Defining Native Advertising

Advertising is a paid insertion of content into content created by someone other than the advertiser. All advertising has to conform to the physical limits and requirements of the medium into which it is placed. Good advertising is compatible with the medium or content vehicle and engages and serves the relevant audience. "Native Advertising" connotes advertising that is maximally compatible in form and function with the "editorial" content of the medium. The goal of appropriate native advertising is to achieve this compatibility and provide the best possible user experience and acceptance of the message, while at the same time communicating information about the genesis of the content that is material to the readers, viewers and now, in digital media, "users" and "consumers".

The discussion of "Native Advertising" has been muddied by two distinct issues: (1) curation – the degree to which the apparent editor or author was influenced to select the content (commonly disclaimed as "sponsored content") and (2) integrity – the degree to which the content itself was influenced by anyone other than the apparent editor or author (commonly disclaimed as "sponsor content"). The law requires adequately communicating the information necessary to the consumer's understanding of any material connection between the author of the content and someone seeking to influence consumers' purchasing decisions. This essential communication is often being lost in the attempt to meet the less important (and perhaps impossible) task of also communicating influences over curation.

The only thing that is clear about native advertising is that myriad ways in which advertisers influence the selection and integrity of content in digital media is far too complicated to effectively be communicated by disclaimers. Publishers and advertisers will have to change the ways they accommodate these concerns and legal requirements as the media and technology evolve and consumers'/users' comprehension of the sources and influences over publishers' offerings develop over time.

CURATION AND SPONSORSHIP OF CONTENT

Trusted media offer tremendous value as curators of the flood of available content, and they want to preserve a distinction between what they choose on the merits and what they publish for other reasons, e.g., "sponsored". Many readers would like to know whether the editor of a publication or website was influenced by something other than pure editorial judgment in selecting specific content, but the fact is that virtually all content is "sponsored" (or supported) in some manner by either 1) a patron, 2) advertisers, or 3) subscribers. Thus the editor's selection is subject to some degree of influence. Monetizing content while competing with venture backed content sites that have no need to monetize their content ("patron" supported content creators) has driven publishers who cannot survive on subscription revenue to further accommodate "native advertising." New digital media are developing and publishing content without promising independence from the influence of sponsors or patrons on their curation choices. The law does not require a warning to readers to protect their interest in not wasting their time on content that has not been curated by a trusted source, at least where there is no likelihood of influencing a purchasing decision.

Trustworthy curation significantly contributes to audience loyalty, size, time of engagement, and successful communication. Thus, the audience's trust in the publisher's integrity is extremely valuable. Each publication has to communicate its degree of sponsor or patron influence as part of its positioning in a competitive marketplace. The degree of sponsor influence may vary from a sponsor purchasing advertising to providing financial support without conditions. The user needs to know whether to trust in the information, but requiring specific communication about the degree of sponsor influence over the curation of the content may be asking too much.

It must be possible for brands to communicate valuable information and brand-building content that is not burdened with a signal or disclaimer that more or less communicates that the user should avoid or distrust the content. Given the rapidly expanding variety of native advertising vehicles, better and more "native" communication (as opposed to ineffective disclosures) will be required. As users become more sophisticated about the different connections between brands and content, it will become increasingly valuable to be able to identify an author or source of the content rather than simply labeling everything as "sponsored content." Recognizable sources of content that can be communicated by a byline or as an integral aspect of the content, as opposed to a generic disclaimer, will be a valuable means of providing the reader or user with the necessary context, including the degree of independence of the author or source. Given the opportunity to experiment with means of communicating the integrity of the source, the authenticity of the expertise, and the degree to which the source is independent or invested in its own reputation, advertisers should find ways to effectively communicate necessary information without relying on stock disclaimers.

Liability Concerns

There are two conflicting liabilities that advertisers and media face in handling "Native Advertising": (1) the liability for failure to disclose a material connection between the author and someone seeking to influence consumers' purchasing decisions, and (2) the liability that may be imposed when editorial content is labeled advertising so that it becomes "commercial speech" with less First Amendment protections, e.g., fair use in copyright, and protection against right of publicity claims. Overzealous labelling of content as commercial in an effort to communicate even immaterial influences on curation and content may trivialize the label and still create the additional exposure to liability that attaches to "commercial speech."

The definition of commercial speech begins with a speech whose sole purpose is to propose a commercial transaction1, but it may extend to include any speech by a company that sells products or services and seeks to influence how consumers view the company "for the purpose of promoting sales of its product."2 The "commercialization" of content affects the application of First Amendment defences3 and can...