MCNs Beware! New Rules for Branded Content & Native Advertising? (or, When Oreos Meet MCNs) -- A “MUST READ” Guest Post

Below is a critically important guest post by Manatt Digital Media’s Linda Goldstein, a partner and the chair of our Advertising, Marketing & Media Division.  She is widely recognized as being one of the leading advertising lawyers in the country, representing clients in every sector of the advertising and marketing industry in advertising, intellectual property and digital media matters.  So, when she talks, people listen.  That means what she writes below should be carefully considered -- and is not intended to be alarmist at all.  It is just the facts -- and, now “just the way it is ....”  This is MUST READING for anyone participating in the YouTube economy.

An Oreo Cookies digital ad campaign -- featuring a series of videos by famous UK-based YouTube personalities -- has been banned by the UK’s Advertising Standards Authority on the grounds that it failed to clearly disclose the fact that those videos were part of an advertising campaign. The case, which was based on Oreo’s “Lick Race Challenge” campaign, understandably has sent shock waves through the MCN community here in the U.S., as well as in the U.K., particularly in light of the FTC’s focus on native advertising (and increased enforcement of its own testimonial and endorsement guides which require disclosure of material connections between endorsers and brands in social media).

The YouTubers involved were all paid by Mondelez, the owner of Oreo, to participate in the “Lick Race Challenge.”  Each produced videos of themselves licking, dunking and performing other entertaining “acts of kindness” with their Oreo cookies.  One such video by YouTube stars Phil Lester and his mate Dan Howell -- whose “Amazing Phil” YouTube channelcounts over two million subscribers -- captured over 1.5 million views in five months.

The case has all of us who specialize in digital marketing and advise the advertising world scratching our heads.  Looking at the facts, it’s hard to understand exactly what Mondelez did wrong. In fact, there seems to be a lot that Mondelez and the YouTubers actually did right.

First, in its creative brief to the YouTube stars, Mondelez instructed them to make it clear that their videos were promotional in nature.  That’s a good thing.

Additionally, the ASA itself acknowledged that all ads contained express references to the Oreo company and to other “Lick Race Challenge” videos.  In fact, the ASA acknowledged that most of the videos expressly stated "Thanks to Oreo for making this video possible" (or similar variations) in the video description box and/or as part of the video itself (and further either mentioned contact with Oreo or that the video was part of a promotional campaign).

So why wasn’t this enough?

Two reasons. First, the ASA felt that the commercial nature of the videos needed to be disclosed before viewers engaged with that content, because those native ads were featured on online video channels that usually are editorial based.  And second, the ASA felt that statements like, "Thanks to Oreo for making this video possible," were not sufficient to make it clear that there was a commercial relationship between Oreo and the YouTubers.  The ASA concluded that the presentation of each ad was similar to the editorial content of the respective channels (i.e. “native advertising”).  So, while consumers might have understood that somehow Oreo was involved with the relevant videos, they might not have appreciated the full extent of the commercial relationship.

If these concerns sound familiar, they should.  These are many of the same concerns being expressed here in the U.S. regarding native advertising. Earlier this year, the Federal Trade Commission held a workshop on the subject of native advertising to explore how disclosure of the commercial nature of sponsored advertising.  Separately, the National Advertising Division (“NAD”) of the Better Business Bureau, which is the leading self-regulatory body within the advertising community, has been extremely active in bringing cases against sponsors of native advertising who, in the eyes of the NAD, have failed to adequately disclose the commercial nature of these ads.

Like the UK’s ASA, the NAD has also stated -- in several cases -- that disclosure of the fact that the native content is “sponsored” or “commercial” in nature should be made before the consumer engages with the content.  The NAD has also stated that the native content should clearly disclose the nature and extent of the advertiser’s involvement. While NAD is a self-regulatory body, companies who fail to comply with NAD recommendations can be referred to the FTC.

So why is this relevant to MCNs?

Because, as the ASA has just reminded us, MCNs by their nature are a form of “native advertising” -- and the talent involved in such videos have an obligation to disclose any material connections they have with the brands that pay them.  To the extent that these videos do not contain adequate disclosures both of the commercial nature of the content and of the relationship between the talent and the brands, both the brands and the talent could find themselves the target of an enforcement action by the FTC.  And, those are never a pleasant experience.

Many segments of the publishing industry are currently working on self-regulatory models for disclosure before the government steps in. The MCN community might be equally well advised to consider these issues as an industry and come up with disclosure solutions that satisfy both the marketing and legal objectives.  

No matter how you stack it, Linda’s guest article should be taken seriously ... very .... due to the potential far-reaching implications.