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Article Excerpt
With banner ads accounting for one-fifth of the $16.4 billion spent on Internet advertising in 2006, this advertising format has become an integral marketing communications tool. Inclusion of required disclosure language and presenting those disclosures in a clear and conspicuous manner are important areas of regulatory interest and in recent years have extended to the online environment. This study examines the extent to which disclosures in banner ads in the top 100 U.S. Web sites adhere to Federal Trade Commission guidance in these two areas. Additionally, this study compares the banner ad results for clear and conspicuous presentation to those of a prior study that examined television advertising. All the banner ads in the study contained at least one disclosure; yet, adherence was mixed in terms of providing all the required information clearly and conspicuously. Implications of these results are discussed.
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Fine print. Terms and Conditions. Legal Notice. Disclaimer. Disclosure. All of these words communicate that more information is needed or provided to explain or qualify the advertising claim. In the 1970s, disclosures were offered as one form of information remedy whose purpose was to "have the direct benefit of improving the free flow of truthful commercial information, (thus allowing) consumers to improve the quality of marketplace decisions" (FTC 1979, p. 14) and subsequently a more competitive marketplace. The companion caveat, however, was that in order to effectively accomplish this purpose, the disclosure must be effectively communicated. The FTC (1979) noted that "the form, availability and context of the information can substantially alter its use and consequently the ultimate consumer decision" (p. 18). The FTC (1970) offered the Clear and Conspicuous Standard (CCS) as the legal precedent for effectively presenting disclosures. Today "clear and conspicuous" (also phrased as clear and prominent) remains the guidance for disclosure presentation regardless of medium (Eggland's Best, Inc. 1994; FTC 1983; FTC 2000a, 2000b).
Although the 1970s saw extensive efforts by the commission and congress to enhance the information marketers provided, much of the growth in disclosure regulation and guidance occurred in the 1990s. Indeed, Hoy and Stankey (1993) predicted that the 1990s would be the "decade of the disclosure." Hoy and Andrews (2004) confirmed that not only did television advertising disclosure prevalence significantly increase during this time but they also noted the rise in overall governmental agency guidance and requirements for disclosures across a variety of product and service categories and advertising claim types.
Additionally, the 1990s saw the growth of e-commerce and the use of the Internet as a communication medium. Early FTC discussion regarding online consumer protection focused on fraud and privacy issues. By September 2000, the FTC had articulated that the application of its current enforcement practice extended to the online environment (FTC 2000b). Of specific relevance to this study, several FTC workshops in the past few years have addressed the importance of making online disclosures clear and conspicuous: Etail Details (January 2001), Disclosure Exposure (May 2001), Negative Options Marketing Workshop (January 2007), and its continuing education workshop "Green Lights and Red Flags: FTC-BBB Rules of the Road for Advertisers"--first held in November 2001 and continuing to the present (www.ftc.gov). In July 2002, the FTC stated that search engines should disclose clearly and conspicuously paid placement or inclusion within their results (FTC 2002). Disclosures, and their presentation in a clear and conspicuous manner, are also important components of the dialogue in addressing the issue of marketing violent entertainment to youth (FFC 2004), peer-to-peer file sharing (FTC 2005), and consumer financial privacy (FTC 2006).
Internet advertising bit a record $16.4 billion in 2006 with approximately 21% attributable to banner advertising (PricewaterhouseCoopers LLP 2006, 2007). A banner ad (also called banner) is a "section of on-line advertising space that typically consists of a combination of graphic and textual content and contains an internal link to target ad pages (the advertiser's information on the host site) or an external link to the advertiser's Web site via a click through URL" (Chatterjee 2005, p. 51). Other forms of online advertising may also have banner elements including sponsorship where advertisers sponsor entire Web sites or site areas. Commercial e-mail communication may also contain banner ads (PricewaterhouseCoopers LLP 2005).
The current study presents a content analysis that evaluates the extent to which banner ads in the top 100 U.S. Web sites use disclosures, the level to which those disclosures provide the required disclosure information and the degree to which the disclosures' structural (i.e., physical) characteristics adhere to FTC (2000a) guidance regarding clear and conspicuous online presentation. The commission's continued focus on disclosures as an information remedy coupled with the sizeable expenditures on banner advertising underscore the issue's importance and the opportunity for academic research to contribute to assessment of current practice and identify areas needing improvement. To date, no study has addressed these issues. Thus, this study serves as a baseline assessment for one form of online advertising much as Hoy and Stankey's (1993) investigation in television advertising.
BACKGROUND
Disclosures as an Information Remedy
The FTC (1979) views advertising disclosures as an information remedy for potential deception or unfairness by providing consumers useful information. The FTC influences the level and content of information primarily through issuing regulations that require (mandate) disclosure of material information and setting standards for certain products or services that a typical consumer could not easily evaluate (Azcuenaga 1995). Additionally, disclosures may be triggered based on the advertising claim (FTC 1979). Hoy and Andrews (2004) noted the many changes in the marketplace in the past decade that gave rise to a growing number of FTC-recommended disclosures in television advertising. Indeed, Hoy and Andrews (2004) reported that 67% of the commercials in their primetime network sample contained at least one disclosure in contrast to a 25% disclosure incidence in 1990 in a similar sample (Hoy and Stankey 1993). Appendix 1 provides an overview of the FTC's mandated or triggered disclosures by product/ service category or claim. Given that all disclosures required in traditional media are also required in electronic media (FTC 2000b), one anticipates their use in banner ads also.
Although this study's focus is on FTC guidance, other governmental agencies provide disclosure guidance depending on their jurisdiction, including the Bureau of Alcohol Tobacco and Firearms (alcohol), the Food and Drug Administration (direct-to-consumer prescription drugs), the Federal Election Commission (sponsorship and candidate approval of political messages), and the Federal Deposit and Insurance Corporation (depository accounts such as checking and savings). Indeed, Hobbs (2004) noted that any information that could assist consumers in making "more efficient and knowledgeable purchasing decisions is a candidate for information disclosure" (p. 10). Therefore, marketers may disclose certain information that is neither mandated nor triggered but qualifies or explains the advertising claim.
The CCS
For disclosures to fulfill their intended purpose they need to be presented in such a fashion that consumers can notice and understand their message (FTC 2000a, 2000b). Thus, in its 1970 Statement of Enforcement Policy, the FTC articulated guidance (primarily) for the executional aspects of disclosure presentation in its CCS. The commission provided further elaboration in the 1983 FTC Policy Statement on Deception and addressed audio duration (Clear and Prominent Language [CPL]) in Eggland's Best, Inc. (1994). A summary of the CCS guidelines is given as follows:
CCS1: Use dual modality (simultaneous presentation in audio and video formats)
CCS2: Have sufficient type size for video
CCS3: Video portion should readily contrast with background
CCS4: Use a single background color for video disclosures
CCS5: Have sufficient duration for video ("presentation rate")
CCS6: No other sounds should air during the audio disclosure
CCS7: Audio and video portions should immediately follow related claims
CCS8: Consider the audience (e.g., children)
CPL: Have sufficient duration for audio disclosures
Limited research has profiled advertising disclosures' adherence to this standard, most notably Hoy and Stankey (1993) and Hoy and Andrews (2004). With respect to television, few disclosures in prime-time network advertising adhered to these guidelines in 1990 (Hoy and Stankey 1993) or in 2002 (Hoy and Andrews 2004). Of particular concern in comparing 1990 with 2002 data was the slight increase in using dual modality, the increased number of disclosures with insufficient type size coupled with a decline in color contrast between type and background, and the growth in multiple background colors (Hoy and Andrews 2004). Furthermore, although there were no significant differences in presentation rates between the two time points, a substantial number of disclosures were presented faster than recommended reading rates. Hoy and Andrews (2004) also noted that nearly every disclosure included distraction and that nearly three-fourths of the audio disclosures were not of sufficient duration. In sum, while Hoy and Andrews (2004) had postulated increased adherence in the latter time frame compared to the former as a result of greater FTC activity regarding disclosures, the authors observed just the opposite.
In their investigation of disclosure effectiveness, Morgan and Stoltman (2002) found that their student sample was confident in its ability to perceive disclosures in television advertising, yet "objective measures of claim recognition/comprehension indicate that this competency is more imaginary than real" (p. 523). The authors further described their subjects' response to the disclosures as somewhere between "confusion and inaccuracy" although they noted that standard disclosures (e.g., batteries not included, void where prohibited) were somewhat more recognizable. They concluded that television advertising disclosures are ineffective and provide little clarification/additional information for consumer decision making.
Online Advertising
Internet advertising appears in a variety of forms: search, classifieds, lead generation/referral, sponsorship, e-mail, and display. Search-related advertising encompasses a variety of categories including paid listings where text links appear along the side or top of the search results page for specific search terms, contextual search where a text link is within page content rather than resulting from user-generated terms, and paid inclusion that guarantees that the marketer's URL is indexed by the search engine and site optimization. For classifieds, advertisers pay a fee to online companies to list specific products or services. Similarly, for lead generation/referrals advertisers pay fees to online companies that refer qualified purchase inquiries (PricewaterhouseCoopers LLP 2005). In display advertising, the marketer pays an online company "for space to display a static or hyper-linked banner or logo on one or more of the on-line company's pages" (PricewaterhouseCoopers LLP 2005, p. 14). Banner ads, previously defined, come in a variety of sizes but most are rectangles in three common sizes: 460 pixels wide by 60 pixels high, 460 x 55, and 392 x 72 (PC Magazine 2007).
The key characteristic that typically separates the Internet from other media is its interactivity defined as "the extent to which the communicator and the audience respond to, or are willing to facilitate, each other's communication needs" (Ha and James 1998, p. 461). Ha and James (1998) definition of interactivity captures the essence of the FTC's intentions that in order for disclosures to be clear and conspicuous, and therefore serve their intended purpose as an information remedy, they must be noticed and understood. Schumann, Artis, and Rivera (2001) view interactivity as a characteristic of the individual rather than the medium because the person chooses to interact. Applying the insight of both perspectives to the context of online disclosures, the Internet's interactivity holds marketers accountable for knowing and facilitating the consumer's communication needs. In other words, marketers need to understand how to develop clear and conspicuous banner ads with the consumer's best interests in mind. However, consumers are also accountable to choose to interact with the disclosure information when it is presented. The FTC (2000a) states that the online environment offers contextual differences resulting from its interactivity that require additional guidance regarding disclosure presentation. This topic is further addressed by examining consumer response to banner ads and the FTC's (2000a) guidance and related consumer research.
Consumer Response to Banner Ads
Due to their constrained space, banner ads usually offer limited information in and of themselves. Typically, consumers must click on the banner ad or hyperlink within the ad, that is, "click through," to be directed to the advertiser's Web site or elsewhere within the host Web site in order to gain more information. This click through signals that the consumer has seen the ad (Chatterjee 2005) and is voluntarily exposing him/herself further to an advertising message (Cho 2003b).
Several studies have investigated influences on consumer click-through behavior. Cho (2003a) found that consumer involvement with the advertised product, congruency between ad and Web site, attitude toward the Web site, and attitude toward Web advertising were all positively related to click-through behavior. While banner ad clicking can be viewed as information-seeking behavior (Cho 2003b), Chatterjee (2005) found that one's navigation orientation influenced likelihood of banner ad click through. Specifically, when consumers are engaged in exploratory browsing, in contrast to goal-oriented navigation, they tend to click through more banner ads. This behavior is attributed to the consumer's willingness to depart from his/her intended purpose in visiting the Web site under exploratory browsing conditions compared to when the consumer is goal oriented. Subsequently, banner ad recall and recognition are significantly higher when the consumer is browsing. Cho and Cheon (2004) found that perceived goal impediment has the strongest predictive power of Internet advertising avoidance. Thus, repetition is necessary to produce ad recall and recognition when the consumer is goal oriented while online (Chatterjee 2005).
Lohtia, Donthu, and Hershberger (2003) examined secondary data involving nearly 8,700 banner ads targeting both consumer and business audiences. They found that incentives, such as a free offer, and interactivity lowered the click-through rate of banner ads, especially for a business audience. In contrast, animation increased the click-through rate. The authors' explanation for these...
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