The Perils of Native Advertising

People pass the New York Times building in New York,  Wednesday, Oct. 10, 2012. The New York Times Co.'s stock rose on Thursd
People pass the New York Times building in New York, Wednesday, Oct. 10, 2012. The New York Times Co.'s stock rose on Thursday, Oct. 11, 2012, after an analyst raised his rating and price target on the shares. (AP Photo/Richard Drew)

Reading Joe Nocera's New York Times column this week, in which he bemoans the rise of Native Advertising (the practice by which newspapers publish paid ads that mimic the news in tone and feel), you'd think he discovered something new. With predictions that newspapers will devise "in-house studios that will produce ads for advertisers," one is left with the impression that this new scary day is just around the corner. But it's not. It's already here. The newspaper industry, however, has an incentive to keep things quiet and cozy. So we Americans don't hear about it. This is dangerous. Things have to change.

The obvious problem with native advertising is customer confusion. The reader thinks she is looking at a news story, but in actuality it is a corporate advertisement. The world's most prestigious publishers are minting millions from this symbiotic relationship with big-name brands while readers are left in the dark. With all of this money being spent to influence us, who among us can even tell the difference between a paid ad and an independent piece of journalism? The answer should blow a few hairs back. Turns out the subterfuge is so effective that a recent survey showed 49 percent of us have no clue what native advertising even is. This is good news for clever brands and bad news for unsuspecting readers.

Native advertising is not new. Indeed, it has been around long before Mike Wallace stumped for cigarettes on air while reading the news. In 1917, the American Federal Trade Commission settled a case with the Muensen Speciality Co., over an ad for its vacuum cleaner, which was presented positively in a newspaper review. There is, however, no precedent for the current massive collusion between brands and publishers. Business Insider recently reported that spending on native ads is expected to reach a staggering $7.9 billion this year and grow to $21 billion in 2018. Regrettably, the erosion of publisher integrity lured by the promise of native advertising's big bucks is likely quaint compared to what is to come in a few years. Just take a look at the opening paragraphs of Nocera's own New York Times annual report last year, which specifically singled out native advertising and online advertising as the largest contributors to the "modest" revenue growth of the Times last year.

Consider what the Times has been up to. In 2014 it launched their in-house T Brand Studio to create homegrown native advertising. The team works directly with companies and brands such as Chevron, Dell, Citi and Cartier to craft clever ads that consumers see online and in print. These working relationships have been so lucrative for the Times that earlier this month T Brand Studio announced it will expand into London to entice more international clientele.

Now, it's not surprising that Nocera appears unaware of what's going on at his own paper. At the Times, native advertising is invisible both in its published ethics codes, and to its own celebrated columnist. Except for the folks who collect the cash, it's largely overlooked, which is precisely how both publishers and native advertisers want things. Native advertising's greatest strength is its camouflage.

The Times and most other major publishers take care to label these ads as "paid posts," so as to try to preserve the editorial credibility of the paper and to honor its responsibility to readers. But no one should take much comfort in the (small) fine print. Indeed, the FTC recently announced it will hold publishers responsible for misleading content due in large part to the fact that publishers are no longer traditional distribution channels. They are instead actively involved in creating advertorial content by working directly with brands while netting big bucks.

Every time a brand pairs with the Times, that brand is leveraging the credibility of the paper. When brands win, traditional journalism loses. That is why news organizations such as the Times need to adopt specific guidelines to address native advertising. Most ethics codes disregard the practice altogether, or lump it in with traditional advertising (which it most certainly isn't). Consumers deserve and should demand direct, non-lawyer speak for what is and what isn't acceptable.

The trouble is that every news organization has an incentive to squelch this debate, particularly in an era of online journalism where traditional revenue models have gone bust. It is up to consumers, and our government, to insist on better practices and codes of conduct that address this insidious practice.