Cardozo Law Advertising Conference Panel 2: Native Advertising

Felix Wu | Professor and Faculty Director, Cardozo Data Law
Initiative, Benjamin N. Cardozo School of Law
Panelists: Shelly Paioff | Deputy General Counsel & Head
of Legal, US, Taboola: Taboola is a content recommendation platform—publishers like
NBC, Microsoft, USA Today—widget at bottom of article pages with links to
third-party content from publishers/advertisers.  “From around the web” or “other content you
make like.”  Never thought of ourselves
as native advertisers, but content discovery platform; we’ve opened up a native
platform, which to us means mid-article or section-front or home-page placement:
ads/content integrated w/in the webpage, within the flow of what the user is
already reading.  Others may define
custom content as native advertising—done to create brand awareness, as
w/Netflix sponsored article on NYT to promote Orange is the New Black.
Rick Kurnit | Partner, Frankfurt Kurnit Klein & Selz, PC:
Debate over definition was whether or not the curation aspect is a problem.
Everyone accepts that influence over content is a concern.  The issue with the Taboola case in NAD was
whether merely influencing curation of content, financing content, distributing
reprints is also advertising.  That’s
where we are today w/a huge problem facing the media. NYT created the Food
section to create an environment for advertising—is that native advertising?
Influence over curation exists—that’s over the top.
Po Yi | Partner, Venable LLP: brands are content marketing—creating
or distributing it to target a particular audience; may be no reference or
relationship to their product. May be cause-related.  Not necessarily native
advertising/advertising at all.  Shouldn’t
think of native advertising interchangeably with content marketing.
Kurnit: Whether the First Amendment permits the government
to permit curation raises question under Sorrell
and the campaign finance rules—if I just want to finance another speaker, is
that something the FTC can regulate?  FTC
did say they were going to regulate whether or not consumers choose to interact
w/content; whether the action of a brand affects the decision/content regarding
the advertising, not just the product/brand. 
Thus, how can you communicate to readers the difference between brand
voice and content influenced by brand v. brand’s decision to provide
information that has nothing to do w/product or service. FTC is still wrestling
with that despite the guidelines. 
Fireside chat: FTC indicated they aren’t particularly
interested in going after items that don’t speak to product, service, brand or
competitor.  FTC embraced disclosures.  FTC wants disclosure to be the focal point of
the ad, and the marketing people don’t have a warm fuzzy feeling about giving
that space to legal.  Not just whether
the consumer gives it greater credence but also whether the consumer would have
chosen not to interact with it if they’d known it was from a brand/company—want
a skull and crossbones.  This is in a
state of flux; FTC asks whether the consumer would be surprised to find out the
truth. Media wants to create a context in which their users understand the
differences between brand voice and something that a brand supports or wants as
a context for its ads.
One prior industry practice: “Sponsored” content as curated
versus “sponsor” content as a label to indicate brand voice—that’s silly to
assume people will distinguish those. 
FTC doesn’t like “promoted by” either unless it’s restricted to where
advertiser had no influence.  Still,
expanding materiality to cover consumer’s choices regarding advertising, not
choices about purchases—that is a big content-based regulation that goes beyond
protecting consumers against material deception in purchase decisions,
Wu: what’s wrong with not fooling consumers into thinking it’s
an ad?
Kurnit: as long as an ad is a material claim about a product
or service, yes, but not if it’s just corporate speech.
Yi: Also: what are you promoting?  If P&G is promoting a diaper v. if it’s
the content created by P&G that you’re promoting.  Which does the FTC care about?  If you paid someone to distribute content,
you have to say that you paid to distribute content.  That’s the FTC’s core focus.
Ellen P. Goodman | Professor, Rutgers University Law School:
The guidelines say if it’s obvious the speaker is P&G, the consumer won’t
be confused.  Also if the speaker isn’t
making product claims, she reads the guidelines to say, disclosure won’t be
required. True that FTC is going further on consumer confusion.  But that’s not reaching so far as to cover
all kinds of branded content.
Yi: but it’s how you deliver the branded content.
Brand-created content; using paid media rather than organic to distribute that—the
FTC wants readers to know that brand paid money to distribute the content, not
because the content itself is advertising but b/c you are paying someone to
distribute the content.
Kurnit: in a perfect world, when consumers read disclaimers,
that’d be nice. FTC failed to take into account that it’s next to impossible to
make the distinction with “this is content with complete integrity, from the
NYT, and you can trust it to the extent you trust the NYT, and I am simply
making it available to you.”  If we put “ad”
on the top of everything, how does that help the consumer?  Mashable/Buzzfeed could label everything ads.
Yi: that would be misleading in itself.  Distinguish what’s in the content from the
brands behind it; how much the brand is behind it is the question. What
terminology will satisfy the FTC?  I don’t
want my clients to use “advertising” on everything.
Kurnit: everything I publish is “advertising” because it
enhances my brand. Should I have to disclose all my ulterior motives?  Disclose before a click?
Paioff: makes you have to worry about releases, SAG issues—wouldn’t
want to get those for certain content.
Kurnit: using Mary Engle’s name in my article = right of
publicity problem?
Wu: is the point to actually inform consumers?  Do they even care?
Jeremy Sheff | Professor of Law, St. John’s University and
Director, St. John’s Intellectual Property Law Center: It’s not clear that we
should care.  Why would it be important? B/c
that affects whether consumers choose to interact w/it and the
weight/credibility they give it.  Not
clear that this empirical claim is true. Are consumers more skeptical of “sponsored”
content?  There is some question—evidence
is mixed. We tend not to be good at monitoring the sources of our beliefs; we
think we’re better than we are; we’re heterogeneous in our capacity.  [I think that makes the case for
pre-interaction disclosure stronger.  If
we have sourcing difficulties, then choosing not to interact with claims that
might be misleading is our best way to protect ourselves, which is why I skip
ads.]  Disclosures are just a bad way of
dealing with this in many cases.  In
certain contexts, disclosures make things worse, as w/dietary supplements.  May not help v. false advertising law
generally—if the claims are true and you believe them, that’s good. If it’s
false and you believe it, that’s bad, but already actionable.

We need a deeper theory of autonomy, given that all our exposures
affect/influence us.  What we want for
ourselves to be protected from, at least w/o our knowledge.
Kurnit: 2 levels of protection. Concern w/truth, integrity
of content—if a brand wants to redistribute content, it makes the content its
own; it’s responsible for ensuring it has substantiation.  That’s the key consumer interest—being misled
about truth of claim.  Problem I have is
when FTC says we also have to provide them with info so they can choose whether
to interact w/ad: prevents exposure to truthful speech just b/c it’s
annoying.  [But isn’t the consumer making
the choice, not the gov’t, in the “prevention”? 
Gov’t can regulate time, place and manner so as to preserve privacy/consumer
choice about interaction in many circumstances.]  YouTube video created by monkey isn’t more “useful”
to consumer than an ad created by a major advertiser.  Made it impossible for media to create the
user experience they want: Taboola needs 3 disclosures: ad from Taboola;
publisher is advertiser; third party wanted you to read this article. All this
communicates it’s all bad and people walk away. That doesn’t protect the truth.
Goodman: you’re assuming these warning signs are effective
and turn people off; Sheff assumes the alternative.
Kurnit: Do I really need to be warned about “it’s an ad, don’t
read it”?  Wouldn’t I much rather know it’s
good content?  Do I really care how much
someone paid for the ecosystem?  [Suppose
someone runs an ad that says “this is a public service announcement” that makes
factual claims about fruit juice and soda and how they contribute to obesity,
but it’s actually a seller of bottled water. 
Do you think that’s a problem?]
Sheff: sometimes it’s reasonable for people to care about
source.  Question is how we want to
engage with one another in our interactions.
Wu: Imagine that a brand distributes some form of content
and says “this is not an ad, this is not being distributed by any commercial
speaker and hasn’t been influenced by any brand owner.”  But the content has been paid for and
influenced by the advertiser. Should that be permissible?  [This is another version of my question; my
question involves both truth and competition.]
Yi: Wrong question. Creative community: they don’t really
care about being told to disclose. 
Marketers: they’re willing to disclose. It’s the how that matters to
them more. They don’t want to create something that somehow makes what they do
inauthentic or impedes the message. 
[Well, the lie Wu discusses would un-impede the message, right?]  They want a way to disclose that doesn’t
interfere with the message.  Seamless,
organic, but transparent.  Your example
will never fly b/c it’s too many words and not creative enough.
Wu: but the point is that it’s a blatant lie, but only about
source and creation of content.  Assume
the content is truthful, but there are blatant lies about source.
Kurnit: if it’s material to purchasing decision, if it
enhances the credibility of a claim about the product or service, it’s
deceptive and illegal. But if the content has nothing to do with the product or
service, no problem. We don’t have a perfect world; content is always
influenced by editor’s decision to not piss off an advertiser. Editor has
curated publication to attract the kind of advertisers they want to have.  Those editorial decisions are not “pure”;
there are no editors free from publishers. Even Consumer Reports
advertises.  Notion of purity in curation
will make it impossible to provide protection against deception, which is a
materially false claim.  It would be nice
to get informed consent before we read anything.
[Part of the problem is that this model is algorithmic; some
of these articles will be
product-relevant, and you can’t easily label only those in the algorithm.]
Goodman: has been mission creep; there’s a long history of
requiring disclosure—for example, lower postal prices for newspapers that wasn’t
available to pure ads. Their concern wasn’t just with the truth of a product ad
or promotion but broader concerns w/ a right to know who’s talking to you.
Similar to our concerns about dark money. It’s not b/c we think that people
would make decisions differently if they knew, but b/c we think transparency is
important and that the consumers aren’t necessarily the direct consumers but
citizens who want to know what’s going on. FTC is now the only entity standing
with jurisdiction over the digital world. 
It’s going beyond consumer protection to deal w/these other concerns.
Paioff: a lot of concerns are addressed in the endorsement
guidelines already; additional disclosure shouldn’t be required in native ad
guidelines. That’s where the confusion is. 
American Express runs a forum for interesting content targeted at small
businesses; NAD said they had to disclose its sponsorship: American Express
Open Forum instead of Open Forum.  [Why would
they resist that?]
Yi: FTC thinks that brand as publisher should be treated
differently than traditional publisher.  But
Red Bull TV isn’t all about Red Bull.
Kurnit: huge problem for media trying to create a
context/format that’s a good user experience. The word “ad” is a complete
negative.  That’s why my clients have
done everything in their power to try to not use that word; it interferes
w/that communication.  Has embraced NAD’s
notion that when a brand creates content, that should be avoided.
Wu: if the FTC decides that people do care about source and
want to know, and that it’s material to them to know where the money flows, can
it decide that?
Kurnit: No, it’s a content-based regulation that isn’t the
less restrictive alternative to protect the consumer interest in not being
deceived or misled in a purchasing decision. 
Interest in not clicking on something without informed consent b/c it
might be an ad [is less strong]—if it’s a NYT link, do I need Tabooleh’s name
on it?
Wu: but it’s about greater credence.  Under that standard, should the FTC be able
to decide that the answer is yes in all circumstances? 
Kurnit: old law—you could disclose before purchase. You just
needed, before purchase/call to action, that they knew clearly what the source
[different version of Wu’s question: the item appears in
your feed: this is not an ad, so you should click on it.  Ok?]
Goodman: but the reason for the change is the new world of
mobile, disaggregated content, where disclosures are often separated.  Harder to know who’s talking to you in your
feed.  Trying to tackle that new environment.  Once they’ve decided it’s material to
consumers—I think they’ve gone too far, but it’s not unconstitutional. They’re
overreaching b/c much of this isn’t trade regulation.  This goes more to our discourse
environment.  All editors may be
influenced as Kurnit says; FCC said that consideration was different than
wanting to suck up to your advertisers, and those institutions developed codes
of ethics.  Everyone wants to disclose
some things here, all industry organizations largely in agreement; it’s mostly
the “how.”
Yi: It’s also the “when.” 
FTC went pretty far on the when.
Sheff: consistent w/ psychology research—how and when matter
more than whether, and can be outcome-determinative on materiality.  Something other than materiality is driving
Yi: telling people ahead of time what they might be clicking
on is treating the content itself like the ad. The FTC is giving credence to
people’s limited time; if you want to distribute content, consumer has right to
know what it is before they view.
Kurnit: and that’s my problem, b/c Scalia wouldn’t have
wanted to read a NYT story.
Goodman: but he’d want to know it was NYT.
Kurnit: but the FTC won’t protect him from that, only from non-media
advertisers.  There’s additional
regulation on those who sell products, which is a content based regulation.
[Put like that, it’s not a content based regulation, it’s a behavior based
regulation, which makes it not speech based at all.  Your promotional speech doesn’t trigger the
regulation, and in fact we’re completely content-indifferent (according to this
discussion of the FTC); the fact that you sell a nonexpressive product is what
triggers the regulation.] You have to label your content as a skull and
crossbones.  [Wow, advertisers must
really hate themselves: they sell poison.]
Wu: Note that under that reasoning all commercial speech
regulation is content based.
Kurnit: we’re all fine with having a disclosure when a brand
pays an influencer to tweet about it; that goes to credence.
Sheff: some evidence suggests that disclosure in advance of
placement doesn’t work, only disclosure afterwards.
Yi: FTC is asking for both/in the content.
Wu: Bait and switch?
Kurnit: It’s only illegal when the consumer relies to
detriment on the deception.  The
difference is: clicking on a link—is that the same as a door-opener?  [Yes?] 
Unless it makes it hard to click back, that’s not the same thing.  In a perfect world that would be great, but
they’re asking for too much.
Paioff: No problem with disclosing when the content really
is an ad. You should disclose who the advertiser is. But when it’s not used as
an ad, why do you need to disclose the source? By virtue of calling it
advertising, you’re assuming the issue.

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