Breaking down the FTC's definition of 'native advertising' in games

August T. Horvath wonders if the FTC really groks native advertising, especially in gaming and entertainment contexts

A few months ago I experienced the phenomenon of Advertising Week, a kind of Comic-Con of online advertising that occurs each year around Times Square. My two main objectives were to meet some of the Angry Birds in person and to find out exactly what “native advertising” is. I had more success with the first goal. Even though many vendors actively promoted native advertising and used it in every other sentence, explaining what it was proved challenging.

Several other entities, especially advertising enforcers, seem disturbingly certain that they know what native advertising is. At a recent presentation, a Federal Trade Commission staffer announced, with tongue-in-cheek pride, the FTC’s first native advertising enforcement action: a 1915 case involving an advertisement posing as a magazine news article. It was a cute way to make the point that nothing in advertising law is really new, and to reinforce the FTC’s perennial position that any truth-in-advertising issue can be resolved by reference to the broad principles stated in the FTC Act. Somehow, though, it was unsatisfying. I came away wondering if the FTC really groks native advertising, especially in gaming and entertainment contexts.

Semi-formally, the FTC has defined “native advertising” as “blending advertisements with news, entertainment, and other editorial content in digital media” and has asserted it to be synonymous with “sponsored content.” Except for the “digital media” part, it encompasses the advertorials that have been around for over a century in print media. This, and the name of the FTC’s December 2013 “Blurred Lines: Advertising or Content?” workshop on native advertising, signal the FTC’s primary concern with native advertising, which is that sponsored content should be clearly labeled as such.

There are a couple of problems with the FTC’s definition of native advertising. First, it is basically tantamount to “disguised advertising.” If in-media advertising is clearly designated as advertising, then it has separated itself from the surrounding content, broken the frame, interrupted the experience; it is no longer native. If it’s native, by definition, it’s blended; the lines are blurred; you can’t tell it from the “content.” It is inherently suspicious, if not deceptive. Second, it has dubious relevance to the gaming context, or to most entertainment media.

If you are looking for a true ancestor of video game native advertising in the (relatively) low-tech world, a better one might be product placement in movies and TV shows. Here, the FTC’s enforcement position deviates from its own principle that sponsored content should be clearly designated as such. In 2005, responding to a Commercial Alert complaint about product placement in TV shows, the FTC declined to require advertisers who pay to have their products appear in programs to flash a superimposed disclosure such as “ADVERTISEMENT” at viewers. Essentially the FTC skirted its own principle by defining the mere placement of one’s brand in front of consumers as not an advertisement that makes objective, and thus potentially deceptive, claims about the product.  

Product placement in traditional media has reached its most advanced form in Asia, where top film and TV stars participate in “Commercial Films” (CFs) that are extended dramatic programs sponsored by an advertiser. Typically the advertiser’s product plays a key plot role, such as in a romantic comedy where the sponsor’s smartphone is crucial in uniting the lovers — similar to, but more pervasive than, America Online’s ground-breaking product placement in the 1998 Tom Hanks/Meg Ryan film You’ve Got Mail. It’s certainly possible that a product in such a story could be shown doing things it can’t really do, and nothing prevents an agency or litigant from challenging any deceptive implied claim. If, for example, Chrysler had sponsored the appearance of the legendary 1969 Charger “General Lee” in The Dukes of Hazzard, the FTC might very well have taken issue with the show’s depiction of the car’s aerial capabilities and crashworthiness.

Games are more like movies than magazines or search portals, and the FTC’s hands-off logic for product placement in movies and TV shows that does not make objective claims holds true for the most common form of video game native advertising, which is to throw a trademark in front of users in the context of a game environment. The FTC’s position implicitly acknowledges an important benefit of this practice. Most games are interactive works of fiction in which the programmer interacts with the user to create a more or less guided but unique narrative experience. Many games build a realistic environment that calls for the suspension of disbelief. Corporate brands and advertising are a part of our modern environment, and it enhances the realism of any simulated environment, be in in a movie or a game, when genuine, familiar brands appear. We have all seen movies and TV productions in which the producer has invented a bogus brand for a common consumer product because it could not use the trademark of a real one. This unrealism jars us momentarily, interfering with our suspension of disbelief. Product placement serves not only the sponsor’s commercial ends, but also the producer’s dramatic purposes and user-viewer’s experience, because it is realism-enhancing to see real, rather than ersatz, product billboards in a street-chase game and real logos on the boards of an ice hockey simulation.

Perhaps not surprisingly, Wikipedia has a more balanced definition of native advertising than the FTC: Online advertising “in which the advertiser attempts to gain attention by providing content in the context of the user's experience [whose] formats match both the form and the function of the user experience in which it is placed.” It’s a definition better suited to native advertising in the gaming context, because it acknowledges that native advertising in gaming is not just snuck into the experience in disguise, it is affirmatively part of the experience, in the same way that products, brands and advertising are part of our lives. Deceptive is still deceptive, of course; but native is not necessarily deceptive.

Contributing Author

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August T. Horvath

August T. Horvath is a partner in the Kelley Drye's New York office. He focuses his practice on advertising law and antitrust matters. Mr. Horvath...

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