Juggling the risks and opportunities of native advertising

Inevitably with scale comes more attention from regulators, and we predict that 2014 will see attempts in important jurisdictions to create a specific regulatory framework for native advertising.

Native advertising is so called because it takes the form of editorial-like content placed in online news media. Unless labelled as advertising it can be indistinguishable from the content which surrounds it, and there are clear risks that consumers may be misled. There are also risks for publishers that they will be seen as biased, and their editorial independence compromised.

The commercial drivers for native advertising are, however, sufficiently strong that regulators need to find a way to accommodate its use. Persuading consumers to pay for editorial content by the use of subscription models and pay-walls has paid off for some large news organisations providing high quality content. But many publishers have been unable to make sufficient revenues in this way and so need to sell better forms of advertising to fund their content. The growth of self-curated news selections has made it even harder for publishers to guide what their readers see, and to guarantee the audience sizes advertisers need.

An answer for the publishers, and for the advertisers who are seeing click-through rates for conventional banner advertising fall, is to embrace native advertising. Consumers' demands to be able to access what they want and how they want it can be accommodated through combining sponsored content with online behavioural advertising techniques. The format is also ideal for social media and the atomised approach to news many users now take. Already, native advertising is having significant effects on the way online services are presented, with news feeds becoming a central element of home pages and portals.

So far, the regulatory response has been to point to existing rules on transparency and advertorials. Native advertising is subject to the usual legal requirements of responsible advertising. For example, it needs to be clear to readers that it is advertising; it should be labelled and readers must be able to understand what the labels mean. Requirements to be able to substantiate advertising claims still apply.

But the existing rules do not adequately deal with who should be responsible, and how the rules will apply once content is placed into news feeds by machine, through programmatic buying of media space. Is it the publisher, the advertiser, or the media buyer who is on the hook to comply with the law? And nor is it clear how content should be labelled to distinguish it from content with no advertising function.

The scene is already being set to answer some of these questions. In early December the US regulator of marketing communications, the Federal Trade Commission, is holding a meeting to discuss what rules it might need to put in place around native advertising. We can expect many more initiatives of this sort from regulators in 2014.

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