News: Search sites under the regulator's gun
The commercial practices of search engines are once again in the spotlight after a recent warning shot from federal regulators over inadequate disclosure of paid links.

The Federal Trade Commission sent a letter late last month urging several Web sites to provide conspicuous labels for commercial search listings or face possible action, and minor changes are already rippling through search destinations, including Terra Lycos, Ask Jeeves, LookSmart, America Online and Microsoft's MSN.

But the reforms are unlikely to go beyond relabeling, at least for now, leaving untouched the myriad arrangements that have transformed many search engines from Web library catalogs to the online equivalent of the Yellow Pages.

"Everything is for sale," said Dana Todd, founder of interactive agency SiteLab. "As a consumer, I'm appalled; as an advertiser, I'm delighted."

The tug-of-war over search engine marketing comes as advertisers increasingly turn to the medium as one of the most effective ways to reach their target audiences on the Internet--a trend that has been eagerly embraced by Web sites that have seen other forms of ad sales wither.

The trend has raised concerns that the public might be misled about the editorial independence of search listings, which have frequently been promoted as unbiased research tools.

At the center of the controversy are two types of for-fee programs common among the search providers: paid placement and paid inclusion.

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

The other major form of search engine advertising under the FTC review is so-called paid inclusion. Although this practice is less well known than paid placement among search engine users, it is no less popular among marketers, and may raise more troubling questions when it comes to sorting out its effects on actual search results.

"Paid inclusion gets more complicated because the programs vary a lot," said Dean Forbes, an attorney with the FTC's division of advertising practices.

"If all of the sites in the search engine's results were paid inclusion then that should be disclosed because that makes it an ad medium," he said.

Paid inclusion largely pertains to "organic" search engines such as Inktomi, AltaVista and Fast Search and Transfer's AlltheWeb, which provide technology that scours the Web and uses mathematical algorithms to compile relevant results. Under financial pressure, many such sites developed programs to guarantee companies that they would "crawl" or search a Web address more often, for a price.

Such programs have been growing in popularity in the past year.
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