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FTC Wants Clear Ad Disclosure in Search Results

By Paul J. Bruemmer, 7/4/2002


The Federal Trade Commission (FTC) responded to a
complaint filed last year by consumer advocacy group href="http://www.commercialalert.org/index.php?category_id=1&subcategory_id=24&article_id=33">Commercial Alert alleging search engines use deceptive advertising practices.
Eight major search engines were accused of "placing ads in search engine results
without clear disclosure that the ads are ads." Implications were that search
engines valued commercialism over editorial integrity.


The FTC responded to the complaint by saying that
current disclosures are not sufficiently clear and should include more
conspicuous descriptions of paid listings. Key changes recommended for search
engines using paid placement and paid inclusion pricing are:


  • Clear delineation of paid listings, whether
    separated from, or integrated into, the non-paid listings. Paid listings can
    be made clear and conspicuous by prominence, placement, mode of presentation,
    and proximity to explanations or qualifiers.
  • Clear descriptions on how sites are
    selected for inclusion in search engine indices, located where consumers can
    easily find these descriptions and become aware of the impact of paid
    inclusion in their search results.

While the FTC doesn't plan legal action, it will send
a letter to those named in the complaint (AltaVista, AOL Time Warner, Direct Hit
Technologies, iWon, LookSmart, Microsoft and Terra Lycos), calling for clearer
disclosure and more conspicuous descriptions of paid listings.


Commercial Alert executive director Gary Ruskin
called it a victory, while acknowledging that some practices have improved since
filing the complaint. However, the consensus is that search engines still have a
long way to go toward clear and conspicuous disclosure.


Specific FTC Recommendations


The FTC recommends that all search engines review
their Web sites, making changes necessary to ensure that:


  • "Any paid ranking search results are
    distinguished from non-paid results with clear and conspicuous
    disclosures.
  • "The use of paid inclusion is clearly and
    conspicuously explained and disclosed.

  • "No affirmative statement is made that
    might mislead consumers as to the basis on which a search result is
    generated."

Furthermore, search companies providing results to
third-party Web sites must also discuss adherence to the above criteria with
regard to "supplied search results that involve payment of any kind for ranking,
insertion of paid results into unpaid results, or any pay-for-inclusion
program."


Is the General Public Aware of Paid
Listings?


The FTC letter quotes a recent study suggesting that
the general public is not aware that the top listings are paid ads. This lack of
knowledge coupled with the belief that search engines should have editorial
integrity can result in users not grasping the significance of paid listings in
search results.


Princeton Survey Research conducted a target=_blank href="http://www.consumerwebwatch.com/news/report1.pdf">national survey for Consumer WebWatch in January 2002 on credibility and
trust online. The study reported the following on users' knowledge of paid
placement in search engines.


  • "Despite so many people using search
    engines and despite their importance online, most users express ignorance of
    the practice of many of these engines taking fees to list some sites more
    prominently than others in their search results. Only four in ten (39%)
    Internet users have heard of this practice and only 43 percent of those who
    use the search engines. The more experienced users (those online three years
    or more) show more awareness of this practice (46%) than those online for six
    months or less (24%).
  • "After being told that some search engines
    take these fees, a solid majority (80%) say it is important for search engines
    to tell users about their fee deals, including 44 percent who say it is very
    important. There is no difference between the novice users (79% important) and
    the most experienced users (77%). Those who use search engines feel strongly
    as well (81% important).
  • "About one in three (30%) say they are less
    likely to use a search engine if they know it is taking money from other sites
    for higher placement in the results. A small minority (10%) would be more
    likely to use the site if it revealed the financial arrangements. Given the
    complicated situation, a majority (56%) say it would make no difference to
    them."

Consumer Alert contends that as more consumers become
aware that the top listings are paid ads, they will move away from the search
engines that don't have clear disclosure. Now that the FTC has spelled out
guidelines for the disclosure of search engine paid listings, perhaps there will
be a little more standardization, and the public will be better
informed.


Meeting FTC Guidelines


While none of the search engines named in the
complaint meet the FTC guidelines, one search engine does. Google offers paid
listings (Google AdWords Select) and clearly labels them "Sponsored Links." It
meets clear and conspicuous disclosure by displaying its paid placement ads in
shaded boxes to the right of the main listings and providing a link explaining
the program below those listings. Since Google doesn't offer paid inclusion, it
easily meets the FTC guidelines.


It won't be so easy for search engines that display
multiple paid listings and have paid inclusion partners. So it will be
interesting to see how search sites like AOL, MSN, Yahoo!, AlltheWeb, AltaVista,
AskJeeves, Lycos and Netscape explain these multiple partnerships to consumers.
It will also be interesting to see if they opt for consistency by adopting clear
terms like "Sponsored Links" rather than the more ambiguous "Products and
Services" or "Featured Listings."


Paul Bruemmer is the CEO of Web Ignite, a search engine optimization company. Founded in 1995, Web Ignite has helped promote over 15,000 Web sites and was recognized by Iconocast and MarketingSherpa as a top SEO firm based on reputation.

 

 

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