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Is The American Society of Magazine Editors about to bend the church/state rules on native advertising?

The pressure appears to be mounting for a looser definition of what separates editorial and advertising content, given the dollars at stake for the traumatized publishing sector.

This story first appeared in the December 5, 2014 issue of WWD.  Subscribe Today.

As the space evolves and publishers develop new sources of revenue, ASME is being pressed to reexamine the ground rules separating editorial and advertising.

The result is that ASME, the organization that runs the National Magazine Awards, is in the process of reviewing and updating its guidelines to encompass how magazines present native ads in digital and print formats. ASME doesn’t overtly refer to its review as a rationale to loosen the rules, but the association appears to be grappling with ways to have the rules — or lack thereof — reflect the liberal digital ad landscape today. Why many consider the current rules as already being too liberal is due to the lack of firm guidelines and publishers’ needs to drum up new revenue streams in the face of declining print ads.

On its Web site, ASME calls the media environment “rapidly changing,” and thus lays the groundwork for four basic working principles for editors and publishers: “Every reader is entitled to fair and accurate news and information; the value of magazines to advertisers depends on reader trust; the difference between editorial content and marketing messages must be transparent; editorial integrity must not be compromised by advertiser influence.”

Although digital ads aren’t new, the rush to find revenue comes at a time when not only print advertising is shrinking — it’s evident that the subscription model linked to the iPad is not the White Knight that the media industry had hoped it to be.

Increasingly, the industry is turning to native advertising, sponsored content and product-placement videos, among other things.

Although he would not comment on how or when ASME might change its guidelines, chief executive officer Sid Holt offered: “Everybody in the publishing business — both editors and publishers — agree that it’s in the best interest of the magazine that the consumer can trust what they read in print and online. If it’s clear that it’s advertising, it’s not a violation of the guidelines.”

Board members of Holt’s organization met late last month to discuss entries for its annual awards, which will take place on Feb. 2. Those nominees will be chosen based on the existing guidelines.

“As an industry, we will all have to continue to look at standards that address the growing native-advertising space,” said Meredith Corp. executive vice president and president of media sales Dick Porter. “At Meredith, we work closely with our legal and edit teams as well as the Federal Trade Commission to build guidelines that make it clear to our consumers what is edit and what is advertising or sponsored content. We believe in full transparency, but also believe that consumers value messaging from marketers, especially when it enhances their experience with our branded content.”

Last year, the FTC addressed the issue of native advertising in a workshop called “Blurred Lines: Advertising or Content?” There, FTC director of the bureau of consumer protection Jessica Rich seemed uncertain if her agency should provide “additional guidance” beyond the guidelines that it revised in 2010, which stressed the dividing line between edit and advertising.

“Today the interest in native advertising is stronger than ever,” Rich said at the time. She noted that native advertising represents a multibillion-dollar industry, and offered: “The goal is that consumers can distinguish native advertising from editorial content.”

With billions of dollars at stake, the FTC hasn’t exactly been playing hardball with publishers. And with digital emerging as such a growth driver, the FTC is taking a second look at the ground rules.

An FTC spokesman acknowledged that second look to WWD and said publishers should “expect a report or follow-up guidance from that workshop sometime next year.”

While New York Magazine publisher Larry Burstein agreed on clearly labeling ads, he added that in light of the changing digital environment, ASME guidelines “probably need to be reexamined.”

He didn’t expound on whether reexamination meant loosening the rules, but he offered that media companies are trying different ways to pull in dollars and that the digital model is in its early developmental stage.

“I think there’s going to need to be a lot of experimentations,” he said. “In print, there have been precedents [but] every day is a new day in the digital world.”

New York Magazine — which operates a host of Web sites such as The Cut and Vulture — is further along than other print-centric titles. The publisher said the magazine often gets frequent requests from advertisers for packages that include video, banner ads, native ads and other things. Such content is labeled “advertisement.”

“What we find here is that native is one part of an entire ad buy,” he said. “Some traditional magazine companies have been late to the party. The thing with the Web that is so interesting to me is that there are these periods where it’s ‘let’s do native,’ and we think that’s the solution. There is no one solution.”

Time Inc. pushed the boundaries when it began selling ad space on the covers of Sports Illustrated and Time magazine. That violates ASME’s first guideline for print, which is found on the organization’s Web site: “Don’t print ads on covers. The cover is the editor and publisher’s brand statement,” it says. “Advertisements should not be printed directly on the cover or spine.” The ad in question was a Verizon ad, which appeared discreetly under the barcode of Time magazine’s June 2 issue. Chief content officer Norman Pearlstine denied the company violated ASME’s guidelines, explaining in media reports that he referred to the organization’s four principles for guidance, and that the ad was clearly labeled. ASME has yet to condemn or condone Time Inc.’s decision, but a lack of response could be construed as a tacit OK on the organization’s part.

In a July interview with WWD, president of Hearst’s magazines division, David Carey, said: “I thought the debate around Verizon on the cover was ridiculous. I think that if a magazine wants to put an ad on the cover — as long as it is clearly marked as an ad — that’s 100 percent their decision, no one else’s.”

It should come as no surprise that Hearst, the publisher of titles such as Cosmopolitan, Elle, Marie Claire and Esquire, has been actively ramping up advertising partnerships, both online and in print.

Its December issue of O, The Oprah Magazine includes a peel-back “O” on the cover, behind which sits an Ikea ad for a $39.99 lamp and a quote by Oprah: “I know for sure that’s what we’re here on Earth to do: Keep the giving going.”

This comes on the heels of a busy summer, in which Hearst raised eyebrows when Cosmopolitan ran a peel-back cover, which was sponsored by L’Oréal. When peeled away, subscribers would see the magazine’s May newsstand cover.

In August, Hearst also ran a denim cover wrap in Marie Claire, which opened with a zipper to reveal an ad by Guess.

According to insiders at Hearst, Carey and Michael Clinton, publishing director and president of marketing, have told editors that if they have to choose between revenue and pushing the limits on ASME rules, to not be afraid to choose the former. By the same token, editors can say “no” if they are uncomfortable running ads that blur the lines too much. Troy Young, president of Hearst Digital, has a say in how digital ads are sold and packaged, as he is in charge of digital editorial teams. In a recent interview with WWD, Young said Hearst’s Content Studios, which produces native ads, often calls on digital editors to “shape” sponsored content for the publisher’s various Web sites.

Carey offered that figuring out native advertising in print is what magazines need to develop, as the blueprint in digital already exists. He cited Buzzfeed and Vice as companies that have paved the way for how to sell digital ads through native ads and viral videos. On Buzzfeed’s site, sponsored content is labeled with a small, yellow rectangle stating it is “promoted by” a particular marketer. It sits next to stories created by Buzzfeed staffers.

The most common occurrence of native on Vice comes via sponsored videos that aren’t labeled with any kind of flag, red or yellow. Instead they are simply accompanied by the sponsor’s name or logo. It should be noted that Buzzfeed and Vice have their own in-house native ad agencies, a trend adopted by Hearst via Content Studios, that has been embraced by other traditional publishers, too. Carey noted that publishers are becoming more like ad agencies and ad agencies are becoming more like publishers — a potentially troubling thought, but one that didn’t seem to bother him.

But back to digital ads. It goes without saying, but digital ad sales are essentially linked to traffic — more traffic, more ads. The problem is, the building of Web traffic at a time when most magazines are still finding their footing in digital makes selling digital ads a tough slog, to say the least.

Hearst has just begun to focus on native in the last six months, and has yet to grow meaningful revenue, Carey said, but added that in the next year, a number of “experiments” in native across print and digital are “coming.”

Experimentation and pushing the limits are part of the executive’s vernacular. When he served as publisher of Condé Nast’s New Yorker magazine, he made waves in 2005 when he brokered a deal for Target Corp. to sponsor its entire Aug. 22 issue that year.

Referring to that issue as a “win in every way,” Carey said “a lot of data suggest that when advertisers tell a good story, it’s accretive to the experience.”

He noted that while the “spirit of ASME is very important to protect journalistic integrity,” the environment is changing. Emphasizing the importance of keeping ads clearly labeled, Carey pointed to a report that said native ads would reach $7.9 billion in 2014 and grow to $21 billion in 2018, up from just $4.7 billion in 2013.

The New York Times, which has been somewhat more reluctant to jump into the murky waters of native advertising than its magazine counterparts, recently ran its first native print ad. While the paper introduced native digital ads earlier this year, print had been a no-no, until it ran an eight-page section sponsored by Shell. In the paper, those ads were bordered by a light blue frame, which labeled the content as a “paid post.” It also includes Shell’s icon throughout the ad to denote that it is not editorial content. The ad was created by T Brand Studio, the Times’ in-house production unit specializing in native content.

Then there’s Condé Nast, which is in the throes of evolving its digital business, where the focus is on relaunching Web sites, building traffic and developing its video inventory. Part of its objective to draw advertising dollars is linked to product placement in videos, a page taken from Hollywood, sources with knowledge of the matter said. That’s a somewhat different spin on native, but it is another way to nab ad dollars through clandestine product placement. ASME has yet to lay out specific guidelines for video, but it does emphasize under its digital guidelines: “Don’t Accept Product Placement” and to identify “paid links.”

Condé Nast declined to comment.

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