THE BLOG
07/09/2013 04:08 pm ET | Updated Oct 17, 2013

On the Internet, Nobody Knows You're An Advertiser: Native Advertising and Its Impact on the Web's Credibility

Yahoo's billion dollar purchase of Tumblr seemed to silence critics who had pegged "native advertising" as Madison Avenue's latest digital gimmick. Indeed, more and more media companies are embracing native ads with the hopes it will rescue them from the beleaguered banner; it seems clear the new ad product will play a major role in the economics of digital media. Yet, while the industry has turned its focus to the financial potential of native ads, it seems to be overlooking how the new format could have a profoundly negative impact on the web's credibility as an informational medium.

To date, much of the debate concerning native advertising has failed to appreciate its impact on the web as a medium. At first, critics showed buzzword fatigue and trotted out the "everything old is new again" theme, dismissing native ads as nothing more than the latest incarnation of the advertorial. While the concept of the advertorial may date back to the early days of print, what's new is its arrival to the Internet with scale. Such migration from traditional to digital often unleashes industry disrupting forces; consider what Craigslist did to newspaper classifieds or Napster for music. Yet, unlike these examples, the advertorial's transition to digital is not inherently beneficial to consumers. The advertorial is a loaded concept. Its purpose is to blur the line between biased and unbiased content. It's true that consumers have learned to delineate edit from ad in TV, print and radio, but the unique characteristics of the web pose more complex challenges.

We've begun to examine how the advertorial will affect the web, first turning our attention to legacy print publishers, a predictable starting place given their long history with the tactic. When institutions of journalistic propriety like The Washington Post, The Atlantic and The Economist opened their websites to native ads, critics wondered if they were forsaking the revered concept of the editorial wall. This was a fascinating subject for journalists but ultimately only a smaller component of the broader issue facing the web.

Then, The Atlantic failed to properly disclose that an article praising Scientology was actually sponsored content and it seemed the critics had their first case study in the perils of native advertising. Yet tellingly, aside from a swift backlash, nothing lasting happened to The Atlantic. All these months later it's still standing, still publishing great content and still integrating native ads.

This suggests that a misstep by a single publisher is absorbed by the collective credibility of the web, rather than the undoing of that publisher. This hypothesis aligns with the way people consume the web -- darting between websites and browser tabs, as opposed to leaning back with a single publication like in print. The online ad industry should assess the ethics of native advertising within the context of how people use the web and resist the temptation to view it through the prism of the print advertorial. As long as disclosure practices are not standardized, there will be sporadic slip-ups like The Atlantic incident. The cumulative effect will be a web littered with credibility mines, conditioning consumers to view the web as a less trustworthy place.

Fortunately, standardization seems close; publishers typically highlight native ads in a different shade than editorial. Yet, that superficial solution is also a relic from the print era and may not be sufficient for the complex interconnectedness of the web. This was made evident by a certain Washington Post article that found its way into the Google News stream in April.

To users of Google News, the piece appeared to be the unbiased work of a journalist, but in fact, it was published on The Washington Post as sponsored content. Somewhere within the Internet plumbing that connects The Washington Post to Google News, the "sponsored content" disclaimer was stripped away, denying readers the ability to know the article's inherent bias. Upon realizing the error, Google built a technical solution to the problem, instructing its partners to publish sponsored content on a different directory, creating what amounts to a filter for the Google News pipeline.

Google's need to build a custom solution is a reminder that the web lacks an inherent mechanism for persistently upholding ethical standards of how information should be presented: What begins as clearly labeled sponsored content on one site becomes editorial on the next. It's clear the web's interconnectedness can render the ethics of an original publisher moot.

This is even more important given the rise of social media -- by some standards Facebook sharing drives more traffic to webpages than Google searching. If the web is inundated with poorly labeled sponsored content, inevitably consumers will unwittingly share biased information with one another. This threatens the credibility of the medium as well as its users -- the picture of an online dystopia.

Consumers are already unwittingly sharing advertiser content with one another every day. Facebook's Sponsored Stories ad product commandeers a user's likeness for the purpose of delivering an advertiser's message, yet grants that user no visibility into how his likeness is ultimately deployed.

The Atlantic, Google News and Facebook examples illustrate how inundating the web with advertorial threatens its credibility. Indeed, its credibility may already be eroding as evidenced by the story of Reddit and The Olive Garden.

In April, a manager at The Olive Garden offered to pay the check for a family dining in the restaurant after overhearing them discuss a fire that had burnt down their grandfather's house. Soon after the meal, the check showing a balance due of $0.00, was uploaded to Reddit. The story was greeted with a strong sense of skepticism. One user questioned whether the entire thing had been conceived by an advertising agency and planted on Reddit as a ploy for good press. This comment was up-voted until the story became national news, prompting spokespeople from Darden, the parent company of Olive Garden, to refute the accusation.

The Olive Garden story turned out to be true; the manager really did spontaneously pick up the check. Reddit users' belief that the story was planted illustrates the heightened sense of paranoia that accompanies a web that fails to standardize how biased content is disclosed. In a web tangled in advertorial, it's a slippery slope from healthy skepticism to paranoia.

As the economic infrastructure of online advertising moves from the banner economy and into native, the industry must assess the sustainability of the new system from both a financial and social perspective.

The banner economy is proving to be unsustainable financially. Plus, it's annoying. The monetization system incentivizes page views -- leading to unpleasant site features like slideshows, misleading links, unnecessary page breaks and disruptive ad products like interstitials and auto-play videos. This is all inconvenient for consumers -- but at least it doesn't threaten the web's usability and credibility.

Native advertising shows promise from a financial perspective but poses more serious challenges to the web's integrity. In the marketplace for native ads, it's rationale for demand to gravitate toward the placements that most effectively conceal the biased nature of the content. This creates a perverse incentive for ad sellers and thus warrants intervention from the industry. Of note, the IAB has commissioned a task force on this issue.

The current state of the online ad industry is reminiscent of a New Yorker cartoon from the nineties which famously pictured a pair of dogs sitting at a computer with the caption, "On the internet, nobody knows you're a dog." These days, the dogs could be replaced with two marketing execs and the caption could read: "On the Internet, nobody knows you're an advertiser."