October 14, 2003

The Federal Trade Commission remains concerned that consumers may not be able to tell when search results are advertiser-sponsored, thanks to sometimes-unclear disclosure on the part of search companies.

Last year, the FTC notified Web operators--including Yahoo-owned AltaVista and America Online--that they must clearly mark advertisements that appear within their search results. Though some reform trickled through the industry, questions still linger about how well companies label the commercial listings that appear when Web surfers delve into their indices.

The U.S. regulatory agency said that so far, it's pleased with efforts to disclose ads as "sponsored" when they appear on top or adjacent to query results. But a more-complex form of paying for exposure within search results--called paid inclusion--remains worrisome for consumer watchdogs and the FTC. Paid inclusion is a class of search marketing in which companies, such as Yahoo-owned Inktomi, accept fees to "crawl" Web sites more often so that fresh product data is included in the index. In Inktomi's case, some marketers pay when Web surfers click on their listings. Typically, those paid-for links are not marked.

"We want the search engines to be cognizant that these are issues we hope they approach and make disclosure as visible as possible, so that consumers understand what they're pulling up and that there's some advertising linked to it," said Heather Hipsley, an assistant director for the FTC's division of advertising practices. "There's more work to be done because it's an ever-evolving issue. Search engines are very dynamic, and there's been a lot of mergers in the area," Hipsley said.

Yahoo is a target of concern because in the last year it bought three of the largest Web crawlers that operate paid-inclusion programs: Inktomi, AltaVista and Fast's AlltheWeb. It acquired AltaVista and AlltheWeb when its deal with their parent company Overture Services went through last week. Yahoo has said that it hopes to augment earnings from search with paid inclusion. The Web giant and others argue that because paid inclusion does not guarantee marketers placement in their indices, it is not a wholly commercial enterprise. Rather, it's a service that helps create a comprehensive database for consumer queries, they say.

Yahoo is widely expected to launch a new paid-inclusion program as it begins to replace search partner Google with its own technology. Complicating matters, Overture was slated to introduce a paid-inclusion program that combined its two new crawlers this month, but Yahoo spokeswoman Diana Lee would not say whether that will still happen now that it has the three technologies to consider. The Inktomi and Overture acquisitions were the result of Yahoo's efforts to regain an edge in the search industry after years of neglecting it. It also wants to compete with rival Google in the lucrative commercial search market. Financial analysts peg commercial search as a $2 billion industry this year and worth as much as $7 billion in four years.

Paying the piper
Two programs expected to fuel that growth are sponsored placement and--to a lesser extent--paid inclusion. Sponsored placement allows an advertiser to pay for higher ranking or prominence on a results page, relative to a keyword search. Marketers bid for that placement, paying a set price for each time a surfer clicks on it.

Overture and Google are the leaders in this mode of marketing, licensing results to portals, Internet service providers and other dot-coms, which split the fees from clicks. Web sites display those ads off to the side, at the top or bottom of search results, marking them as ads in compliance with the FTC's request last year. Paid inclusion is less well known than paid placement among search engine users, but it's no less popular among marketers. The programs largely pertain to "editorial" search engines such as Inktomi, AltaVista and AlltheWeb, which provide technology that scours the Web and uses mathematical algorithms to compile results relevant to users' queries.

Under financial pressure, many such services have developed programs to guarantee companies that they would "crawl," or search, their Web addresses more often. Though companies pay for the service, all of the providers say that they do not guarantee a higher ranking for customers in search results.

For example, Inktomi, the largest paid-inclusion provider, operates Index Connect, which lets small and medium-size sites pay a flat annual fee to have their Web addresses regularly indexed. Larger sites such as Amazon.com and eBay--which typically want assurance that more than 1,000 addresses are indexed--pay on a sliding scale, depending on the category. These sites can pay anywhere from 15 cents to $1 each time a Web surfer clicks on a listing--which is akin to the paid-placement model.

In contrast, Google delivers unbiased search results from a vast index of Web sites; the company does not accept fees for cataloging sites. Paid inclusion has sparked ongoing concerns that the public might be misled about the independence of search listings, however. While Yahoo argues that paid inclusion produces unbiased, relevant results, search engine experts say that the practice is widely known to give the listings of marketers higher rankings in the index.

"Search engines like to say it doesn't affect the rankings. But there have been cases where rankings on AltaVista and Inktomi were boosted (for marketers that pay)," said Danny Sullivan, an editor of Search Engine Watch, an online industry newsletter. "It's much more noticeable then it was in the past," he added, even though out of the 1.5 billion Web pages being indexed, only about 3 million pay to be crawled more often. "The way that it's mixed in with ordinary content can be favorable to (marketers)," he said.

Sullivan added that there's little to no disclosure for these kinds of commercial results. "Consumers have no idea that this is happening, and at the moment, that's in line with what's the FTC has said--that paid inclusion doesn't need to be segregated, if there's no boosting happening," he said. "I'd suspect if they were to look at it, and saw that boosting was there, they'd want it to be separated."

All in a day's work
Yahoo spokeswoman Diana Lee said that as long as the search results are relevant, the company is doing its job. "Results are based on relevancy, irregardless of whether a site participates in a paid inclusion," Lee said, though she did not define how that relevancy is determined.

When asked whether Yahoo should give the public notice that some Web search results are paid for by the click, Lee said "as long as consumers are getting what they want, that's all that matters." Some companies that offer paid inclusion, including AlltheWeb and AltaVista, have disclosed it by adding a tiny link labeled "about" near results pages. The link leads to a disclaimer that describes how companies can pay to have their sites visited more frequently.

Yet Sullivan and others say that search providers need to separate these results or label them conspicuously. Gary Ruskin is executive director of Commercial Alert, a consumer watchdog nonprofit, which filed the first complaint against the search providers in 2001 that prompted the FTC's investigation. Ruskin said that conspicuous disclosure should more than a 5-point type "about" link in the corner of a search results page.

"We think it's very important that the FTC keep close watch on the search engines to ensure that they are not deceiving the American public by failing to disclose that ads are ads. As search engines grow in importance, it's ever more important if search engines are being hijacked by commercial advertisers that the public know it."

Article by Stefanie Olsen
Source: C-Net News

        

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