The feds, native ads, and truly deceptive practices

By Kirk Cheyfitz , written on January 20, 2014

From The News Desk

This is the twisted tale of why so-called “native advertising” is a dead end for publishers, a passing fad in the slow demise of traditional advertising, and a deceptive view of what’s really happening in digital media.

The entire native ad phenomenon springs from a fundamental misunderstanding of the massive ongoing transformation of marketing, content, audiences and publishing. It fails to comprehend who can command people’s attention and trust in a digital world.

Last year was almost over when the Federal Trade Commission jumped into the deep end of this ever-murkier media pool. In early December, the feds held a day-long “workshop” to figure out how to regulate so-called native advertising.

Every corner of adland got involved in the FTC workshop -- publishers (traditional and digital), brands, ad agencies, lobbyists, lawyers, public advocates, and so on.

The FTC jumped on the bandwagon, because part of its mission is to stop “deceptive acts or practices” in business.

I believe the only people being deceived by native ads are the publishers. They’ve hoodwinked themselves into believing this is a long-term source of ad revenue. But the feds and the publishing industry (from traditional folks like The New York Times to online upstarts like Buzzfeed) believe differently.

The “deception” that has the FTC, in particular, wringing its hands and promising more regulation is the prospect of online publishers selling their “credibility” to brands by running “advertising that resembles editorial” or “content.”

Watchdogs of the public trust -- official and self-appointed -- fumed during the workshop about the deceptions practiced by publishers creating native ads that look like news stories or tell lies or both. FTC Chairwoman Edith Ramirez said her agency held its native ad workshop to define, pursue, prevent, or punish the crime committed when brands “capitalize on the reputations of publishers.”

This would have been a fascinating way to frame the discussion if it weren’t counter to the facts and fundamentally deceptive in three important ways:

Fundamental Deception no. 1: Publishers can’t mislead the public by selling their credibility, because they have so little credibility to sell.

Gallup tells us that last year only 44 percent of Americans “trusted” mass media. At the same time, Nielsen tells us that 69 percent of the online audience trusts what it sees on brand websites. (Brand sites are second in trust only to friends sharing brand messages with friends, Nielsen finds.) In other words, Gallup and Nielsen find brands are nearly 1.6 times more trusted than publishers. By the logic of the native ad debate, advertisers should be selling space on their brand websites for publishers to publish more credible news.

Fundamental Deception no. 2: The FTC is misrepresenting what advertising is.

The FTC claims it cannot define “native advertising.” This is because the agency’s working definition of “advertising” is all wrong. The feds are sticking to the outdated notion that an ad is a paid message placed next to “editorial” content on pages owned by a publisher -- pages that are visited solely because the publisher’s editorial content attracts the audience.

Working under that 19th-century assumption, the FTC, many advertisers, and virtually all publishers fail to see that publishers and their audiences are not particularly valuable to advertisers in the new era. The regulators and publishers somehow missed the moment more than a decade ago when the Internet allowed brands to publish their own content on the Web. The feds and the ad industry claim not to see that the best ads now stand on their own, telling the brands’ stories and engaging the brand’s audiences very successfully with no help at all, thank you very much, from the publishing industry.

As more brands learn to create content that engages them directly with their own audiences, advertisers will end their unnecessary dependency on publishers and native ads will fade away like a bad dream on a bright morning.

Fundamental Deception no. 3: The FTC cannot keep pretending that non-biased news exists and that such content can be easily or simply or dependably distinguished from advertising.

It is delusional to believe that anyone, including a federal regulator, can tell these things apart. It’s clear, on the other hand, that news and “editorial content” are not something only “news organizations” can create. What stops consumer brands from creating legitimate journalism, for example? What’s the difference between a “news organization” and any other corporation, say, Comcast or Disney?

The feds’ assumptions about the compartmentalization of the media world were made clear when they named their native ad workshop “Blurred Lines: Advertising or Content?” But those assumptions won’t survive much scrutiny.

In my opinion, roughly half the content on Fox News is actually native advertising for the US Chamber of Commerce and the far right of the Republican Party. On the other hand, I wonder whether the FTC’s watchdogs care when Disney (owner of ESPN, ABC News, and other media networks) repeatedly produces films, books, and reports that are native ads for the theme parks and real estate ventures that yield roughly $2 billion in operating income each year.

Examples like these can go on and on. When does a skewed medical or environmental study published by a corporation stop being science and become, instead, a native ad for a potentially dangerous pharmaceutical or harmful chemical? And where does the FTC stand on this?

I don’t mean to say that journalism from Disney or Comcast is worse, better, or different than journalism from The New York Times Company or News Corp. But why would we grant greater privileges to these corporations than we do to any other and presume to interfere with the rights of people and companies to report and tell their own and others’ stories?

The Poynter Institute recently updated its decades-long work on journalism ethics. It’s called “The New Ethics of Journalism.” In the introduction, the co-editors write, “…as the invention and adoption of new technologies continues to accelerate, it is clear journalism will come from varied sources.” With an apparent nod to the rise of brand-created content, they acknowledge this may include “even corporate sources.” (I get what they mean, even though it raises the question: Isn’t the New York Times Company a corporation?) They note that “the opening of the information system to all means those who make the news will also cover it.” And so on.

All this nuance and change is apparently news to the FTC and, more surprisingly, much of the publishing world.

Major law firms rang in the new year warning their clients that federal regulation of native ads would be a big issue this year. Two antitrust lawyers with the firm Arnold and Porter wrote, “We expect the FTC to continue to look at online native advertising practices and…we might see more FTC enforcement actions” in 2014.

Imagine that: the feds making rules about something they clearly don’t understand.