Death of the Banner Ad (Article)

RECENT DEVELOPMENTS IN DIGITAL MEDIA ADVERTISING LAW: Death of the Banner Ad

1.      Introduction

The landscape of digital media advertising continues to evolve with rapidly changing devices, ad technologies, consumer behavior, and business strategies. The laws governing such developments remain but must also adapt. Commercial laws govern the transactions between parties who buy, sell, optimize and measure ads. Laws and self-regulatory frameworks are necessary to protect consumers and provide confidence to all stakeholders. This paper summarizes current developments in digital media advertising and the legal implications.

2.     Digital Media Advertising Industry

Digital media advertising remains strong with global revenue reaching $116 billion for 2013, a 16% annual increase. Mobile advertising currently comprises 11% of global ad revenue dollars with a 47% increase. The number of global Internet users is still increasing albeit at a slower rate of less than 10%. Most importantly, the manner in which users are accessing content is increasing significantly in the areas of smartphones, tablets, and other mobile devices.

Category User/Usage Trends
Internet Users <10% growth & slowing…fastest growth in more difficult to monetize developing   international markets
Smartphone Subscribers +20% strong growth though slowing…fastest growth in underpenetrated international
Tablets +52% early stage rapid unit growth
Mobile Data Traffic +81% accelerating growth…video = strong driver

*Source: Internet Trends 2014 – Code Conference May 28, 2014) (http://www.kpcb.com/internet-trends)

3.     What is Digital Media Advertising?

Digital media advertising uses websites, mobile applications, and other online services to deliver promotional marketing messages to consumers.” Such advertising includes:

  • email marketing
  • text message marketing
  • search engine marketing (SEM)
  • social media marketing
  • display advertising/web banners
  • video advertising
  • mobile advertising
  • native advertising

The list of digital media categories continue to grow with mobile, social media, video, and native advertising playing increasing larger roles.

4.     Who are the Parties?

Various parties are involved in the delivery of digital media advertising to consumers. Those parties include:

  • Publishers who integrate advertisements into its online content
  • Advertisers who provide the advertisements to be displayed on the publisher’s content
  • Advertising Agencies who help generate and place the ad copy
  • Ad Servers and Other Technology Providers who use technology to deliver and track the ads

5.     Developments in Digital Media Advertising Contract Terms

Below are summaries of recent developments related to digital media contract terms.

Interactive Advertising Bureau Guidelines, Standards and Best Practices

The Interactive Advertising Bureau (IAB) is an association of publishers, advertisers, advertising agencies and technology providers. IAB sets guidelines, standards and best practices for the industry and are the basis of many Internet advertising contracts. The “back of the napkin” advertising deals frequently incorporate IAB terms to simplify the process for buying, planning and creating interactive media. Guidelines include:

  • Ad Standards & Creative Guidelines
  • Ad Verification
  • Data
  • Digital Video
  • Email & Lead Generation
  • Games Advertising
  • Interactive Television
  • Local Search Whitepaper
  • Measurement Guidelines
  • Mobile
  • Native Advertising
  • Online Ad Effectiveness Best Practices
  • Online Traffic Fraud
  • Operational Efficiency Best Practices
  • Platform Overviews: Status Reports on Emerging Platforms
  • Programmatic
  • Quality Assurance Guidelines Initiative
  • Real-Time Bidding
  • Terms & Conditions*

*The starting point for internet advertising contracts should be to define the contractual terms among the parties. The IAB publishes the Standard Terms and Conditions for Internet Advertising for Media Buys One Year or Less, Version 3.0 (“Standard Ts&Cs”). (http://www.iab.net/guidelines/508676/tscs3) Version 2.0 was originally published in 2002. The latest version of the Standard Ts&Cs was updated in 2009. The standard, specifications, and other guidelines are updated more frequently. More info at http://www.iab.net/guidelines.

Differences Between V3.0 and V2.0 of the IAB Standard Ts&Cs

Significant portions of the following sections were updated in 2009 for Version 3.0:

Section XII: Non-disclosure, Data Usage and Ownership, Privacy and Laws: Entirely new data usage language has been developed for Media Companies, Agencies, and Advertisers – this is the section where the most new material has been added so pay close attention.

Section II: Ad Placement and Positioning: Standard editorial adjacency language has been developed to handle most Advertisers’ concerns and specific language regarding UGC site/page requirements has been added.

Section III: Payment and Payment Liability: Among other things, invoicing requirements have been changed and proof of performance is no longer required unless explicitly requested.

Section V: Cancellation and Termination: Cancellation terms have been rewritten to include different cancellation periods for different types of inventory and services (guaranteed, performance, pre-launch development costs, etc).

Section IX: Ad Materials: The late creative policy has been updated to something that will hopefully be easier for Media Companies and Agencies to voluntarily agree to.

Section X: Indemnification: Indemnification language has been reorganized and updated.

Section XIII: Third Party Ad Serving and Tracking: Third party ad serving, tracking, and billing language outlines conditions in which, if satisfied, Agency third-party numbers can be used by default for billing

A Definitions section has been added at the front of document.

Source: IAB

The IAB published an Education Guide is available to explain the key provisions. (http://www.iab.net/media/file/IAB_AAAAs_v_3_0_Education_20091215_FINAL.pdf)

Addenda to the IAB Standard Ts&Cs

Because the IAB Standard Ts&Cs represent a “pre-negotiated” contract, the IAB recommends that any changes be included in an Addendum. In many cases, an Addenda can fundamentally alter a deal including with respect to payment terms, cancellation rights, and adherence to additional privacy standards.

6.     Recent Developments in Categories of Advertising

Native Advertising

As consumers consume content in more varied ways, native advertising is become an increasingly important category of digital media advertising. What is native advertising? There is no universal definition; however, consider the following general description:

“Native advertising is an online advertising method in which the advertiser attempts to gain attention by providing content in the context of the user’s experience. Native ad formats match both the form and function of the user experience in which they are placed. The advertiser’s intent is to make the paid advertising feel less intrusive and thus increase the likelihood users will click on it. The word “native” is used to refer to the formatting of the advertising materials to make them appear more consistent with other media in the recipient’s universe.” (http://en.wikipedia.org/wiki/Native_advertising)

In December 2013, to address issues raised by native advertising, the Interactive Advertising Bureau (IAB) and its Native Advertising Task Force released the “IAB Native Advertising Playbook.” (http://www.iab.net/media/file/IAB-Native-Advertising-Playbook2.pdf) The paper provides a outline of native advertising options and related issues impacting consumers.

The IAB identifies six types of native advertising units:

  • In-Feed Units (e.g., Facebook “Sponsored Posts” in your Feed
  • Paid Search Units (e.g., Google “Sponsored Ads)
  • Recommendation Widgets (e.g., Outbrain “From Around The Web”)
  • Promoted Listings (e.g., Amazon “Ads from External Websites”)
  • In-Ad With Native Element Units (EA “Game Units”)
  • Custom/”Can’t Be Contained (e.g., Pandora)

A key legal issue is identification and proper disclosure of native ads as advertising not content. The IAB Native Advertising Task Force agrees: “a reasonable consumer should be able to distinguish between what is a paid native advertising unit vs. what is publisher editorial content.”

Depending on the type of native advertising, the disclosures may differ.

Category Examples of Disclosure
In Feed Unit Disclosures “Advertisement” or “AD“ (Google,YouTube), “Promoted” or “Promoted by [brand]” (Twitter, Sharethrough), “Sponsored” or “Sponsored by [brand]” or “Sponsored Content” (LinkedIn, Yahoo), “Presented by [brand]” + “Featured Partner” tag (BuzzFeed, Huffington Post), and “Suggested Post” + a “Sponsored” tag (Facebook).
Paid Search Unit Disclosures* Commonly used disclosure language for paid search units using “pizza” as a search word includes: “Ads related to pizza,” shaded with AdChoices icon – Google; “Ads related to pizza”, shaded – Yahoo; “All links will open in new tabs. Click to opt out.” dark purple shading – Bing.These units contain up to three disclosure cues.·         Cue #1 – This language is typically found above the listings in bold type: “You might also like” or “You might like”, “Elsewhere from around the web” or “From around the web”, “You may have missed”, “Recommended for you”·         Cue #2 – The name of the sponsor or the destination site is placed after the visual and/or the headline in the unit, noting that this format may contain both local and third-party content in the same overall unit.·         Cue #3 – If served via a third party, the technology provider may also include their company name or logo to further indicate to consumers that the content contained therein is not coming from the publisher. E.g.,- Recommended by Outbrain; – Sponsored content by Taboola
Promoted Listings Commonly used disclosure language for Promoted Listings includes: “Ads” with icon (Google); “Yelp Ad”;“Sponsored Products”– Amazon; and “Product Ads from External Websites”/Sponsored Content/”What’s this?” link – Amazon.
In-Ad With Native Element Units Ad unit must have clearly defined borders and not be confused with normal page content
Custom Custom

Source: IAB Native Advertising Playbook

Online Behavioral Advertising

More and more consumer services are driven by personal data. Online behavioral advertising has faced increasing scrutiny from regulators and consumer advocates. What is online behavioral advertising? A 2009 FTC staff report provides the following definition:

online behavioral advertising means the tracking of a consumer’s online activities over time − including the searches the consumer has conducted, the web pages visited, and the content viewed − in order to deliver advertising targeted to the individual consumer’s interests. (http://www.ftc.gov/reports/federal-trade-commission-staff-report-self-regulatory-principles-online-behavioral)

“Online behavioral advertising” is also sometimes called “interest-based advertising.”

Behavior is tracked and data collected by the cookies, pixels, or other technology using a consumer’s browser or mobile device. Online behavioral advertising generally does NOT include the following:

  • First-party advertising-where no data is shared with third parties
  • Contextual advertising-where advertisements are based on a single visit or search query
  • First-party data collection and analysis-for website optimization/analytics

Publishers and advertisers want higher returns from targeted, higher performing ads. Consumers can benefit from such targeted ads. However, consumers also want to be informed about data collection practices, have the right to opt-out, and have access or control of their data.

7.     FTC Guidance on Online Behavioral Advertising

There is no federal law governing online behavioral advertising. The FTC has issued staff reports and guidance which are summarized below.

FTC’s Self-Regulatory Principles for Online Behavioral Advertising

In February 2009. The FTC released Self-Regulatory Principles for Online Behavioral Advertising (www.ftc.gov/reports/federal-trade-commission-staff-report-self-regulatory-principles-online-behavioral). The 2009 FTC Report set forth key principles of online behavioral adverting: transparency, consumer control and consent.

FTC’s Mobile Privacy Disclosures: Building Trust Through Transparency

In February 2012, the FTC issued Mobile Privacy Disclosures: Building Trust Through Transparency http://www.ftc.gov/reports/mobile-privacy-disclosures-building-trust-through-transparency-federal-trade-commission). The 2012 FTC Report called for notice, choice and more transparency for the mobile environment.

FTC’s Protecting Consumer Privacy in an Era of Rapid Change, Recommendations for Businesses and Policymakers

In March 2012, the FTC issued Protecting Consumer Privacy in an Era of Rapid Change, Recommendations for Businesses and Policymakers (http://www.ftc.gov/reports/protecting-consumer-privacy-era-rapid-change-recommendations-businesses-policymakers). The 2012 FTC Report (based on prior 2010 preliminary report) details a framework for privacy by design, simplified choice, greater transparency, and a Do Not Track mechanism. The FTC also describes using “just-in-time” disclosures for space-constrained mobile devices at the time of download or at collection or transmission of data.

8.    Industry Self-Regulatory Frameworks for Online Behavioral Advertising

In response to FTC guidance on online behavioral advertising, various trade groups issued their own principles and frameworks for online behavioral advertising.

Digital Advertising Alliance (DAA) Self-Regulatory Principles for Online Behavioral Advertising

In July 2009, the Digital Advertising Alliance (“DAA”), a network of media companies and marketing trade associations released its own Self-Regulatory Principles for Online Behavioral Advertising having the same name as the 2009 FTC Report (http://www.aboutads.info/obaprinciples). The DAA OBA Principles include the following:

The Education Principle calls for organizations to participate in efforts to educate individuals and businesses about online behavioral advertising and the Principles.

The Transparency Principle calls for clearer and easily accessible disclosures to consumers about data collection and use practices associated with online behavioral advertising. It will result in new, enhanced notice on the page where data is collected through links embedded in or around advertisements, or on the Web page itself.

The Consumer Control Principle provides consumers with an expanded ability to choose whether data is collected and used for online behavioral advertising purposes. This choice will be available through a link from the notice provided on the Web page where data is collected.

The Consumer Control Principle requires “service providers”, a term that includes Internet access service providers and providers of desktop applications software such as Web browser “tool bars” to obtain the consent of users before engaging in online behavioral advertising, and take steps to de-identify the data used for such purposes.

The Data Security Principle calls for organizations to provide appropriate security for, and limited retention of data, collected and used for online behavioral advertising purposes.

The Material Changes Principle calls for obtaining consumer consent before a Material Change is made to an entity’s Online Behavioral Advertising data collection and use policies unless that change will result in less collection or use of data.

The Sensitive Data Principle recognizes that data collected from children and used for online behavioral advertising merits heightened protection, and requires parental consent for behavioral advertising to consumers known to be under 13 on child-directed Web sites. This Principle also provides heightened protections to certain health and financial data when attributable to a specific individual.

The Accountability Principle calls for development of programs to further advance these Principles, including programs to monitor and report instances of uncorrected non-compliance with these Principles to appropriate government agencies. The CBBB and DMA have been asked and agreed to work cooperatively to establish accountability mechanisms under the Principles.

(http://www.aboutads.info/obaprinciples)

In October 2010, the DAA published an Implementation Guide as its self regulatory program (http://www.aboutads.info/resources). The DAA Program corresponds to the FTC guidance and recommendations in the 2009 FTC Staff Report.

The Blue Pointy Icon

What’s the blue pointy thing that’s all over the Internet? Importantly, the DAA Program introduces the “Advertising Option” icon along with the approved words: ‘Why did I get this ad?’, ‘Interest Based Ads’, or ‘Ad Choices’. The icon indicates that indicates that the advertising is covered by the self regulatory program, and by clicking on it consumers will be able to link to a clear disclosure statement regarding the data collection and use practices associated with the ad, as well as an easy-to-use opt-out mechanism.

DAA’s Self-Regulatory Principles for Multi-Site Data

In November 2011, the DAA published the Self-Regulatory Principles for Multi-Site Data (http://www.aboutads.info/msdprinciples) to standards governing the collection and use of data collected from a particular computer or device regarding Web viewing over time and across non-affiliated Websites.

DAA’s Application of Self-Regulatory Principles to the Mobile Environment

In July 2013, the DAA published Application of Self-Regulatory Principles to the Mobile Environment (http://www.aboutads.info/principles) to provide guidance on collection and use of data in the mobile Web site and application environment as it relates to the DAA OBA Principles and the Multi Site Data.

The online home of the DAA’s Self-Regulatory Program for Online Behavioral Advertising is at http://www.aboutads.info/.

Network Advertisers Initiative (NAI) Code of Conduct

In 2013, the Network Advertising Initiative (http://www.networkadvertising.org) published a new version of the NAI Code of Conduct (http://www.networkadvertising.org/code-enforcement/code). NAI members include ad networks, exchanges, platforms, creative optimization firms, yield optimization firms, sharing utilities and other technology providers. The Code is a set of self-regulatory principles for collection and use of data for interest-based advertising. The 2013 Code updates are directed at the more complex online advertising eco system, technology updates, and regulatory changes such as enhanced notice requirements.

The Code requires (i) transparency and notice, including an opt-mechanism to disallow interest based advertising; (ii) user control including with respect to merging data; collection of geolocation data; and use of financial, health, and other sensitive date; (iii) use limitation, such as employment, credit, healthcare, and insurance eligibility information; (iv) transfer restrictions with respect to personal data and merging data; and (v) data access for users, quality systems, and security of data.

In addition, to the opt-out mechanism, NAI members are required to represent compliance with the Code in their publicly available privacy policy and undergo annual review for compliance with the Code.

The application and enforcement of the NAI self-regulatory principles across mobile devices (including mobile web browsers and mobile applications) are scheduled to begin in 2015. The NAI Mobile Application Code is limited to “cross app” advertising and review process.

The NAI opt out tool is hosted at http://www.networkadvertising.org/choices/ for purposes of allowing consumers to “opt out” of the interest-based advertising delivered by NAI members.

9.     Other Digital Media Advertising Laws, Regulations and Guidance

FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising

The FTC revised its Endorsement Guides in October 2009 to keep them up-to-date with current marketing techniques, such as blogging and word-of-mouth advertising.  The Guides point out that marketers using these new techniques are subject to the same truthful advertising laws that other forms of advertising always have been.  That means, among other things, that marketers who are compensated to promote or review a product should disclose it. (http://www.ftc.gov/policy/federal-register-notices/guides-concerning-use-endorsements-and-testimonials-advertising-16)

California Do Not Track Law

Effective January 1, 2013, the California’s Online Privacy Protection Act (CalOPPA) (http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB370) requires operators of websites, mobile applications, and online services that collect personally identifiable information about consumers to disclosed their “do not track” policies and procedures. The new law does not require the operators to honor do not track requests, but it requires operators to inform consumers if they disclose consumer data to third parties.

In May 2014, Attorney General Kamala Harris issued best practiced recommendations for the business that must comply with the law. (http://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-issues-guide-privacy-policies-and-do-not-track) Highlights of the recommendations:

Readability

  • Use plain, straightforward language. Avoid technical or legal jargon.
  • Use a format that makes the policy readable, such as a layered format.

Online Tracking/Do Not Track

  • Make it easy for a consumer to find the section in which you describe your policy regarding online tracking by labeling it, for example: “How We Respond to Do Not Track Signals,” “Online Tracking” or “California Do Not Track Disclosures.”
  • Describe how you respond to a browser’s Do Not Track signal or to other such mechanisms. This is more transparent than linking to a “choice program.”
  • State whether other parties are or may be collecting personally identifiable information of consumers while they are on your site or service.

Data Use and Sharing

  • Explain your uses of personally identifiable information beyond what is necessary for fulfilling a customer transaction or for the basic functionality of an online service.
  • Whenever possible, provide a link to the privacy policies of third parties with whom you share personally identifiable information.

Individual Choice and Access

  • Describe the choices a consumer has regarding the collection, use and sharing of his or her personal information.

Accountability

  • Tell your customers whom they can contact with questions or concerns about your privacy policies and practices.

The responses to California’s Do Not Track Law fall into the following categories:

The law includes penalties of up to $2,500 per violation which for apps could be measured in app downloads. However, a violation of the law occurs, “only if the operator fails to post its policy within 30 days after being notified of noncompliance.”

Dot-Com Disclosures

In March 2013, the Federal Trade Commission updated its staff guidance known as the “Dot Com Disclosures.” (http://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-staff-revises-online-advertising-disclosure-guidelines/130312dotcomdisclosures.pdf) The Commission originally issued such guidance in 2000 to explain how to make online disclosures clear and conspicuous and avoid deception. The 2013 guidance addresses new issues related to smartphones and social media marketing.

 

The 2000 guidelines defined proximity as “near, and when possible, on the same screen” (i.e., no scrolling required). The 2013 guidance indicates disclosures should be “as close as possible” to the relevant claim recognizing that smaller screens on mobile devices and in social media may require other approaches. The new guidance provides examples disclosures to assist advertisers in these new areas.

Search Engine Guidance

On June 25, 2013, the Commission sent letters to search engines with updated guidance emphasizes the need for visual cues, labels, or other techniques to effectively identify advertisements in search engine results. (http://www.ftc.gov/sites/default/files/attachments/press-releases/ftc-consumer-protection-staff-updates-agencys-guidance-search-engine-industryon-need-distinguish/130625searchenginegeneralletter.pdf) Such guidance was issued in response to concerns that paid search results were becoming increasingly less distinguishable as advertising.

The Federal Trade Commission had previously issued guidance to search engines on distinguishing paid search results and other forms of advertising from natural search results. http://www.ftc.gov/enforcement/cases-proceedings/closing-letters/commercial-alert-response-letter).

The letters acknowledge that “social media, mobile apps, voice assistants on mobile devices, and specialized search results that are integrated into general search results offer consumers new ways of getting information.” The letters advise that such forms of advertising must still be clearly distinguishable from natural search results.

FDA Social Media Guidance

In June 2014, the Food and Drug Administration published draft social media guidelines for pharmaceutical companies and medical device manufacturers. The FDA issued two documents for public comment:

The guidance emphasizes that despite limited space, risk information must be adequately disclosed to consumers. Sample tweet for a fictional drug NoFocus: “NoFocus for mild to moderate memory loss – may cause seizures in patients with a seizure disorder www.nofocus.com/risk.

The FDA draft guidance clarifies FDA’s policies on the correction of misinformation created or disseminated by independent third parties on the Internet or through social media platforms.

10.Summary

Digital media advertising continues to grow at a fast rate and is playing a greater role in the future of the Internet, mobile apps, and online services. Categories of advertising are evolving as user behavior in consuming information changes. As users shift to mobile devices and tablets, the user interfaces, the manner of delivering ads, and the delivery platforms must be updated.

This paper summarizes how regulators and industry groups are reacting to a changing environment for digital media advertising. Privacy advocates are also providing input so properly balance consumer and commercial interests.

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