Here is an excerpt from an article by William Launder for The Wall Street Journal in which he examines a recent and rapidly developing opportunity to combine knowledge leadership with digital marketing. To read the complete article, check out others, and obtain WSJ subscription information, please click here.

Illustration Credit: Ray Bartkus

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In their search for new ad revenue, many news outlets have embraced “sponsored content”—advertisements that are meant to blend in with regular editorial content. Now regulators are taking a look at the practice.

The Federal Trade Commission on Wednesday will host an informal workshop for advertisers, publishers and legal experts titled “Blurred Lines: Advertising or Content?” to discuss whether media outlets are adequately identifying sponsored stories on their websites as promotional pitches, and to consider if consumers might be misled.

The gathering isn’t a hearing or investigation of sponsored content or its practitioners. But it could serve as a jumping-off point for the FTC, which is charged with preventing unfair or deceptive advertising practices, to eventually establish guidelines governing sponsored-content practices.

Interest from regulators comes amid rapid growth in demand for the new marketing technique. Spending on sponsored content is expected to grow 24% to $1.9 billion this year, a faster growth rate than for most other forms of digital marketing. Total digital advertising spending will total $42.3 billion this year, according to eMarketer.

An outgrowth of the television ad format known as “branded content”—TV shows created to promote a product—sponsored content in the news media has taken off as traditional ad revenue in print media dropped sharply in recent years. At the same time, the rise of social media has spurred sponsored content as well. Sponsored stories are more likely to be read and then shared on outlets like Twitter and Facebook, and thus generate more buzz for marketers, than other types of online ads, ad executives say.

New online news publishers such as Buzzfeed, which use social media to widen distribution of their content, have built their ad business around sponsored content, sometimes eschewing traditional banner advertisements that many in the ad industry say are less effective ways for reaching audiences.

“Sponsored content enables you as an advertiser to be a storyteller and to not be limited to a certain physical ad-limit space,” said Ben Lerer, Chief Executive of Thrillest Media Group, an online media company targeting male audiences. Mr. Lerer is also a partner at Lerer Ventures, an investment fund with stakes in digital media companies including Buzzfeed.

Traditional publishers, such as Forbes and the Washington Post, have adopted the format. Atlantic Media, which has aggressively expanded its digital presence in recent years, estimated that half of its total ad revenue at the Atlantic this year will come from sponsorships.

All of these publishers, along with Buzzfeed and other outlets, say they are careful to distinguish their sponsored content from regular editorial material, such as by including language that identifies it as such, with different-colored backgrounds or both.

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To read the complete article, please click here.

William Launder writes about the media industry for The Wall Street Journal, with a specific focus on traditional publishing companies and digital media. He is also the author of WSJ’s daily “Media Journal” newsletter and blog. To check out his other articles, please click here.

You can contact him directly by clicking here.