Many mobile applications turn to “native advertising” to drive traffic to their applications. Native advertising is content delivered to consumers in-stream or as a more organic part of the user experience. Well-known early types of native advertising include magazine “advertorials” and infomercials. Native advertising can also be used to develop an in-app revenue stream.

 

Native advertising is not immune from claims of deceptive advertising, and according to the Federal Trade Commission (FTC), an advertisement can be deceptive if the consumer does not know it is an advertisement. The FTC has issued guidance on native advertising, including when content needs to be identified as advertising and how to make appropriate disclosures, in the context of some of the more common uses of native advertising.

 

DRIVING TRAFFIC TO A MOBILE APPLICATION

Native advertising may be taking new forms with the advent of new technology, but the FTC maintains that there is nothing novel as far as the applicable legal analysis is concerned. The FTC has been addressing advertising that does not look like traditional advertising since 1968, when a misleadingly sponsored restaurant review appeared in a newspaper. The FTC’s current guidance on how to prevent consumer confusion is rooted in this long history. There, the basic question was whether an act or practice is likely to affect the consumer’s conduct or decision with regard to a product or service. These same principles undergird the FTC’s current view of native advertising.

 

In December 2015, the FTC issued an Enforcement Policy Statement on Deceptively Formatted Advertisements (“Enforcement Statement”) specifically addressing native advertising, together with an informative guide called Native Advertising: A Guide for Businesses (“Business Guide”) to help businesses understand the FTC’s position and comply with its requirements. The Enforcement Statement and the Business Guide remind advertisers that, as in the past, advertisements must be clearly recognized as such by consumers and that any necessary disclosure identifying content as “advertising” must be made at the outset. Therefore, before clicking on a link or tapping on a tablet, consumers must know that they are accessing an advertisement.

 

With regard to its guidance on native advertising, the FTC specifically addressed influencer marketing in digital media, and the advertiser’s (and influencers’) obligations in engaging in such marketing to avoid deceptive advertising. The FTC’s Endorsement Guides: What People Are Asking (“Endorsement FAQs”) (published in May 2015 and updated in September 2017) answers a number of frequently asked questions related to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Endorsement Guides”) and emphatically outlines the need for clear disclosure of any paid or other material relationship between the influencer and the advertiser.

 

Of course, in today’s marketing world, there are myriad ways to design and deliver advertising. Technology affords so many new and different ways to interact with and connect to your target audience. Creative advertising, however, does not insulate you from the basic truth-in-advertising principle that you cannot mislead consumers about the commercial nature of content. Advertising content that rivals purely editorial content (i.e., content with no advertising message or editorial involvement from an advertiser) in entertainment value is considered advertising that requires disclosure of the commercial nature if such content contains a product claim or a promotional message.

 

Such a distinction may be particularly difficult to make when the product that is being promoted, for example, is a video game. When the content you use to drive traffic or sale is a video of a well-known gamer whom you pay to play your game, the FTC has adopted the position that such content is advertising that requires disclosure, as did through an enforcement action against Machinima in March 2016.

 

By contrast, some sponsored content may not need to be explicitly disclosed when users will know, based on their customary use of the social media, that the content is sponsored. One example is a video sourced from a vendor that a user does not follow that shows up in that user’s regular feed. On the other hand, if a video is sponsored, the company sponsoring the video must ensure that when that video is posted to social media, it includes a disclosure of the sponsorship.

 

When determining whether an advertisement is clearly recognizable as such, the FTC will look to the overall impression conveyed by the material, including images and the interaction of all of the advertisement’s elements. The FTC will also evaluate the net impression of the advertisement from the perspective of reasonable members of its target audience.

 

Social Media

If you are using or thinking about using a social media campaign, you need to be aware of the FTC’s recommendations on required disclosure in social media to avoid a claim of deceptive advertising. The Endorsement FAQs advise disclosing a relationship if knowing about the incentive, even if it is one with no financial value, “might affect the credibility of an endorsement.” For example, that an endorser has a familial relationship with a brand may affect the credibility of the endorsement. Likewise, knowing that a brand has paid for the endorser’s travel to review the product even if no fees were paid may also affect a consumer’s view of the endorsement. For example, if you are using influencers to promote a game through content that such gamers produce in social media, it is important that such content includes an explicit disclosure that the video or post is advertising or the nature of the incentive that the gamer was given to produce and disseminate such content.

 

Lord & Taylor ran afoul of its disclosure obligations after it launched an advertising campaign consisting of Lord & Taylor-branded social media posts and the use of a team of “influencers” to post on social media. Although the influencers were paid and Lord & Taylor reviewed their social posts, Lord & Taylor did not require the influencers to disclose that Lord & Taylor had paid them and exercised control over their content. The FTC believed that disclosure was required and filed a complaint against Lord & Taylor in 2016, resulting in a settlement.

 

Similarly, CSGO Lotto entered into a consent agreement related to the owners’ social media posts, and that of CSGO Lotto influencers, all of whom allegedly did not disclose the material connection to CSGO Lotto between the owners, on the one hand, or the paid influencers, on the other. CSGO Lotto paid individuals between $2,500 and $55,000 to promote the CSGO Lotto website through social media (and prohibited them from saying anything negative about CSGO Lotto), but did not require the influencers to disclose that they received compensation to promote CSGO Lotto.

 

Furthermore, brands should be familiar with the different forms of social media that their influencers will use to endorse a product or service. A disclosure viewed on a social media platform on a mobile device must be clear and conspicuous on that device (it is not enough that it would be clear and conspicuous only if viewed on a certain tablet or computer). In the Business Guide, the FTC explains that “[a]dvertisers should ensure that the format of any link for posting in social media does not mislead consumers about its commercial nature.” In the mobile context, brands and influencers should be familiar with how the post will appear and ensure that the disclosure will not be missed by a consumer in the specific mobile format. As the FTC has cautioned, “[t]he disclosure should catch users’ attention and be placed where they aren’t likely to miss it.”

 

A clear and conspicuous disclosure generally means that a disclosure is close to the claims to which the disclosure relates, and is in a font that is easy to read and in a shade or color that stands out. For video ads, the disclosure should be printed on the screen long enough to be noticed, read, and understood (audio-only disclosures are insufficient). For audio disclosures, the disclosure should be read at a cadence that is easy for consumers to follow and in words they will understand. Relatedly, “[a]dvertisers shouldn’t encourage endorsements using features that don’t allow for clear and conspicuous disclosures.”

 

Your Own Repurposing and Reuse

A cousin to social media, generally, is determining when and how you can repurpose or reuse content on social media. This may prove to be your most successful form of driving traffic to your game – a fan loves your app and organically posts a video online showing their gameplay or use of your app, which you now want to reuse on your own Twitter account, for example. Can you?

 

The FTC has also provided several examples involving the repurposing of content. In the first example, an advertiser wants to republish an independent favorable review. Because the advertiser did not solicit the review, the review itself does not need to be labeled as an ad, but its placement by the advertiser in other third-party media is an ad and should be disclosed.

 

Similarly, advertisers sometimes want content to appear in a consumer’s social media feed. If the link appears in a manner that is not typical for an advertisement (e.g., if it looks like a user’s friend has just posted a link to an article in a magazine), then you must be certain that the reposting conveys that the link will take the user to advertising content. The same advice holds true if the article can be found through nonpaid search engine results.

 

IN-APP ADVERTISING

An issue that is separate from driving traffic to your application is using in-app advertising to generate revenue. A common format in mobile, for example, is to serve sponsored videos that reward a gamer, for example, with in-game currency or tokens after watching. Problems can arise when the integration of the advertising and the game is so clever that the consumer has no idea that he or she is viewing marketing material.

 

The trick is still the same: making sure that consumers understand when they are seeing an advertisement in the context of that game and the specific advertising. Thus, in-game native advertising will sometimes, but not always, require a disclosure to a consumer that there is an advertisement. The FTC has explained that disclosure is not required if the game format is a virtual world that incorporates traditional advertising, such as billboards, into that virtual world. If the billboards in that virtual world advertise actual products, consumers are likely to know that the virtual billboard represents an actual advertisement.

 

Similarly, if in that same virtual world, the characters use representations of actual products (such as sunglasses, hats, drinks, etc.) or patronize representations of actual restaurants, gamers will understand that the real brand paid to be featured in that way in the game.

 

On the other hand, disclosures will be required if, in that same virtual world, a gamer interacts with one of the actual products and is then taken outside of the game to the actual brand website. The game needs to inform the gamer, before he or she is taken outside of the game, about what is about to happen and why. Depending on how this is deployed, context may be enough.

 

As apps continue to evolve, we can expect the rules about whether and when to disclose an advertisement to evolve as well. For instance, it can be expected that for some augmented reality apps, brands will pay to have the geolocation feature in the app take the user to a brand’s physical storefront to complete certain tasks. If brands are paying apps to direct consumers to these physical stores, we can expect some debate over whether and how apps must disclose the relationship between the brand, the app, and the consumer.

 

There is not necessarily any one-size-fits-all approach to successfully implementing native advertising into an app. The key is context – within the context of a specific app consumers should know when they are viewing an advertisement.

 

CONCLUSION

Native advertising is not new, although current modes of delivery may be. The rules are evolving and adapting to new media as we learn more about how consumers view native advertising and what they understand about disclosures. As the video game industry encounters more opportunities to use native advertising, the lines may become clearer. But as long as technology stays ahead of the law, video game companies will need to continue to rely on the decades-old principle that they should not mislead their consumers, and context is everything.