What is it?

Sponsored content exists when an advertiser pays a publisher to have its name and/or message paired with a particular story. Sponsored content is often also categorized under native advertising, which is when ad content matches the form and function of the platform upon which it appears. Native advertising is the new term for “advertorials,” or advertisements disguised as editorial content. This method has been used for nearly 50 years with the intention of companies to disguise an advertisement as a true editorial endorsement or testimonial but is gaining more attention now as digital marketing techniques become more and more disguised.

"Native advertising is a form of paid media where the ad experience follows the natural form and function of the user experience in which it is placed." -Kai (Digiday user)

A modern example of this might be a promoted Tweet or a sponsored Instagram post. Surprisingly, only 24 percent of readers claim to scroll down on native ad content according to Tony Haile, CEO of Chartbeat (a web analytics company headquartered in New York City). That stats speak for themselves, people aren't clicking on sponsored content for a reason.

However, while people are more likely to scroll on normal content, when it comes to ads people seem to prefer native ad content over the more traditional advertisements. In 2008, the BCMA (Branded Content Marketing Association) conducted a study comparing branded content to traditional advertising. They found that around 95% of the time, websites that feature branded content were more successful than those featuring typical advertisements, and are 24% more effective at increasing the purchase intent of viewers. The study also concluded that branded content is most effective in the 18-34 age group, who tend to generally like branded sites more than any other age group.

“In nearly every category measured, ad effectiveness scores on branded content sites were numerically higher than on the web in general, on portals or on ad networks." -Pam Horan (Online Publishers Association’s President)

What's the issue?

It's everywhere. And consumers are getting annoyed. But beyond the nuisance of advertisements popping when you don't want them to, this form of advertising has become so pervasive that it's often difficult to distinguish between native content and regular content. The simple name of some of these terms insinuates that the content is intended to blend in to what you're already looking at. Brands don't want consumers to recognize that they're being advertised to. It's deceptive in nature and people are beginning to speak out about it.

Affected Parties

The main parties affected by these types of ads are the advertisers themselves and, of course, consumers. Except the interesting thing about sponsored content or native advertising is that people often don't have a choice as to whether they want to see the ad. The content appears as they're reading a magazine, an online journal, or simply scrolling through their social media timelines. As the video and info graphic above state, many people are getting fed up with sponsored content whereas advertisers likely want to continue using this form of advertising to reach more consumers.

Why should I care?

According to a survey conducted by Joe Lazauskas of The Content Strategist, people are pretty confused about the definition of sponsored content. "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." Additionally, two-thirds of readers claim to have felt deceived after realizing that an article or video was sponsored by a brand while 59 percent of readers believe a news site loses credibility if it runs articles sponsored by a brand.

54 percent of readers don’t trust sponsored content.

If people can't distinguish between real and sponsored content, they are likely to develop misconceptions about some information they're digesting. Consequently, if people can't trust sites that support such content, many publishers are going to lose credibility.

Existing Regulation and Case Examples

The FTC (Federal Trade Commission) is responsible for protecting consumers from “unfair or deceptive acts or practices in or affecting commerce,” as stated in the Federal Trade Commission Act. One of the FTC’s first cases addressing native advertising took place in 1917 when the FTC claimed that Muenzen Speciality Co., a vacuum manufacturer of the first electric vacuum, engaged in unfair and deceptive advertising by promoting its product through content designed to look like an editorial piece.

In 1968, the FTC asserted that a restaurant review paid for by advertisers, but which appeared in the same column of the newspaper where journalists' reviews typically appeared, was deceptive. The FTC then issued an advisory stating that where the content looks like a news article intended to give readers a unbiased testimonial, but which in fact contains commercial messages paid for by advertisers, it is necessary to “clearly and conspicuously disclose it is an advertisement.”

These guidelines have been updated through the years to remain relevant in the digital era. The FTC has stated that paid-content-based advertisements should be:

• In clear and unambiguous language
• As close as possible to the advertisement to which they relate
• In a font and color that’s easy to read and in a shade that stands out against the background
• For video ads, on the screen long enough to be noticed, read, and understood
• For audio disclosures, read at a cadence that’s easy for consumers to follow and in words consumers will understand
• Disclosures must be displayed on all devices equally (phones, tablets and desktops must have disclosure statements for the same advertisement)
• All platforms (Chrome or Safari) should have disclosure statements
• Ads must have disclosure statements that are understandable to the audience the advertisement is targeted to (advertisements to children may require different disclosure statements than those targeted to adults)

The main way that the FTC ensures advertisers follow the disclosure rule is by requiring labels to be paired with sponsored content. This can take form in a number of ways including visual cues, labels, and other techniques.

There is no particular required wording required by the FTC to effectively make an endorsement disclosure, but it must be clear and conspicuous. The most common language associated with sponsored content includes "Advertisement", "Ad", "Promoted", "Sponsored", "Partner", “Featured Partner”, or “Suggested Post." The label is usually placed in subtitles, bolded or italicized, and in a corner or at the bottom of an ad. Some labels will also include the name of the sponsoring brand, for example "Sponsored by Pepsi", or "Promoted by Dove." Clearly, there is a wide range of variation regarding sponsored content. Every site seems to have their own way of labeling branded content, which adds to the confusion among consumers.

In 2015, the American Society of Magazine Editors (ASME) released updated guidelines reinforcing the need of publishers to distinguish editorial and advertising content. First published in 1982, the original purpose of the guidelines was to help editors and publishers manage the publication of advertorials. The ASME approach recommends including a label to disclose commercial sponsorship and a visual cue to help the user distinguish native advertising from editorial.

The guidelines can be summarized in one sentence: Don’t deceive the reader

Applicable Theories

The University of California conducted a study where they analyzed how people interpreted an advertorial about a new diet pill. They found that, despite the "Sponsored Content" disclosure, some people were still deceived. 27% of study participants seemed to have missed the label as they claimed to believe the diet pill endorsement was written by the journalist. Since the Federal Trade Commission can investigate and to take legal action if an advertisement "misleads a significant minority” of “reasonable consumers”, the researchers conclude that many native advertising campaigns are probably deceptive under federal law. The authors propose two theories that explain why native advertising is inherently deceptive.

1. The Schema Theory suggests that advertorials mislead by causing consumers not to trigger their innate skepticism to advertising. It assumes that people inherently think differently about content when they know it's an ad.
2. The Attribution Problem refers to source-based misleadingness problems caused by advertorials when assigning advertising material with the authority normally assigned to editorial content. Basically, when you think something was written by a journalist you're more likely to believe it than if you knew it was written by the advertiser.

Analysis of Options

2013 was a big year for sponsored content policy responses. The Atlantic released a set of guidelines for its use of sponsored content after pulling and apologizing for a sponsored piece about Scientology. Frank Sennett of Time Out Chicago also proposed a set of guidelines for sponsored online content. The major suggestions from both accounts have to do with transparency and distinguishability. Both guidelines stress the importance of having a clear label on the content and making it fairly easy for readers to separate sponsored from editorial pieces.

The Atlantic recognized its editorial bias and right to deny sponsorship to an advertiser if its commercial message does not align with their values (such as The Church of Scientology). In his eight guidelines, Frank Sennett mentions fair use and gaining commercial rights to any copyrighted material as well as various aspects publishers should consider before agreeing to let brands sponsor content on their site. For the most part, both of these proposals contain several valid guidelines, some of which the FTC appears to agree with. At the end of the day, as long as publishers are abiding by FTC guidelines, I don't see why they can't also have a set of their own, more extensive rules for sponsorship.

Proposal/Argument

Currently, there is still a lot of ambiguity regarding sponsored content since there is a lack of consistent disclosure policy. While the FTC requires sponsored content to be clearly disclosed, appear on all devices, and across all platforms, there is no universal disclosure symbol that must be used for all content. I propose an amendment to the FTC guidelines on disclosures in digital advertising, Disclosures: How to Make Effective Disclosures in Digital Advertising (Disclosure Guide). The amendment is simply that all sponsored content, regardless of the platform/device it appears on and to which audience it's targeted, should be required to use the following disclosure symbol.

This symbol should be required to appear at the top left-hand corner of all sponsored content. It would be strictly regulated by the FTC and if advertisers fail to include this new disclosure symbol, there would be a penalty of a monetary fine and a month-long probation. The fine would be determined by the cost of the ad itself (1/3 of the total amount). So, for example, if Nike paid $5,000 for a sponsored Facebook video post, the fine would be approximately $1,667. The probation period would consist of strict regulation by the FTC and if an advertiser violated FTC guidelines during the month of probation, they would face an even greater fine (half of the original price of the ad) and up to a year without permission to advertise.

Feasibility

This adoption of the universal sponsored content disclaimer is mostly feasible. It doesn't require much on the publisher's part and it's small enough that it wouldn't interfere with other, nearby content. Additionally, the symbol is bright enough to be noticed by readers and has the words "sponsored content" directly on the symbol, which eliminates any questions people may have regarding its significance. The only potential issue with the proposed amendment might be the responsibility of the FTC to diligently monitor advertisers' compliance with the new rule. Obviously, FTC employers have many other things to worry about and may not have the necessary time to enforce use of the disclosure symbol.