FTC Will Study 'Sponsored Content' Online Ads

Online ads disguised as news and social network posts face regulatory scrutiny.

Federal Trade Commission Chairwoman Edith Ramirez testifies before a congressional subcommittee in July. The FTC will hold a workshop in December that will focus on how to help consumers distinguish advertisements from news articles and other content.

Federal Trade Commission Chairwoman Edith Ramirez testifies before a congressional subcommittee in July. The FTC will hold a workshop in December that will focus on how to help consumers distinguish advertisements from news articles and other content.

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Paid advertisements disguised as news and posts on social network websites will be among the 'sponsored content' studied by the Federal Trade Commission (FTC) in a workshop in December that could inspire new guidelines for digital advertising.

The FTC announced in a blog post on Monday that it will hold a public workshop on Dec. 4, which will bring together leaders from the legal, academic, political and business sectors to determine how to help consumers distinguish advertisements from news articles and other content.

[READ: FTC Reviewing Whether Facebook Violated Privacy Rules]

"Increasingly, advertisements that more closely resemble the content in which they are embedded are replacing banner advertisements — graphical images that typically are rectangular in shape — on publishers' websites and mobile applications," according to the FTC blog post.

Helping consumers identify real news and content from sponsored online ads is "a subject of long-standing agency interest," according to a separate blog post on Monday written by Lesley Fair, a senior attorney at the FTC's Bureau of Consumer Protection. The FTC will also examine the blurred lines between real content and advertising on smartphones and mobile apps, Fair explained.

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John Simpson, director of Consumer Watchdog's Privacy Project, told The Hill that the FTC will "likely" use lessons from the workshop to update agency guidelines on how websites can clearly identify "sponsored content" as advertisements. The FTC updated its DotCom Disclosures report in March, which stated that online ads must be accompanied by "clear and conspicuous" disclosures to meet commission standards and to avoid deceiving customers.

Websites that post advertisements disguised as short articles can be deceptive because the reader is uncertain whether the post is written by a journalist or by an advertiser, according to the New York Times. Joe McCambley, founder of The Wonderfactory, a digital design firm that helped create the first banner advertisement in 1994, told the New York Times that ads thinly disguised as news stories on websites including Forbes are "doing damage to the contract between consumer and media organizations."

"What I love about Forbes is that they have the guts to take risks, to experiment, but I think some of it is dangerous," McCambley said. "When you go to Forbes, you expect sound business advice and news, information that has been fact-checked and vetted. But what you get instead is a mix of staff content, contributor content and sponsored content. It's hard to know where you are. "

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In the same New York Times article Lewis Dvorkin, chief product officer of Forbes, said the company has "very high standards," for advertising on the Forbes website that is labeled as advertising but resembles the art and configuration of editorial work.

"We spend a lot of time vetting our contributors and making sure that our marketers put real effort into what they put on the site, and understand the importance of coming up with accurate, useful information," Dvorkin said.

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