Takeaways from FTC's “Protecting Kids from Stealth Advertising in Digital Media” Event – Lexology

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Last week, the Federal Trade Commission hosted a virtual event on “Protecting Kids from Stealth Advertising in Digital Media,” providing insights from researchers, child development experts, and others into children’s advertising. See here for a transcript of the event, and here for the video recording.
The event explored the techniques used to advertise to children online, children’s ability to recognize and understand advertising, the harms children face when unable to recognize advertising, and protective measures and solutions to these harms.
Here are some key takeaways from the event:
1. Blurring is a Main Concern — One area of great concern when it comes to advertising in a digital environment is blurring, especially when it comes to a young audience.
Blurring occurs when an advertisement is designed to look more like organic content, to distract from the fact that it is actually an advertisement. Advertisers may do this through influencers, endorsers, avatars, and the like. Panelists illustrated the effects of blurring on a young audience by showing a brightly colored, branded candy-themed advertisement for a game, where through the eyes of a child, the experience is fun, colorful, and enticing – though nothing overtly indicates it is advertising.
According to the “Children’s Advertising Show and Tell” presentation, CARU has recently brought four cases against mobile apps designed for children in which blurring was present. It was found in some cases that the practices reached the level of being manipulative, an example being that the buttons for ads within a game were designed to look like they led to the next stage of the game. This allegedly manipulated children into believing they had to take this step to be able advance to the game’s next level.
While children with developing brains are highly susceptible to deceptive and harmful practices such as blurring, this is something of great concern to CARU and the FTC. FTC’s Serena Viswanathan remarked that aside from blurring, there are larger, complex questions surrounding how to appropriately regulate what children experience online, and that the FTC intends on engaging with stakeholders to further discuss these issues.
2. With New Worlds Comes New Challenges — Advertising gets complicated in metaverse spaces.
As discussed in the event’s “Children’s Advertising Show and Tell” presentation, spending on metaverse advertising is on track to total between $144 billion and $206 billion by the year 2030. With the novelty of the metaverse, and other immersive virtual and augmented spaces, there is a concern with what children do and do not understand as advertising.
Challenges arise in making it clear to children that a game avatar they’re interacting with, for example, isn’t simply another player – but a character put there intentionally for advertising purposes. Characters can be made to look friendly and attractive to children, making it difficult for them to understand the motives or intentions behind what is shown to them on the surface. Children may perceive interactions in the metaverse as “friendship,” when some of these interactions may instead be meant to persuade or manipulate.
Another potential issue discussed was that the metaverse creates a connection between the virtual and physical worlds in which children exist; virtual experiences do not stop when the computer is turned off. They continue to impact children’s attitudes, thoughts, and behaviors, giving them experiences they want to experience in their physical world. While connectivity can be good, it can also create lasting problems.
CARU has issued a compliance warning regarding child-directed advertising in the metaverse, putting advertisers, brands, influencers and endorsers, developers, and others on notice that CARU’s advertising guidelines apply to advertising in the metaverse and that CARU will strictly enforce its guidelines against metaverse advertising.
3. Not All Children Are the Same — The way children recognize and understand the persuasive intent of advertising is not a one-size-fits-all skill.
Generally, experts at the event agreed that there are certain knowledge competencies acquired during childhood. According to the panel, “Children’s Cognitive Abilities – What Do They Know and When?”, this includes the ability to recognize advertising and evaluate its fairness, transactional knowledge in the context of shopping, decision-making skills and ability, purchase influence, and consumption motives. According to the panel, phases of development generally begin with a perceptual stage from ages 3 to 7, an analytical stage from ages 8 to 11, and a more nuanced reflective stage from ages 11 to 16.
However, these theories and concepts do not apply to all children. As discussed among panelists, neurodiverse children, for example, are often avid users of video platforms and social gaming platforms where advertising is prevalent – and, unfortunately, they are not often included in the studies done on how children understand advertising. According to panelists, recognizing something as an advertisement or understanding its motive can be much harder for children with autism or ADHD, and digital environments may be even more perceptually overwhelming to them. By providing more transparent, fair, and honest advertising to a larger group of youth overall, children in this category would be accommodated too.
Additionally, according to the panelists, there is no “magic age” where children suddenly understand certain concepts. Children develop at different rates and go through different processes when learning. Thus, when it comes to recognizing advertising, many of these different competencies are acquired at different ages. It is critical not to treat all children the same, they said.
4. Harms Extend to Parents and Households — The harms associated with advertising to children go beyond just impacting children; families are affected, too.
For children to develop autonomy within digital spaces they need help from informed decision makers, like parents or other adults. Often, however, it is unrealistic for parents to monitor what their children are doing online and what types of advertising they are being exposed to. Some adults assume that children are savvy enough to be left alone in these digital environments, or simply may not have the bandwidth to act as gatekeepers or provide guidance.
In the panel, “The Current Advertising Landscape and its Impact on Kids,” panelists discussed how we are living in a “small screen era” where children are using small phones or tablets while parents are unaware of what they are doing. This poses some financial harms, particularly when it comes to younger children who may be playing on parents’ tablets or phones that may not have children’s settings, because kids may be allowed to make purchases directly from the games they are playing with just the click of a button.
Additionally, families of lower socioeconomic statuses, immigrants, younger parents, and communities of color may be more greatly impacted. Panelists discussed that many of these families may not have as much access to high quality daycares or afterschool programs, and thus children in these families spend more time with media and are more frequently exposed to commercial messages. They may be more engaged in and more trusting with this commercial messaging, as advertising may represent an ideal world that does not resemble the world that they themselves live in. Many of these families have less resources to afford ad-free content or subscription services, which increases the likelihood of children being impacted by online advertising. Many parents in these circumstances may also not have enough time to navigate the parental control tools available to them.
The panel, “Children’s Cognitive Abilities – What Do They Know and When?”, discussed that in almost 94% of influencer videos, there are materialistic cues signaling that having products makes you happy, will help you get friends, and other similar messages. Often, influencers may show products are expensive and possibly unrealistic for most parents to purchase for children. This may lead, they said, to family difficulties when children see their peers with items shown in influencer videos that they themselves cannot have.
5. Looking Forward: Disclosures and Other Solutions — Solutions to consider as we look ahead include the use of paid advertising disclosures, promoting education in media literacy, and potentially the use of ad-blocking technologies.
In “Looking Forward and Considering Solutions,” the panelists discussed some of the different strategies that can be implemented to protect children from manipulative advertising. A main point of discussion was the use of disclosures and how to ensure they work for children.
According to panelists, for disclosures to work best when geared toward children, they should communicate clearly who is paying for an advertisement, include any information that may affect a consumer’s decision to buy the product, the syntax and language should be easy to understand, and viewers should be able to see the information clearly. Additionally, disclosure text should be close in proximity to the claim and be presented in the same format.
For children to best understand a disclosure, advertisers should avoid using adult-oriented language (e.g., “advertiser content”) by instead using simple words. They can even use certain easy to recognize icons to indicate advertising to children. Disclosures can be effective for a wide age group of children or children of different developmental milestones.
Disclosures in the metaverse may be trickier to navigate, according to panelists. Advertisers must make sure that disclosures in virtual worlds are unavoidable and understandable in a multitude of places. For younger children who cannot read, using audio is an effective disclosure option. Icons may be effective as well depending on the audience, but advertisers must pay attention to the cognitive capabilities of their audience to determine what is most effective.
Panelists also discussed the importance of media literacy. While media literacy curriculum is being adopted in many public schools, panelists opined that sometimes these courses are focused more on foundational computer skills than the skills needed to critically evaluate the intent of advertising messaging. However, it is a great start and can be a great platform to hopefully implement more education on stealth advertising. Additionally, while parents have been successful at teaching their kids about the dangers of social media when it comes to meeting strangers, they may be less aware of the advertising dangers the digital landscape creates. Panelists discussed that perhaps there should be a media literacy initiative geared toward educating parents, as well.
Lastly, panelists discussed whether ad-blocking tools could be an effective way to mitigate the harms of manipulative advertising that children face. Some expressed that the use of ad blockers could be a helpful strategy, but that it will not solve the problem as it currently stands. If we did away with advertising by blocking ads, one panelist expressed, we would be doing away with content – and this may prompt companies to put their content behind a paywall so that only those who can afford it have access. Panelists encouraged the audience to consider the value advertising plays in our economy when thinking about solutions.
"What particularly concerns the FTC is the fact that kids often cannot tell the difference between ads and organic content" — FTC Chair Lina Khan
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