GOING NATIVE: CAN CONSUMERS RECOGNIZE NATIVE ADVERTISING? DOES IT MATTER?

Yale Journal of Law and Technology Volume 19 | Issue 1 Article 2 2018 GOING NATIVE: CAN CONSUMERS RECOGNIZE NATIVE ADVERTISING? DOES IT MATTER? David A. Hyman Georgetown University David Franklyn University of San Francisco Calla Yee Associate at Kilpatrick, Townsend & Stockton Mohammad Rahmati Sharif University Follow this and additional works at: https://digitalcommons.law.yale.edu/yjolt Part of the Computer Law Commons, Intellectual Property Law Commons, and the Science and Technology Law Commons Recommended Citation David A. Hyman, David Franklyn, Calla Yee & Mohammad Rahmati, GOING NATIVE: CAN CONSUMERS RECOGNIZE NATIVE ADVERTISING? DOES IT MATTER?, 19 Yale J.L. & Tech (2018). Available at: https://digitalcommons.law.yale.edu/yjolt/vol19/iss1/2 This Article is brought to you for free and open access by Yale Law School Legal Scholarship Repository. It has been accepted for inclusion in Yale Journal of Law and Technology by an authorized editor of Yale Law School Legal Scholarship Repository. For more information, please contact . Hyman et al.: GOING NATIVE: CAN CONSUMERS RECOGNIZE NATIVE ADVERTISING? DOES IT GOING NATIVE: CAN CONSUMERS RECOGNIZE NATIVE ADVERTISING? DOES IT MATTER? David A. Hyman, David Franklyn, Calla Yee, and Mohammad Rahmati* 19 YALE J.L. & TECH. 77 (2017) ABSTRACT Native advertising, which matches the look and feel of unpaid news and editorials, has exploded online. The Federal Trade Commission has long required advertising to be clearly and conspicuously labeled, and it recently reiterated that these requirements apply to native advertising. We explore whether respondents can distinguish native advertising and "regular" ads from unpaid content, using 16 native ads, 5 '"egular"ads, and 8 examples of news/editorialcontent, drawn from multiple sources and platforms. Overall, only 37% of respondents thought that the tested examples of native advertising were paid content, compared to 81% for "regular" advertising, with variation by platform, advertiser, and labeling. Modest labeling changes materially increased the number of respondents that correctly recognized that native ads are paid content - but even these improved results fell well short of those for "regular"advertising. We also explored labeling preferences and self-reported concern about native advertising. Our findings indicate that native advertising involves a significant risk of deception which self-regulation has not addressed. * Hyman is Professor of Law, Georgetown University. Franklyn is Professor of Law, University of San Francisco. Yee is an associate at Kilpatrick, Townsend & Stockton. Rahmati is an associate professor at Sharif University. We appreciate the comments and feedback we received when this paper was presented to FTC Bureau of Consumer Protection Staff; at the 2015 University of San Francisco McCarthy Institute Trademark Symposium; and at the 2016 Stanford IPSC Conference. In particular, we appreciate the comments provided by Barton Beebe, Laura Heymann, Mark McKenna, Lisa Ramsey, and Rebecca Tushnet. Published by Yale Law School Legal Scholarship Repository, 2018 1 Yale Journal of Law and Technology, Vol. 19 [2018], Iss. 1, Art. 2 TABLE OF CONTENTS I. Introduction II. ............................... The Evolution of Native Advertising ..... ..... 79 ......... 83 III. Past Research, Industry Guidelines, And the Law of Native Advertising ........................... ....... 87 A . P ast R esearch ..................................................................................... 87 B . Industry G uidelines .......................................................................... 88 C. The Law of Native Advertising...................................................89 IV. A. B. C. D. E. F. V. Our Methodology and Findings ...................... 91 M ethodology ........................................................................................ 91 Overview of Findings ..................................................................... 91 Effectiveness of Labeling and Pop-Ups.................................95 Attitudes Regarding Advertising ................................................ 102 Do Users Learn From Experience? .. . . . . . . . . . . . . . . . 103 R egression A nalysis ............................................................................ 103 Discussion ............................... ...... 105 A. The Logic of Native Advertising..................................................105 B. Do Consumers Know That Native Advertising Is Paid? 106 C . T rust and Integrity .............................................................................. 106 ............................. D . D oes Intent M atter? ................................................ 108 E. Self-Identity and the Media Ecosystem...................................109 F . R em ed ies....................................................................................................1 10 G. Robustness/Further Research.......................................................110 VI. Conclusion https://digitalcommons.law.yale.edu/yjolt/vol19/iss1/2 ............................... .... 111 2 Hyman et al.: GOING NATIVE: CAN CONSUMERS RECOGNIZE NATIVE ADVERTISING? DOES IT Vol. 19 THE YALE JOURNAL OF LAW & TECHNOLOGY 79 "[W]hen I explain what I do to friends outside the publishing industry, the first response is always "so you are basically tricking users into clicking on ads?"' I. INTRODUCTION For more than a century, advertisers have used "advertorials" to promote a wide array of products and companies. The latest incarnation of advertorials is "native advertising," which closely matches the look and feel of unpaid news and editorials, but it is actually paid content. Native advertising did not attract much popular attention until January, 2013, when The Atlantic put a "sponsored article" for the Church of Scientology on its web site, hailing the "milestone year" that Scientology had experienced. 2 The "article," which was actually a paid ad, had the same look and feel as Atlantic's editorial content. The only indication that the "article" was an ad was a small yellow label that said "Sponsor Content." The piece triggered a major backlash, 3 including a scathing parody in the Onion.4 The Atlantic quickly withdrew the "article," apologized to its readers, and adopted stricter policies regarding native advertising.5 This episode did little to dampen the rise of native advertising. Indeed, in the past few years, native advertising has become a pervasive feature of the print and online media environment.6 Native advertising 2 3 4 5 6 Kunal Gupta, 4 big threats native advertising faces in 2015, VENTUREBEAT (Oct. 24, 2014, 6:30 PM), https://perma.cc/YHT4-P2WP. See also Tanzina Vega, Sponsors Now Pay for Online Articles, Not Just Ads, N.Y. TIMES, Apr. 7, 2013 (arguing the average reader doesn't "realize they are being fed corporate propaganda.") Jim Ed (...truncated)