By Alex Salkever
Ralph Nader has a beef with search engines. A watchdog group headed by the self-styled consumer crusader filed a petition with the Federal Trade Commission on July 16, alleging that eight search engines violate truth-in-advertising rules. Why? According to the Commercial Alert complaint, search results include ads, "without clear disclosure that the ads are ads." So, if you ask for pages about "widgets," you may get not just Web sites with references to widgets on them but links to ads for companies that sell widgets.
While its concern may seem frivolous, the Nader group has a point. Often, such ads are not clearly identified for what they are. And one of the primary purposes of search engines since the beginning of the Internet Revolution has been to act as a reference tool, providing impartial information in much the same way a librarian might help you navigate the Dewey decimal system.
"Search engines have become crucial in the Internet Age," says Gary Ruskin, executive director of Commercial Alert. "If these are being hijacked and skewed by corporate advertisers for their benefit, that can lead to dramatic degradation of the information citizens really get."
THE VIAGRA TEST.
Not so, according to the search-engine companies named in the complaint. Some claim they clearly demarcate ads and are in no way deceiving Web surfers. Further, they say prominent paid placements actually help shoppers -- who represent a good chunk of search engines' visitors -- to quickly find what they want. They're right about that, but I don't buy their assertion that paid placements are clearly marked.
Here's why. Take a search for the term "Viagra" at AltaVista. The first listing at the top of the results page touts a "Featured Site" that happens to be online drugstore 4-health-drugs.com. Below are three listings referred to as "Partner Listings," which are all online drug sellers -- USA Prescriptions, online-viagra-sales.com, and Net-Dr.com. The rest of the listings appear more than halfway down the page.
So what exactly are featured sites and partner listings? Simply other ways to say "paid placement." Companies pay AltaVista to ensure that their hyperlink comes out in a designated slot at or near the top of the results list.
But did you know what they were until I just told you? You've got company. Surely, not everyone knows that "feature site" and "partner listing" mean advertisement, and few Web surfers distinguish them from regular search-engine returns.
That's precisely the beef Commercial Alert has with AltaVista, AOL Time Warner, Direct Hit Technologies, iWon, LookSmart, Microsoft, and Terra Lycos, the companies named in the complaint. All offer paid placements, but none plainly label the placements as such.
"Commercial Alert's complaint itself is fairly persuasive in my view, particularly in light of the fact that these same search engines formerly provided results based on some sort of independent relevancy standard," says Deborah Wilcox, an intellectual-property attorney and search-engine expert at Baker & Hostetler.
What to do? Banning paid placements by law would be harsh and foolish. Search engines will rely on them more and more as banner ads continue to flag. The melding of search and advertisements does make sense, just as sporting-goods companies place ads in magazines such as Sports Illustrated. Some search-engine companies already rely on paid placements for one-third to half of their revenues.
Besides, maintaining search-engine infrastructure isn't cheap. Big search engines scan the Web 24 hours a day to keep their results updated and current. Take Google.com, widely regarded as the industry's crème de la crème. "Google uses 3,000 machines. That's a lot of hardware to maintain," says Danny Sullivan, editor of search technology site searchenginewatch.com.
For some shoppers, paid-placement search returns might actually be quite useful. According to a recent study by Jupiter Media Metrix, users found relevant listings 50% faster on search engines using only paid placements. The study said visitors spent an average of 56 minutes at GoTo.com, a paid search engine, compared with 106 minutes at Yahoo!'s proprietary search function. The differential, Jupiter's analysts believe, indicates more satisfied customers at GoTo.com.
So what's the problem with paid placement that's marked in vague terms? Nothing at all, says AltaVista spokesperson David Emmanuel. "It's fair to say that while some of these labels are relatively new and lack industrywide nomenclature, users accept these various types of results as long as they find the intended information," he says. "We believe our results categories and their presentation uphold a high standard of editorial integrity and relevance with appropriate labeling. Our users are affirming their acceptance with the click of the mouse."
Perhaps. But full disclosure wouldn't be that difficult a step, requiring a simple change in wording. Sullivan speculates that the other search engines fear a switch to clearer wording might scare away users by making results seem more commercial.
If this fear exists, it's unfounded. Witness Google and GoTo.com, neither of which were cited in Commercial Alert's complaint. Google sells paid placements but dubs them "Sponsored Links," a clearer indication that those URLs belong to advertisers. GoTo actually lists alongside each returned URL the price per click through that an advertiser is paying for that placement.
Not coincidentally, Google and GoTo are two of the sector's hot performers -- and both posted nifty gains in the July 6 ratings. It just goes to show that full disclosure can make for happy surfers -- and happy search-engine companies alike.
Salkever is BusinessWeek Online's Technology editor
Edited by Douglas Harbrecht