Update: Yahoo ad network offers 'deceptive' ads

Deceptive advertising may be illegal in the U.S., but Yahoo's ad exchange appears to offer it to publishers on a menu of choices when they're deciding what ads to run on their Web sites.

Yahoo Right Media's Direct Media Exchange gives publishers the option of running or blocking several different types of ads, based on their "deceptiveness."

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These ads include graphical advertisements that are designed to look like fake error or download messages or look like genuine Windows dialog boxes. Also included are ads that have phony "close window" buttons or pull-down menus that actually take the user to a Web site instead of closing the window or producing a pull-down menu. Direct Media Exchange also categorizes deceptive ads by language, letting publishers filter out "deceptive or questionably realistic offers," or "free" offers that do not disclose what a consumer might have to do to qualify for this free offer, according to the company's Web site.

According to data on the Direct Media Exchange Web site, viewed by the IDG News Service, these "Free with no disclosure language" ads can make up close to 18 percent of Right Media's ad inventory at certain times.

Advertisers like these types of ads because they are effective. Last month, researchers at North Carolina State University found that computer users have a hard time distinguishing between fake Windows warning messages and the real thing. In an experiment that tested the responses of 42 Web-browsing university students, they found that almost two-thirds of them would click "OK" whenever they saw a popup warning, whether it was fake or not.

Right Media argues that it is simply a technology offering, designed to create an open marketplace for advertisers and publishers. "The Exchange doesn't make a judgment on that type of ad category," said Yahoo spokeswoman Kristen Wareham. "It's up to the publisher to select the type of ad that works on their page."

Yahoo should refuse to run deceptive ads on its network, said Ben Edelman, an assistant professor at the Harvard Business School who studies Internet marketing practices. "It's hard to defend these ads' tactics. They intend to deceive, and by all indications they succeed," he said. "They have no proper place in Yahoo's ad network."

Yahoo bought Right Media for about $700 million last year, looking to strengthen its position in its fight with Google for online advertising dollars. The network provides a marketplace for Web publishers who have been unable to fill all of their advertising spots, allowing unused ad inventory to be sold at auction to advertisers.

Government officials charged with enforcing deceptive advertising say that while the ads on Direct Media Exchange ads may be dubious, they may not be bad enough to warrant an enforcement action.

"Any type of advertisement that is likely to deceive consumers acting reasonably under the circumstances could be deceptive," said Rick Quaresima, an assistant director in the U.S. FTC's Division of Advertising Practices.