The Paid Inclusion Dinosaur

  |  June 23, 2004   |  Comments

Why would Yahoo! and other search engines do paid inclusion? Money’s a big reason -- the ability to earn off otherwise-free listings. But paid inclusion gambles that relevancy won’t be hurt. A look at the bet Yahoo made and alternatives it could have tried.

The first part of this paid-inclusion series covers how Yahoo views paid inclusion as a solution to some of the problems crawlers have in gathering content from across the Web. I’ll examine that argument more closely later in this series. Today, a look at the other major reason Yahoo likes paid inclusion: money.

A very large proportion of search engine screen real estate is unsold. The chart below shows the number of paid versus free links for a recent search on "shoes" at several major search engines:

Links Yahoo AOL MSN Google Ask
Paid 8 8 9 10 11
Free 20 10 11 10 10
Total 28 18 20 20 21
Percent Free 71 56 55 50 48

An important caveat: I didn’t subtract any paid inclusion URLs that may have been mixed in among the "free" links. Identifying these is complex, as I’ll explain in another part of this series. Despite this, the free figure still serves as a useful starting point.

"Pure" Google has one of the lowest percentages of free material on its search results pages. Half of Google’s major outgoing links are devoted to ads.

Of course, most of Google’s paid links reside along side of results, a less-prominent ad area. That’s why Google doesn’t appear so ad heavy. "Sell-out" Yahoo devotes more of its search results page to editorial content than any of its competitors.

Why not run only paid listings and stop giving away traffic away for free? Because doing so might hurt relevancy. You can’t earn if people stop coming to search.

Hence, paid inclusion’s attraction. Some search engines see it as a way to make money from editorial results, without harming relevancy (they hope). But it’s an unproven gamble... so far.

Throw the Dice!

Until Yahoo’s recent move, LookSmart had placed the biggest bet on paid inclusion. I wrote in 2002 how the company sought to earn attractive, recurring income by selling all its commercial listings on a CPC basis.

Verdict? MSN dumped LookSmart as a provider in October 2003. A major reason given was LookSmart’s relevancy was poor. So there you have it, proof that paid inclusion hurts relevancy!

Were it so simple. It’s difficult to be conclusive. For one thing, LookSmart’s limited human-powered database might not have performed as well against a comprehensive crawler-based index, even if paid inclusion weren’t involved. In addition, LookSmart recently fired back that had its U.S. database been tested, rather than its U.K. one, results would have been better.

The LookSmart experience is important, because Yahoo has embarked on a somewhat similar path. Its new program puts all paid inclusion listings on a CPC basis. That means good pages could potentially disappear if the owners stop paying. However, Yahoo assures us it will continue to carry the vast majority of its listings for free, including any good pages, regardless of whether they’ve paid.

Another part of this series will look much more closely at this claim and how the Yahoo paid inclusion system operates. In this part, we’ll focus on paid inclusion as a revenue source.

Some Paid Inclusion Alternatives

Paid inclusion evolved as a survival strategy for companies such as Inktomi and LookSmart that "powered" search for others. They needed the income to subsidize the cost of providing results. Partners were pressuring them for better deals due to new competition from Overture and Google.

What made sense for Inktomi and LookSmart in the past makes no sense for Yahoo now. Yahoo operates its own popular search site, powered by its own search technology. It can subsidize the cost of providing "free" editorial results through the ads it offers, as Google does. There simply are better ways for it to increase revenue than follow the traditional paid inclusion model -- and ways that would avoid the mixed messages paid inclusion brings with it.

How? For one, Yahoo could’ve reduced the number of editorial listings it shows to 10, rather than the default 20 it currently displays. That likely would have upped the paid listing CTR (and revenues), yet Yahoo still would carry fewer ads than Google.

Alternately, Yahoo could have gone the Ask Jeeves route, increasing its number of paid listings. Ask Jeeves upped its paid listings from 3 to 10 paid listings. The danger is such a move could make searchers feel results are too commercial. At least the paid listings would be well marked, and editorial results would be present on the page.

Being selective about when to go "long" with expanded paid results, perhaps with highly commercial terms, could also help. That’s what Ask Jeeves used to do. Unfortunately, the company now seems to go long for all queries.

There are even more creative and valuable ways Yahoo could have made money by partnering with content owners, which I’ll explore later in the series. These include things such as centralized and approved rank checking, click-through tracking independent of paid inclusion, and express support for crawler issues.

Unfortunately, the current paid inclusion program isn’t creative, doesn’t solve the mixed message problem, and a per-click fee for all types of paid inclusion was a giant step backwards.

Exceed Disclosure Requirements!

Another revenue-building solution Yahoo could have tried is entirely segregating its paid inclusion listings. Why not have a section of "Sponsored" paid-placement results, followed by something like "Content Partner" listings, then ordinary Web results? That would help many advertisers see the value in paid inclusion, yet keep things clean for searchers.

More radically, why not give paid inclusion listings a ranking boost? After all, Yahoo’s made a big deal that paid inclusion and its other content acquisition programs supposedly ferret out the best in content from across the Web. Embrace this, and reward the content if you’re proud of it. Again, that gives advertisers value. As for consumers, if the content really is better, they’d be better served by such promotion.

It’s important to remember U.S. Federal Trade Commission (FTC) guidelines don’t forbid boosting paid inclusion listings. They simply say you should somehow provide adequate disclosure of how paid inclusion operates within your service.

Currently, Yahoo appears to meet those requirements via a "What’s This?" link at the top of its Web search results section, above the top 20 Web results. The link leads to a basic page that explains how paid inclusion works at Yahoo.

Although Yahoo’s doing what’s required, just meeting FTC requirements isn’t sufficient any longer. I’d like Yahoo to take a leadership role and exceed requirements by somehow clearly labeling paid inclusion listings. Such a move would help improve the somewhat battered image paid inclusion has earned over the past two years.

What exactly might Yahoo do? Why do it? And what does Yahoo think about such an idea? I’ll explore that in the next part of this series.

This column was adopted from ClickZ’s SearchEngineWatch.com. A longer, more detailed version is available to paid Search Engine Watch members.

Want more search information? ClickZ SEM Archives contain all our search columns, organized by topic.

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ABOUT THE AUTHOR

Danny Sullivan

Danny Sullivan left Search Engine Watch as of Dec. 1, 2006.

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