• by Wendy Davis , Staff Writer @wendyndavis, January 4, 2016

Many consumers think that native ads are actually written by reporters or editors, even when those ads are labeled "sponsored report."

That's according to Chris Jay Hoofnagle, faculty director, Berkeley Center for Law & Technology, who recently published research about how consumers interpret native ads.

"Our findings suggest that even with a prominent disclosure, a substantial number of consumers are misled about the advertising nature of advertorials," Hoofnagle and Eduard Meleshinsky, a former Berkeley Law Public Interest Fellow, write in Technology Science.

To examine customers' beliefs about native ads, Hoofnagle and Meleshinsky took an advertorial for a diet bill and placed it, along with two articles, on a site that resembled a blog page. The advertorial was labeled "sponsored report," and had the same font size and style as the other articles on the page.

Researchers then questioned around 600 survey respondents about the ad. More than one in four (27%) said that they thought it had been written by journalists or editors, while less than half (43%) said it was written by someone else. Almost one in three (29%) said they didn't know who authored the post.

A separate study published by researchers at Grady College in Georgia in the December issue of the Journal of Advertising also concluded that many consumers have trouble distinguishing native ads from editorial content.

Hoofnagle's report was published one week before the FTC issued its long-awaited native ad guidelines, which say that native ads formatted to resemble editorial content must be labeled with terms like "advertisement," "paid advertisement," or "sponsored advertising content."

The agency specifically criticized the use of some terms currently in labels, including "promoted" or "promoted stories," on the grounds that those words "are at best ambiguous and potentially could mislead consumers that advertising content is endorsed by a publisher site."

Even terms like "promoted by," followed by the name of the advertiser, could be misinterpreted "to mean that a sponsoring advertiser funded or 'underwrote' but did not create or influence the content," the FTC says.

The IAB recently criticized those requirements as "overly prescriptive," arguing that the FTC doesn't have "compelling evidence" to justify requiring the use of specific phrases in labels.

But Hoofnagle proposes that companies should do more than just label native advertising with terms that include the word "ad." He also suggests that companies should differentiate advertorials from editorial content in the text -- such as by using a different font. His paper gives two examples from print ads, but it's not clear that either would translate online. The first, which dates to 1914, shows an advertorial that ran with paragraph marks and different fonts than the articles. The second came from a 1951 Atlantic Monthly advertorial, which used a different style than the editorial material.