June 28th, 2002
FTC Wants Paid Search to Shape Up
By Evan Hansen
C|NET
The Federal Trade Commission on Friday said search-engine companies need to
clearly mark paid listings on their sites, concluding an 11-month investigation.
Responding to a complaint last July from Portland, Ore.-based Commercial Alert,
the FTC said it would send letters outlining the need for clear disclosure to
companies that offer Internet search services. Companies named in the complaint
were AltaVista, AOL Time Warner, Direct Hit Technologies, iWon, LookSmart, Microsoft
and Terra Lycos.
The FTC said it would not take formal action at this time, however, noting
that many of the sites named in the original complaint had already taken steps
to flag paid listings. Of the 12 search sites owned or operated by the seven
search-engine companies named in the complaint, 11 separate paid-ranking results
by placing them above the non-paid results, the agency found.
Commercial Alert Executive Director Gary Ruskin said the FTC’s response was
a victory for consumers.
"The FTC is telling search-engine companies to adopt clear and conspicuous
disclosure for paid listings, under direct threat of possible future commission
action," he said. "They’ve set standards of disclosure and are telling
search-engine companies to comply."
The tussle over paid-search listings comes as Web publishers turn to search
engines as a rare bright spot in an otherwise bleak environment for online advertising.
Paid-search company Overture Services has posted strong revenue growth in recent
quarters on the strength of a syndicated paid-listings service that has won
over a long list of customers, including Web portal Yahoo.
The sudden proliferation of paid listings has raised red flags for consumer
groups such as Commercial Alert, which claims the practice threatens to undermine
editorial integrity on the Web.
Some search-engine companies downplayed the FTC’s result, saying they had already
taken steps to clearly mark listings that appear as a result of payments from
advertisers. An AOL Time Warner representative said the company’s Netscape Communications
division at one time had used the term "Partner Listings" to display
such results, but changed the language to "Sponsored Links" prior
to this week’s decision.
In a statement, Fred Bullock, AltaVista’s chief marketing officer, also defended
his company’s practices.
"We believe that the paid listings that we display on our site are delineated
from our search results and that the disclosure is not misleading," he
said. "To date, the FTC has not addressed any letter to us regarding this
matter. If and when we do receive such a letter, we will take it very seriously
and review its recommendations carefully. We will then respond accordingly."
In its letter Friday, the FTC said some disclosures from search engines still
fall short. The agency singled out a long list of terms that it considers inadequate,
including "Recommended Sites," "Featured Listings," "Premier
Listings," "Search Partners," or "Start Here."
"Other sites use much more ambiguous terms such as ‘Products and Services,’
‘News,’ ‘Resources,’ ‘Featured Listings,’ ‘Partner Search Results,’ or ‘Spotlight,’
or no labels at all," the FTC found.