Yahoo!: putting focus on native advertising
Yahoo!: putting focus on native advertising
A view from Mark Owen, partner, Taylor Wessing

Why native advertising could open up a legal minefield

The market for sponsored content or "native advertising" has emerged quickly. Marissa Mayer's high-profile launch at CES of Yahoo! Tech and Yahoo! Food, a mix of traditional journalism with paid stories in online magazines which will form a key part of the platform's offering, shows that it is being taken seriously as a revenue stream.

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. 

The Internet Advertising Bureau calculates that some 73% of publishers are now carrying native advertising. Inevitably, however, with scale comes more attention from regulators and the prospect of specific regulation is looming. 

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.

But the commercial drivers for native advertising are sufficiently strong that regulators need to find a way to accommodate its use.  While many newer entrants to the news and publishing world, include networks such as Facebook and Twitter, have been using forms of sponsored content for some time, it is now being embraced by more mainstream media.

Persuading consumers to pay for editorial content by the use of subscriptions models and pay-walls has paid off for some large news organisations providing high quality content, though even the Wall Street Journal now contains some sponsored content.

Questions raised

Native advertising is in theory subject to the usual legal requirements of responsible advertising, but exactly how these apply in practice is uncertain and raises a number of questions:

  • The main regulatory concern is that readers understand they are reading advertising material, but what form should any labelling take and when should it appear, and will consumers need educating about what those labels mean? 
  • Should the publishers take some responsibility for what the content says and how it says it? If so, how is that responsibility to be apportioned between the publisher and advertiser? 
  • Once content is placed into news feeds by machine, through programmatic buying of media space, things may get yet more complicated. Is it the media buyer who is then on the hook to comply with the law? 

The scene is already being set to answer some of these questions.  In December under the banner "Blurred Lines: Advertising or Content?", the US Federal Trade Commission held an open meeting to discuss what rules might need to be put in place around native advertising and each of the issues identified above was robustly debated.  There seems to be much consensus that transparency is not simply necessary for compliance, but makes good business sense too.  Publishers simply cannot risk squandering their reputation for it. 

Meanwhile, the IAB has published a set of best practice guidelines, and several publishers have produced their own rules around the use of native advertising.  While things are not as far advanced publicly in the UK or the EU, we can expect many more initiatives of this sort both from industry and regulators in 2014 until a new balance is reached.