At the Clean Ads I/O conference in New York last week, Mary Engle, the FTC’s associate director of advertising practices, told attendees that the FTC is uneasy with native advertising that users can’t distinguish as advertising, making them deceptive.

“An ad is deceptive if it misleads a significant percentage of consumers,” she explained, noting that the FTC sees 10-15% of users representing a “significant percentage of consumers.”

Easy-to-miss disclosures, like a sponsored label that is in small text or buried at the end of an article, don’t satisfy the FTC.

“I would urge advertisers to think about how to communicate [disclosure] to consumers while wanting the ad to be in the flow of what consumers are seeing,” Engle stated, while also putting publishers on notice that they too could face liability for native ads that aren’t up to standard. “When the publisher is creating the content, they’re more involved in the process, and that creates some potential liability.”

Will disclosure harm efficacy?

While Engle’s comments might leave the impression that the FTC is not a fan of native advertising, Engle was quick to point out that the agency doesn’t have a problem with the ad format itself.

As she told attendees:

I don’t think [a native ad is] inherently deceptive any more than an infomercial is inherently deceptive. 

At some point, the FTC will make it clear which native ad disclosures are acceptable and which are not.

At that point, the big question for marketers and publishers will be whether the disclosures themselves reduce the efficacy of the ads.

While native ads will continue to address some of the viewability concerns marketers face with traditional ads, if they must be so prominently labeled that consumers tune them out, marketers could find themselves back at square one.