By Kirk Cheyfitz published April 20, 2014

Why Native Advertising Won’t Survive, Regardless of FTC Involvement

glasses-mustache image-deceptionThe Federal Trade Commission has signaled it intends to watch — and possibly regulate — how brands and the media handle native advertising.

Unfortunately, the agency is only highlighting how out of touch it is with today’s media landscape.

The long, noisy debate over so-called native advertising has completely missed that native is a dead end for advertisers and publishers — a passing fad in the slow demise of traditional advertising. 

The Federal Trade Commission (FTC) weighed in back in December 2013 with a day-long workshop to figure out how to regulate native ads on digital publishers’ sites. Everybody in adland got involved — publishers (traditional and digital), brands, ad agencies, lobbyists, lawyers, public advocates, and so on.

Part of the FTC mission, of course, is to stop “deceptive acts or practices.” This clearly doesn’t include self-deception, however, because both the FTC and the publishers (from The New York Times to BuzzFeed) have talked themselves into believing that “native” is the long-sought replacement for dwindling ad revenue.

It isn’t. For better or worse, it can’t be.

Here’s what content marketing has demonstrated so far: Brand storytelling with rich content is powerful because audiences — the people formerly known merely as “consumers” — pay attention to valuable content and reward brand-authors by sharing such content with friends and strangers on social platforms. This social sharing increases impact (by two to four times, studies show) and reach (up to nine times, mathematical models show), reducing media spend and boosting efficiency (by as much as 100 times).

A story good enough to accomplish all that is actually rendered less effective (from the advertisers’ viewpoint) by appearing to be part of a publisher’s site. Brand-told stories work harder for a brand when they appear on neutral platforms (YouTube, for example) or sites owned by the advertiser.

Why? A brand must be known as the provider of such content so audiences will see the brand as trusted ally, valued adviser, and inventive entertainer. No sane brand would spend money to create great content only to let some publisher or broadcaster get the credit.

The FTC says it’s upset by the prospect of online publishers selling their “credibility” to brands by running “advertising that resembles editorial” or “content” and deceives the audience. FTC Chairwoman Edith Ramirez said her agency held its native advertising workshop to define, pursue, prevent, or punish the crime committed when brands deceptively “capitalize on the reputations of publishers.”

This might have been a fascinating way to frame the discussion — if it weren’t counter to the facts and an act of self-deception on at least three levels.

Gallup tells us that last year only 44 percent of Americans trusted mass media. At the same time, Nielsen says that 69 percent of the global online audience trusts what they see on brand websites. In other words, Gallup and Nielsen find brands are roughly 1.6 times more trusted than publishers. So following the logic of the native ad argument, advertisers should be selling space on their brand websites for publishers to publish more credible news.

Self-deception No. 1: Publishers can’t mislead the public by selling their credibility because they have very little credibility to sell.

Self-deception No. 2: The FTC is misunderstanding, perhaps intentionally, what advertising is.

Self-deception No. 3: The FTC is pretending that there is such a thing as non-biased news and that it can be cleanly, dependably distinguished from advertising.

The FTC has admitted that it cannot define native advertising. This is because the agency’s working definition of advertising is wrong. The feds are sticking to the story that an ad is a paid message that interrupts or sits alongside news or entertainment content owned by a publisher or a broadcaster. In the FTC’s version of reality, ads get seen solely because the publisher’s editorial content or the broadcaster’s show attracts an audience.

Working under this 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 a digital world. The feds and the ad industry apparently cannot see that the best ads now stand successfully on their own, telling the brands’ stories and attracting, holding, and engaging the brand’s audiences with no help at all, thank you very much, from newspapers, magazines, TV, or online publishing.

It’s actually clear that news and editorial content are not things that only news organizations can create. Nothing stops non-news brands from creating legitimate journalism.

The feds named the native ad workshop, Blurred Lines: Advertising or Content? The name assumes that advertising and content are different things. That assumption can’t survive much scrutiny.

I could argue that roughly half the content on Fox News is actually native advertising for the U.S. Chamber of Commerce and the far right of the Republican Party. On another front, I would ask why the FTC’s watchdogs apparently don’t 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 the company roughly $2 billion in operating income each year.

I’m not saying that journalism from Disney is worse, better, or even different than journalism from The New York Times Co. or News Corp. I am just skeptical about granting greater privileges (freedom from regulation of speech, for example) to so-called news corporations than to other corporations. I believe it’s hard to find a substantive difference between a news organization and any other corporation — say, Comcast, Disney, American Express, or Red Bull. It’s also not the government’s job.

The Poynter Institute, a leading center for journalism education and study, recently published The New Ethics of Journalism, the first major update of ethical guidelines for the news business in the digital era. 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 that this may include “even corporate sources.” (I think I get what they mean, even though it raises the question: Isn’t The New York Times Co. a corporation?) And so on.

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

Whether the feds and the industry understand it or not, brands are beginning to create shows to which audiences flock. Red Bull’s Stratos space jump is the poster child for this sort of thing. So is Amex’s Your Business TV series. Entertainers like Louis C.K. are beginning to market their shows directly to the public without any help from publishers or broadcasters. Examples of advertising that needs and wants nothing from media companies extends to the horizon and beyond. It’s scary, actually.

Robert Tercek, an expert on the future of television, recently told a roomful of TV execs and producers that the business of “TV doesn’t make any sense.” For one thing, he noted, “Just when the TV show gets good, it is interrupted by a commercial. Actually a whole bunch of commercials.” Who, he asked on another occasion, wants to watch entertainment that way? Like I said, scary.

Major law firms rang in the New Year by warning their clients that federal regulation of native ads will be a big issue this year. Two antitrust lawyers with 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.

It is sadly easy to imagine the feds making rules about something they clearly don’t understand. It is happily harder to imagine that native ads will survive too much longer no matter what the FTC does or doesn’t do about them.

This article originally appeared in the April 2014 issue of Chief Content Officer. Sign up to receive your free subscription to our quarterly magazine. 

Author: Kirk Cheyfitz

Kirk Cheyfitz is an award-winning journalist, author, editor, publisher and innovator in nontraditional advertising, marketing and content creation. He is also the CEO and chief editorial officer of Story Worldwide, the full-service, global ad agency he co-founded and runs.

Other posts by Kirk Cheyfitz

  • Gene De Libero

    “Out of Touch” describes the entire government these days, not just the FTC. The sad thing is the feds have been making rules about things they clearly don’t understand for years, with the people’s permission! Brands connect with consumers through timely, relevant, and personal messaging, products, and services that help those consumers solve problems or in some way create value for them in their daily lives. The only thing “blurred” is the FTC’s view of the world.

  • PeterJ42

    Good article.

    For too long we have assumed that news was unbiased and untainted by commercial influence. But the days of the big-hitter, Pulitzer Prize investigative journalist have gone and most journalists’ jobs these days are taking news releases from companies and pressure groups and placing them on their news pages.

    The relationship between the major media and government is corrupt. Governments use these media as methods of advertising their policies and persuading people that the other party is iniquitous. Journalists which aren’t acceptable or which don’t publish when asked are excluded from the briefings.

    But I’m concerned that the companies which set out to undermine the media by enabling social networking are simply becoming the new media owners. It seems the Scylla and Charybdis of Power and Influence on the one hand and Advertising Revenues on the other have deflected them from the task the public wants, which is to undermine the influence of big business and big government on their lives.

    • NancyJ

      You lost me at, “… Most journalists’ jobs these days are taking news releases from
      companies and pressure groups and placing them on their news pages.”

      What a bunch of hooey. : (

      • PeterJ42

        If I lost you, how do you know it is hooey?
        Take any newspaper today and work out where the stories came from on the first five pages. I will bet most are planted stories by charities, companies and politicians.

        • Mac McCarthy

          The front page of eg the Washington Post is developed largely from the daily press briefings of the White House. I’ve been to a press briefing and was shocked to find the next day’s front page little more than a rehash.

  • Jonathan Kaye

    Nice article, thanks! I am in total agreement about how scary it is that the FTC is suggesting it needs to be involved while it has such as misguided view of what is going on. The fear reminds me of practices at certain industry (government) events where vendors are essentially prohibited from submitting proposals for talks, and yet the organizers conveniently ignore the fact that many speakers themselves have their own consulting business that is implicitly being pitched.
    One thing though from your post…I’m curious whether your statement is a bit overly general, that “publishers and their audiences are not particularly valuable to advertisers in a digital world.” I think publishers (especially niche ones) are still relevant in getting exposure/awareness for advertisers, because you are hitting audiences that may be relevant and interested in your message, but not aware enough to follow your activities directly.

    • Bill Carmody

      I agree, Jonathan. I
      think the statement “publishers and their audiences are
      not particularly valuable to advertisers in a digital world” is not
      accurate. Brands are trying to create their own stories and do, in fact,
      publish great content. However, how does the first Dove “Real Beauty”
      or Red Bull’s Stratos space jump get picked up? I believe that there
      is a role for publishers and that they can be very valuable to advertisers in a
      digital world when they help facilitate the discovery process. Otherwise, how
      do brands reach their desired audience to spark these brand conversations? The
      best brands have worked hard to establish their engagements via digital as well
      as traditional publishing, and that is paying off handsomely.

      • Kirk Cheyfitz

        I think both of you make a good case. But I believe the numbers make a better one. The steep fall-off in print and broadcast ad revenue (especially print) over the past decade are ample demonstration to me that publishers and their audiences are, at the very least, rapidly declining in their value to brands. I probably should have been clearer and said they are declining in value as advertising vehicles. They still have great value as news vehicles and they always help brands when they legitimately cover and amplify brand stories. But native ads are not news, no matter how much they try to look like news. Make sense?

  • Doug Kessler

    Well argued, but I can’t let go of the idea that there are such (admittedly rare) things as trusted news sources. And that they’re worth protecting.

    No, Fox News isn’t one of them. But I thought the Guardian (UK) and the New York Times were. (Until they jumped head-first into native advertising).

    I’m not saying they were ever 100% trustworthy — clearly no corporation can be. Noam Chomsky, in ‘Manufacturing Consent’ made a compelling case that the media is inescapably the instrument of the elite. But I feel their agenda is, on balance, Reader First.

    Call me old-fashioned, but I don’t WANT my news from Coca-Cola or Unilever. I may accept my entertainment from them (if it’s entertaining) but not my news.

    And if a brand is behind a piece of content in either category, I want that to be totally transparent.

    • Kirk Cheyfitz

      I’m with you regarding transparency. But the fact is there are many areas of news that brands are well equipped to report on — areas in which they have good motives and little or no conflict. This is rarely true of so-called news organizations, especially news organizations that depend on many brands for advertising and are reluctant to bite the hands that feed them. Michelin, for example, began publishing travel guides in 1900 that remain to this day far more authoritative and trustworthy than, say, Condé Nast Traveler, because the Michelin Guides never depended on hotel ads to stay in business. Dove, a personal care brand of Unilever, has done some great journalism on the ways in which women’s personal attitudes towards beauty are shaped and misshaped by the media (yes, including entertainment journalists) and pop culture. So I would not automatically dismiss brand journalism and embrace other kinds of corporate journalism (like Fox). It’s a case-by-case thing, I believe, and everyone needs to play.

      • Mac McCarthy

        What we’re talking about here is ‘service journalism’. What brands haven’t figured out (and may not care to figure out) is how to do straight news.Confusing the two confuses the discussion–What Fox and NYT publish is far different from what Dove or Red Bull publish…

        • Kirk Cheyfitz

          I can think of quite a number of B2B brands that regularly produce “straight news” about the sectors in which they operate. We produce a trade magazine for one client that reports on an entire industry segment. The key fact, I think, is that publishers become less valuable to brands as digital empowers the brands to have their own direct (rather than indirect) connections to their audiences. It’s that simple. I take no joy in it, but I think it’s clearly true.

  • Poustman

    You buy a loaf of bread from the bakery. Between the slices there are cardboard pieces, with various brand names and logos plastered on them. You notice these on a basic level as you toss them into the garbage.

    The baker bases his business model on the brands paying him to insert the cardboard, rather than on selling loaves. What he fails to notice is that his customers barely tolerate the cardboard, would gladly switch to any baker whose bread is cardboard-free, and in fact would pay a premium to any baker whose bread was superlative in taste and quality while being unsullied by cardboard and ink flavours.

    The brands spend $X on bribing bakers, thinking they must. If they spent the same $X improving their products, the likelihood of sales increase due to greater customer delight (and subsequent sharing of product and info) would be greater than the likelihood of sales increase due to greater general awareness that results from such indifferent – – indeed irritating – – ‘advertising’.

    Fantasy? Maybe. But on a stat holiday a fellow can daydream…

    • Kirk Cheyfitz

      Very funny. Thanks for this.

    • phood

      Great and funny, but you’ve raised something I’ve felt for awhile, after a life selling ads. And that is this. “Free” is a bit of a fraud. I think it’s unfortunate that Silicon Valley and many of the businesses controlling our media landscape are based on either “free” or “ad-supported” or both. Because “free” always disguises the real cost of something, just as the low cost of goods from China may disguise the jobs and productive capacity lost here, or the environmental damage of production processes there. In the online world “free” disguises that we (and our privacy) ARE the product. Free creates a world in which potential harm to creators and copyright owners is seen as minor collateral damage to tech firms trying to earn their first billion. Free is a tool of the monopolist trying to kill the cute local business down the street.
      (Adults know that free isn’t free, but even we aren’t immune to its charms.)
      For the baker’s customers to really appreciate his great loaves we need to change mindsets from thinking that free is so much better than getting something with more taste, more style, healthier ingredients, and less environmental impact. Please figure that out on your next holiday.

  • devinmeister

    Interesting article and discussion. Reader first is great idea. To do that, the reader is going to require multiple sources. Most won’t or can’t put in the time. And the baker idea that consumers will gladly switch and pay a premium has proven to have scale limitations over and over.

  • Kirk Cheyfitz

    This is a really good discussion and I am grateful, first, to everyone for reading and also for pushing back against my ideas. Part of my sub-text, certainly, is that the FTC is treading very close to regulating publishing, not advertising, when they campaign against native ads. No matter what a bad idea I believe native advertising to be, I think it’s a far worse idea for the federal government to start messing with regulations involving news and publishing.

  • Graham Kelly

    I agree with the comments regarding FTC and native marketing. However, I disagree with the comment that publishers and their audiences are not particularly valuable in a digital world. It seems to me that any audience is potentially valuable in the world of content marketing — those audiences aren’t limited to YouTube or Facebook or any standalone vendor platform. Shouldn’t the right content marketing strategy be defined by the environment that is most likely to get the best response. And by best response, I don’t necessarily mean big numbers, rather the maximum number of the right viewers. To brush publishers and their domains aside as has-been entities that are incapable of evolving and providing ideas or a stage for creative content seems more than a little short sighted.

  • devinmeister

    It is a sticky wicket. Agree that the FTC is out of it’s depth here. Also agree that “(admittedly rare) things as trusted news sources. And that they’re worth protecting.” But who is going to pay for it and how?

  • John Federman

    So many excellent points are raised in this article – but a pronouncement of native advertising’s death knell is perhaps premature. True, the least engaging forms of native ads can’t survive in an economy that’s increasingly tied to production of measurable and meaningful results. Bad advertising will always fail, in whatever form it is executed, with or without regulation. And without a doubt, ads that masquerade as editorial will not bring goodwill or positive results.

    Native advertising isn’t new – it is an evolution of print media’s advertorial, adapted to the digital age. Today’s simplistic, native ads that are designed and integrated to blend with editorial, without proper delineation as sponsored content, will wither on the vine without much intervention from the FTC. But as quickly as those ineffective ads disappear, they’ll be replaced with better, richer, more engaging forms of sponsored content. Whether we call it “native advertising” or something else, what sets winning executions apart from losers will be the quality of the content and its capacity for generating meaningful engagement.

    • leenjones

      I agree with John that it’s too early to call for the death of native advertising. The success of native advertising and sponsored content depend on its execution. After all, CMI has successfully offered sponsored content for years. I had to chuckle when the CMI email promoting this article also listed, immediately below, an article from one of CMI’s benefactors (sponsors).

      There are plenty of other examples of doing sponsored content successfully at Forbes (Brand Voice) and The New York Times. (I share a few examples here:

      I don’t agree with the assumption that the goal of native advertising is to tell the brand story, which has to happen on the brand site. The successful examples of native advertising I’ve seen focus on helping customers. Usually that means educating potential customers about the problems or needs that advertisers can help address. (I’m okay with this because credible businesses have to have genuine expertise in the problems that their products or services try to solve.)

      Also, I enjoyed your discussion of the blurring lines between journalism and other kinds of publishing. I particularly agree that there is no such thing as objective, unbiased news. Everyone, even a news organization, has a point of view that colors their interpretation of facts or events.

  • William Holland

    I stopped reading after FTC. Any content used in a linear didactic manner will fail. PERIOD. I’ve got two words for the management of any institution that cannot anticipate the disruption that is digital mediums: Marshall McLuhan!!

  • Carlos Abler

    Like “Content Marketing”, “Native Advertising” is just a new term for old practices, that is appropriate for our times. The impact of the internet has forced a very big publishing learning curve on all of us and therefore a new set of neologisms is inevitable. So if Native Advertising is dead, it’s been dying a very slow death. The same death that print is dying. And all these other things that are “dying” at high-volume very slowly. Your comments pushing back against native are (it seems to me) just best practice issues, and not anything to do with being rotten at the core. If Native Advertising is executed as ‘advertising-worth-reading/watching-that-drives-a desired outcome’ — and that will reflect well on the brand by respecting the publication and the audience, I don’t see how the downsides have an environment in which to survive. If your practices are deceptive you will lose trust and may invoke retribution. If your content is irrelevant you will be ignored. It seems a simple matter to me.

    I just think we need clear guidelines on what constitutes credibility, quality, relevance and transparency. I think these would address the root causes of about any symptoms we can point to.

  • The Extraordinary Gentleman

    I think it’s even simpler. “The publication and its audience is losing its value to the ad industry” because supply of audience and publication have exploded online.

    Thus, NYT making native ad as a product — faking as a “true” story — is a losing strategy. The value of “true” story are decreasing anyway. But making native ad a service — helping to communicate to the audience — has a chance. After all, NYT does have expertise in its audience’s taste (one would hope). No different from a speech coach advising executives how to make public speech.

    Not saying native ad can make up for 100% of NYT’s loss ad revenue — profiting from attention dominance is certainly more lucrative — but it is natural. Red Bull provides (free) acrobat content to drive energy drink sales (from teenagers). Dove provides women-centered content to drive soap sales (from women). NYT provides daily news to drive “communication consulting” service (from mass-attention seeker, like brands).

  • Amish Ad Guy

    Who has time to sit down and read one brand story after another? Life is clipping by in a digital world, and the bottom line is that people read what interests them. Sometimes it’s a news story. Sometimes it’s an ad, native, online, radio, or whatever.

    We can keep spinning this any way we like, but people have fundamentally always wanted what they want. It has been our job to inform them. In an ad, a brochure, a TV commercial, a blog, whatever. There is no new or old, there is just more ways to reach an audience.

    Even this article is an ad, a native ad cloaked in a blog post, selling today’s new and improved form of advertising coined “content marketing.” We marketing people are so tricky, it’s almost laughable. Which is to say, I agree with you and I disagree with you. I’m more old school advertising, so of course I’m going to disagree with you, but I am smart enough to realize that at the end of the day, ideas and benefits still matter. They still push the consumer’s or audience’s buttons.

    But the idea of storytelling, to me, is flawed, because it implies people have loads of time to sit around and read every brand they interact with’s story. Old school says, “cut to the chase.” My approach is more of a hybrid of the two schools of thought.

    Just my thoughts, real quick. Love the information you provided, don’t get me wrong.

  • Theresa Dyer Cook

    I completely flipped to the bottom because every one of you pontificated. Goodness gracious. Get to the point. Native ads are annoying.

  • inboulder

    “Publishers can’t mislead the public by selling their credibility because they have very little credibility to sell.” Your argument falls apart right here. You think Buzzfeed, Facebook, and Youtube are selling ‘credibility’?

  • phood

    I love Kirk Cheyfitz’ “Sponsored What?” about the FTC but in his effort to take a stand for brand stories and against traditional journalism he goes a bit off-target. He says no sane company would risk putting their content on a publisher’s site, and recommends using a “neutral” base like YouTube instead. But surely getting covered in the NYTimes still matters. Having your boutique firm profiled in Inc. is a better third-party endorsement than most Youtube videos.

    The FTC is probably barking up the wrong tree trying to regulate the journalistic efforts of content marketers, but again that doesn’t mean there is no difference between a Coke commercial and a Center for Investigative Journalism report. He says “I believe it’s hard to find a substantive difference between any news organization and any other corporation–Say, Comcast, Disney, American Express or Red Bull.” Come on! That’s like saying the Roman Catholic Church and the Army are essentially just large institutions, or Zeus and Howdy-Doody are both fictional. There is a pretty big difference historically between information that was “free” from for-profit sources (trade journals, over-the air-tv, radio) and that supplied by media that the customer paid to receive (books, magazines, newspapers, movies). The latter tackled tougher, deeper issues with more honesty and specific codes of ethics related to newsgathering. We can justify the content marketing business without having to denigrate the history of journalism.