Search engines: how advertisers shape the results you see (1)

By Stefanie Olsen

The commercial practices of search engines are in the spotlight after a recent warning shot from US federal regulators over inadequate disclosure of paid links.

At the centre of the controversy are two commercial schemes offered by search providers: paid placement and paid inclusion.

Paid placement allows an advertiser to pay for higher ranking or prominence on a results page, relative to a keyword search.

Overture Services lets marketers bid for placement in search results, paying a set price for each click. It licences results to portals, including Yahoo! and MSN, which split sales with Overture. The listings typically appear at the top or bottom of results pages.

The handsome profits culled from the system have drawn many followers. Portals such as MSN and Yahoo! sell their own placements to beef up revenue. Search site Google added an auction-style ad program to compliment its usual results, which set it into rivalry with Overture. The company has won accounts with Ask Jeeves, AOL and EarthLink, previously held by Overture.

But the practice drew criticism last year from Commercial Alert, which said the sites misled consumers by promoting paid links as "recommended" or "featured" sites. The FTC quickly chimed in. Companies named in the complaint were AltaVista, AOL Time Warner, Direct Hit Technologies (owned by Ask Jeeves), iWon, LookSmart, Microsoft and Terra Lycos. A copy of the recent FTC letter was also sent to About.com, Disney, Google, InfoSpace, Overture and Yahoo!

Now, many sites, including Altavista, Ask Jeeves, LookSmart and Terra Lycos are conforming by choosing a more explicit term for commercial results appearing throughout their pages.

Others have complied or are in accordance with the FTC's guidelines. AOL updated its Netscape search results with the word "sponsored". Yahoo! had already used the term for its commercial links.

In contrast, MSN promotes "featured" sites, which include links to advertisers or partners of the online portal as well as sponsored sites.

In an email, MSN product manager Parul Shah said the company has prominently placed links to an explanation of its results that disclose sponsored and non-sponsored results. He added that MSN plans to update its search pages in September to add additional explanatory links.

For an explanation of how Paid Inclusion works - the alternative to Paid Placement - see http://www.silicon.com/a55179

Stefanie Olsen writes for News.com