Should The Government Regulate Paid Content?

Online advertising has changed. It used to be that Web sites would have a few banner ads or side bar ads to bring in revenue. Then consumers started to use adblockers and other methods to ignore these ads. That’s when sites turned to native advertising, and it’s caught the FTC’s attention.

The Federal Trade Commission announced on Monday that it would be hosting a “native ad” workshop later this year. The Commission says that the workshop will serve to continue its quest of helping consumers “identify advertisements as advertising wherever they appear.”

Should the FTC regulate native advertising on the Web? Do sites already do a good enough job of labeling sponsored content? Let us know in the comments.

So, what’s the big deal with native advertising? Well, as you may know, another name for native advertising is sponsored content. These are the ads that parade around as regular content. A good example would be BuzzFeed as a lot of its famous lists are sponsored content.

Here’s what the FTC has to say on the matter:

Increasingly, advertisements that more closely resemble the content in which they are embedded are replacing banner advertisements – graphical images that typically are rectangular in shape – on publishers’ websites and mobile applications.

The big question now then is whether or not this is a problem. That’s actually what the FTC wants to figure out in its workshop. The Commission wants to educate consumers on the difference between regular content and native ads, but it wants to first figure out the best way to do so. That’s why the Commission is hosting a workshop that “will bring together publishing and advertising industry representatives, consumer advocates, academics, and government regulators to explore changes in how paid messages are presented to consumers and consumers’ recognition and understanding of these messages.”

Now advertisers who are increasingly relying on native advertising and sponsored content shouldn’t be getting scared just yet. The workshop is merely an opportunity for the FTC to collaborate with advertisers and publishers to inform its own decisions on the matter. That’s why it’s inviting everybody to take part in said workshop so it can best address the needs of both advertisers, publishers and consumers in any potential future regulation.

In fact, the FTC published a list of topics that it will be examining at the workshop so that advertisers can prepare themselves for the kinds of questions the Commission will be asking:

What is the origin and purpose of the wall between regular content and advertising, and what challenges do publishers face in maintaining that wall in digital media, including in the mobile environment?

In what ways are paid messages integrated into, or presented as, regular content and in what contexts does this integration occur? How does it differ when paid messages are displayed within mobile apps and on smart phones and other mobile devices?

What business models support and facilitate the monetization and display of native or integrated advertisements? What entities control how these advertisements are presented to consumers?

How can ads effectively be differentiated from regular content, such as through the use of labels and visual cues? How can methods used to differentiate content as advertising be retained when paid messages are aggregated (for example, in search results) or re-transmitted through social media?

What does research show about how consumers notice and understand paid messages that are integrated into, or presented as, news, entertainment, or regular content? What does research show about whether the ways that consumers seek out, receive, and view content online influences their capacity to notice and understand these messages as paid content?

Do you think the FTC will welcome a healthy debate on the issue of native advertising? Or does the Commission’s questions worry you that it will unfairly target advertisers? Let us know in the comments.

Of course, it should be noted that the FTC isn’t the only entity that’s concerned about native advertising. For years now, Google has penalized sites that use paid links, and it just recently started setting its sights on sponsored content that’s not been fully disclosed.

Back in May, Matt Cutts said that Google would be “looking at some efforts to be a bit stronger on our enforcement” of native advertising. He later clarified this by saying that native advertising falls within its longstanding rules regarding paid content:

“We’ve seen a little bit of problems where there’s been advertorial or native advertising content or paid content, that hasn’t really been disclosed adequately, so that people realize that what they’re looking at was paid. So that’s a problem. We’ve had longstanding guidance since at least 2005 I think that says, ‘Look, if you pay for links, those links should not pass PageRank,’ and the reason is that Google, for a very long time, in fact, everywhere on the web, people have mostly treated links as editorial votes.”

Cutts also provided a real world example of how native advertising that’s not been fully disclosed can impact consumers:

“So we’ve seen, for example, in the United Kingdom, a few sites that have been taking money, and writing articles that were paid, and including keyword-rich anchor text in those articles that flowed PageRank, and then not telling anybody that those were paid articles. And that’s the sort of thing where if a regular user happened to be reading your website, and didn’t know that it was paid, they’d really be pretty frustrated and pretty angry when they found out that it was paid.”

The FTC may not be regulating native advertising just yet, but Google is clearly on the warpath. The Commission’s desire to better identify and possibly regulate sponsored content will probably net Google a pretty influential role in the FTC’s workshop and future decision making down the road.

That being said, it’s not sounding like the FTC wants to outright ban sponsored content. Doing so would be an absolutely asinine response to something that hasn’t even presented itself as a wide spread problem just yet. Most sites that utilize sponsored content mark it as such already. Instead, it will probably just expand upon its current report on native advertising – Dotcom Disclosures.

Even then, publishers and advertisers wanting to stay on the good side of Google are probably already following any potential new regulations that may come out of this.

Do you think Google’s rules on native advertising should influence the FTC’s decision making? Let us know in the comments.

[Image: Wikimedia Commons]