The Legal Implications of Turning Advertisers Into Content Makers

“Advertising is content — the only new content that really matters,” wrote AR&D‘s Terry Heaton in a recent blog post responding to a Pew report that questions the financial future of news. His point is salient, for sure, and it renews the question of whether hyperlocals should be incorporating content created by local merchants — perhaps in the form of advertorials or “guest columns.” Publishers like StarNewsOnline are giving it a try. Pulling it off successfully, however, requires hyperlocals to make sure they don’t turn a revenue opportunity into a regulatory nightmare.

Heaton suggests that one remedy for local media is to acknowledge that “advertisers are the new content makers, and we need to be exploiting our strengths as experts in the world of content creation in order to serve this burgeoning market.” In a Street Fight column published last year, Patrick Kitano suggested this was just the formula: “Simply put,” Kitano wrote, “business is integral to engaging the community, because they have the commercial incentive to create content that builds their brand equity, directly or indirectly. In the world of social media, the local foodie reporters own restaurants, and the real estate bloggers are realtors; their voices are part of the local media landscape but generally segregated from local news media.”

A new research report released by the Content Marketing Institute disclosed that marketers use articles as a leading tactic for B2B marketing. In fact, articles make up 79% of B2B marketing strategies according to the study. Clearly, taking content from merchants is a ripe opportunity for publishers. Patrick Williams, publisher of Worth Magazine, estimated in January 2010 that the magazine’s advertorial program would account for 50 to 60 percent of the magazine’s revenue “in the near future.”

However, advertorials and “guest editorials” cannot be passed off as standard editorial content. Two years ago, the FTC issued new guides governing testimonial advertisements, bloggers and celebrity endorsement. The FTC Guides require that a publisher disclose whether content posted on an editorial site or blog was sponsored, paid for, subsidized, or prepared by an advertiser or merchant. For example, the guidelines require:

• If you run an advertorial for a local business, such as yoga class, you must disclose that the content is a paid advertisement.
• If you obtain free services or a free sample to write a review for a local shop, you must disclose to the reader that you were provided the sample to write the review.
• If you are offered a free meal at a local restaurant to write a review, you must disclose the fact in your review.
• You must disclose if any of your writers or bloggers are sponsored by a particular advertiser or merchant.
• Your independent writers and bloggers must disclose if they were paid to provide an article or review.

The consequences for lack of transparency can be severe. In March 2011, Legacy Learning of Nashville, Tenn., agreed to pay the FTC a $250,000 fine to settle charges that it deceptively advertised its products through online affiliate marketers who falsely posed as ordinary consumers or independent reviewers on various blogs. The company sold a series of guitar-lesson DVDs. It used an online affiliate program, through which it recruited “Review Ad” affiliates to promote its courses through endorsements in articles, blog posts, and other online editorial material. The affiliate sites never disclosed that Legacy Learning paid for the affiliates to post the content.

Even if hyperlocals are not directly paid or sponsored to run a “guest column” by a local merchant, the FTC Guides may require disclose about the advertorial nature of the article. The “guest columnist” likely is an employee, owner, or a writer paid by the merchant to write the article, whose economic interest may directly, or subtly, motive the nature of the article.

Hyperlocal publishers such as StarNewsOnline.com of Wilmington, N.C., provide an effective example of using “guest columnists” for advertorials that may avoid regulatory scrutiny. The StarNewsOnline publishes guest articles prepared by restaurateurs, who may write about their menus or other topics of human interest about their guests. Although appearing in most respects as a standard story, the articles’ headlines are clearly — and boldly — labeled as advertorials. Thus, as long as hyperlocals are transparent about the advertorial nature of some content, hyperlocals can benefit from a source for content, a community connection, a community story, and potential revenue opportunities.

Brian Dengler is an attorney with Vorys Legal Counsel and journalist who covers legal issues in eMedia. He is a former vice-president of AOL, Inc., a former newspaperman, and an EMMY-winning TV journalist. He teaches new media issues as an adjunct at Kent State University and formerly at Otterbein University.