Native advertising has always had the advantage over banner ads because it mimics the look and tone of editorial content. And because publishers may have confused readers with native ads that look too much like editorial, the Federal Trade Commission (FTC) announced guidelines late last month in an effort to keep readers from being misled. It also announced an 11-page guidebook for businesses on how they can comply with the FTC’s new policy.

The overarching theme behind the FTC’s new guidelines is that advertising must be absolutely clear to consumers, and the language used to describe it must be explicit. Plus, disclosure should be in proximity to the headline and should be disclosed before people click on the story – much stronger rules than is now common practice.

Impacting Innovation
So will these new regulations stymie native advertising’s potential? The Interactive Advertising Bureau (IAB), while welcoming the guidelines, took some issue with them, saying the emphasis on the clarity of meaning was “overly prescriptive, especially absent any compelling evidence to justify some term over others.”

”While guidance serves great benefit to industry, it must also be technically feasible, creatively relevant, and not stifle innovation,” Brad Weltman, IAB’s vice president of public policy, said in a statement.

However, DCN CEO Jason Kint had a more nuanced take on the rules: “Ultimately the impact of these guidelines will very much depend on what cases the FTC brings,” Kint told me via email. “We hope the FTC will use their enforcement authority to stop egregious acts of deception and not punish publishers and advertisers trying to do the right thing.”

An Ongoing Problem
According to the FTC, terms such as “Promoted” or “Promoted Stories” — which are commonly employed to label native advertising — are “at best ambiguous and potentially could mislead consumers that advertising content is endorsed by a publisher site.” Words such as “Ad” and “Sponsored Advertising Content,” according to the FTC, are much more direct and clearly understood as advertising by consumers, and should be used instead.

The FTC’s conern is meritted. A study conducted by Contently last year found that most consumers can’t distinguish native advertising from regular content on a website. “Our findings show that no matter what steps publishers have taken, there is still significant confusion on the part of readers as to what constitutes an article and what constitutes an ad,” Contently said in its report on the study. The company suggested the “devil may be in the details,” and that perhaps readers also aren’t choosing to take the time to recognize the difference between an article and an advertisement.

Jeffrey Chester, the executive director of the Center for Digital Democracy, meanwhile, likened native advertising to “product placement on digital steroids. There’s no way that saying, ‘This is an ad,’ means anything,” he told the New York Times.

Ensuring Clarity
Perhaps these reactions indicate that publishers and advertisers just haven’t yet found the right way to ensure clarity — which only substantiates the FTC’s argument that obvious and well-placed statements are necessary to describe native advertising. Indeed, digital publishers such as Mashable and the Huffington Post were relatively calm about the new policy, with the Huffington Post saying it’s the result of inconsistency in the market.

But the bigger issue for publishers, according to the IAB, is that more enforcement on native advertising is bound to come. While the FTC’s regulations are not quite the law of the land, most publishers and advertisers are going to want to comply to avoid financial sanctions or risk being held out as bad actors.

And that brings publishers and advertisers back to a predicament that once seemed far away from this new, innovative kind of advertising. So publishers will have to weigh their desire to push the envelope with innovative ad forms and being crystal clear to users about ads. The winners will be the ones who can do both, without sacrificing quality or trust.