Workshop on Native Advertising. While the workshop was not a hearing or policymaking meeting, the event may be a
precursor to expanded regulations in this area. The panel was billed as an examination of “the ways in which sponsored content is
presented to consumers online and in mobile apps; consumers’ recognition and understanding of it; the contexts in which it
should be identifiable as advertising; and effective ways of differentiating it from editorial content.”1
Current
Regula/ons
The FTC’s authority over advertisers stems from its right to enforce the law prohibiting deceptive business practices. An
advertisement is deceptive if “(1) it’s likely to mislead consumers, (2) who are acting reasonably under the circumstances, and (3)
it would be material to their decision to buy or use the product.”2 As indicated at the workshop during a presentation by Lesley
Fair, an FTC Staff Attorney, the FTC’s position is that native advertising is nothing new, and that the FTC’s regulations prohibiting
deceptive advertising are sufficient to help content providers determine what native advertising may be appropriate and what
may run afoul of the law.
For example, the FTC has issued specific guidance on when endorsements,3 advertorials4 (ads written like news articles) and
sponsored search engine results5 may be deceptive. This guidance almost always concludes that advertisers should clearly disclose
ads as ads to allow consumers to distinguish them from surrounding content.
What’s
Next:
New
Regula/ons
and
Enforcement
As the Internet-surfing public has grown numb to clearly disclosed ads (so called “banner blindness”), content providers continue
to look for new and unique ways to monetize their web traffic. While regulations may seem clear to the FTC, the increased
presence of native advertising would suggest either that advertisers do not understand the applicability of the regulations, or
believe that native advertisements, which often include small disclosures, are sufficient to skirt the deceptive advertising laws.
As it turns out, over a quarter of consumers recently surveyed believed that a native ad was content authored by the website
owner and not by a third party advertisers, according to a recent study commission by the FTC. Nearly a third of respondents
said they did not know who the author of the native advertisement was.6 Since consumers tend to recognize online advertising
for what it is, explained Chris Jay Hoofnagle in describing the study, it follows that native ads are generally effective because many
users cannot distinguish them as such.
Given these findings, it seems likely that the FTC will consider issuing some for of guidance or advisory opinions as to the viability
of native advertising under current regulations. At the same time, advertisers and marketing affiliates should expect increased
enforcement actions as the FTC starts to set precedent in this area.
A GAMA Byte produced by Brandon Wiebe © 2013. Gagnier Margossian LLP. All rights reserved.

2. Endnotes
1. Blurred Lines, FTC.GOV, http://www.ftc.gov/bcp/workshops/native-advertising/.
2. FTC Deception Policy Statement, appended to Cliffdale Associates, Inc., 103 F.T.C. 110, 174 (1984).
3. “Where there exists a connection between the endorser and the seller of the advertised product that might materially affect the weight or
credibility of the endorsement (i.e., the connection is not reasonably expected by the audience), such connection must be fully disclosed.” FTC
Endorsement Guides, 16 C.F.R. § 255.
4. “[T]he column uses the format and has the general appearance of a news feature and/or article for public information which purports to
give an independent, impartial, and unbiased view of the cuisine facilities. Since the column in fact consists of a series of commercial messages
which are paid for by advertisers, the Commission is of the opinion that it will be necessary to clearly and conspicuously disclose it is an
advertisement . . . .” FTC Advisory Opinion on Ads in News Formats, 73 F.T.C. 1307 (1968).
5. See 2002 Staff Letter to Search Engines, FED. TRADE COMM’N (2002) (“The staff recommends that you review your Web sites to ensure
that: . . . any paid ranking search results are distinguished from non-paid results with clear and conspicuous disclosures . . . .”); 2013 Staff Letter
to Search Engines, Fed. Trade Comm’n (2013) (“[C]onsumers ordinarily expect that natural search results are included and ranked based on
relevance to a search query, not based on payment from a third party. Including or ranking a search result in whole or in part based on
payment is a form of advertising. To avoid the potential for deception, consumers should be able to easily distinguish a natural search result
from advertising that a search engine delivers.”)
6. Chris Jay Hoofnagle, Presentation at FTC Workshop on Native Advertising (Slide Deck, slide 98, 99).
For
more
informa/on
or
guidance
on
complying
with
adver/sing
and
sponsored
content
regula/ons
or
just
to
chat,
contact
an
aEorney
at
Gagnier
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