Going Native: Can Consumers Recognize Native Advertising? Does It Matter?

By Hyman, David A.; Franklyn, David et al. | Yale Journal of Law & Technology, Annual 2017 | Go to article overview

Going Native: Can Consumers Recognize Native Advertising? Does It Matter?


Hyman, David A., Franklyn, David, Yee, Calla, Rahmati, Mohammad, Yale Journal of Law & Technology


TABLE OF CONTENTS  I. Introduction II. The Evolution of Native Advertising III. Past Research, Industry Guidelines, And the Law of Native Advertising   A. Past Research   B. Industry Guidelines   C. The Law of Native Advertising IV. Our Methodology and Findings   A. Methodology   B. Overview of Findings   C. Effectiveness of Labeling and Pop-Ups   D. Attitudes Regarding Advertising   E. Do Users Learn From Experience?   F. Regression Analysis V. Discussion   A. The Logic of Native Advertising   B. Do Consumers Know That Native Advertising Is Paid?   C. Trust and Integrity   D. Does Intent Matter?   E. Self-Identity and the Media Ecosystem   F. Remedies   G. Robustness/Further Research VI. Conclusion 

"[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?" (1)

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 accounted for $4.7 billion in ad spending in 2013, (7) and was estimated to grow to $7.9 billion in 2015, (8) $21 billion in 2018, (9) and $53 billion in 2020. (10)

Mainstream media outlets, including The New York Times, The Wall Street Journal, and Forbes have set up in-house special units to develop and market native advertising campaigns. (11) Despite the 2013 meltdown, native advertising now accounts for 75% of ad revenue at The Atlantic. (12) At the New York Times, native advertising "accounted for 18% of digital advertising revenue in the third quarter [of 2015], up from 10% in the second quarter. (13) At Facebook, 83% of its ads are native advertising, and more than 50% of its advertisers use native advertising exclusively. (14) Because native advertising circumvents ad blocking software, it is likely to become an even more prominent part of the advertising landscape, particularly in the mobile setting. (15)

The rise of native advertising has prompted vehement criticism. When Forbes puts a native ad for Fidelity on the cover of its print edition, critics accused it of breaking "one of the last remaining taboos in [the] industry." (16) The editor of The Wall Street Journal referred to native advertising as a "Faustian pact." (17) Comedian John Oliver described native advertising and the justifications that had been offered for it as "repurposed bovine waste"--more colloquially referred to as "bullshit." (18) Others have worried about the impact of native advertising on the integrity and credibility of publishers and media platforms, (19) and called for more aggressive regulation. (20)

Proponents have defended native advertising as substantive content that also provides an economic lifeline for a declining industry--i.e., a way the media can "put content [it] can monetize in the hands of the right audiences." (21) For example, Forbes executives thought it was "appropriate for Fidelity to be called out on the cover just like any other great piece of content would be. …

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