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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.