The FTC and Disclosure, Part 2

The U.S. Federal Trade Commission (FTC) made a landmark recommendation to the search engine industry, saying it should improve disclosure of paid content within search results.

The implications of these recommendations on the search engine industry are enormous. Last week, I discussed the FTC recommendations themselves. This week, I’ll examine disclosure issues for paid disclosure and paid inclusion. In part three, we’ll discuss more disclosure issues and the impact disclosure may have on consumers.

Paid Placement

If payment is accepted in association with listings, the arrangement needs to be disclosed, says the FTC. It names two types of paid content arrangements. The first is “paid placement.”

I’ve always described paid placement listings as those guaranteeing a ranking for particular terms. The commission adopts a slightly broader definition:

The staff considered “paid placement” to be any program in which individual Web sites or URLs can pay for a higher ranking in a search results list, with the result that relevancy measures alone do not dictate their rank.

In its letter to search engines, the FTC advises considering distinguishing paid placement listings from non-paid or editorial-style listings:

The staff recommends that if your search engine uses paid placement, you make any changes to the presentation of your paid-ranking search results that would be necessary to clearly delineate them as such, whether they are segregated from, or inserted into, non-paid listings. Factors to be considered in making such a disclosure clear and conspicuous are prominence, placement, presentation (i.e., it uses terms and a format that are easy for consumers to understand, and that do not contradict other statements made), and proximity to a claim that it explains or qualifies.

Paid Placement Disclosure Right — and Wrong

The principal FTC attorneys who authored the recommendations, Beverly Thomas and Dean Forbes, were extremely reluctant to name the search engines they believe have the paid placement format “right.”

The FTC is trying not to impose a one-size-fits-all solution on search engines, as all have unique ways of presenting information.

Nevertheless, staffers indicated personally (as opposed to an official FTC statement) they like the way Google handles paid placement. Paid results are in visually distinct, colored boxes, separate from the main editorial results and labeled “Sponsored Link” or “Sponsored Links.”

Of course, other search engines “delineate” or “segregate” paid placement listings. At Yahoo, these look like “regular” listings but are separated from them, placed under a “Sponsor Matches” heading associated with a hyperlink link that reads, “What are Sponsor Matches?”

That links to an explanation for consumers that results are “paid for.” This treatment was also viewed favorably by Thomas and Forbes, from a personal perspective.

AltaVista provides an example of what, in my opinion, fails the recommendations. Paid listings are segregated, as with Yahoo But the heading is “Products and Services,” which doesn’t meet the “presentation” quality the FTC wants, which includes using terms that clearly denote the paid nature of content.

The commission frowned on this kind of uncertain wording:

Many of these sites appear to be headed in the right direction, using terms such as “Sponsored Links” or “Sponsored Search Listings” to denote payment for rankings…. 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. To avoid deception, these sites should be labeled to better convey that paid placement is being used.

AltaVista may feel it provides disclosure in another way, via the “Info” link appearing next to the “Products and Services” label. Clicking brings up a page that notes, “Sites advertising in this section have done so either directly through AltaVista, or through our distribution agreement with Overture.” Pretty clear, right?

Perhaps. But the fact the “Info” link is smaller than the “Products and Services” heading could be deemed poor “presentation.” In contrast, the corresponding link at Yahoo, while also smaller than the heading, is more verbose. It almost invites users to learn “What are Sponsor Matches?” More important, the label it’s associated with unambiguously communicates the paid qualities of the listings below. This is not the case with AltaVista, and the company is hardly alone.

Issues With Paid Inclusion

Paid inclusion is the other major type of paid listings specifically called out by the FTC. I’ve described paid inclusion as when someone is guaranteed to be included in a search engine’s listings but given no promise to rank well for any particular terms. The FTC uses a similar definition:

The staff considered “paid inclusion” to be any program in which individual Web sites or URLs are included in a search engine’s index, or pool, of sites available for display as search results, when that Web site or URL might not otherwise have been included, or might not have been included at a particular point in time, but for participation in the paid program.

Some people, when they first learn about paid inclusion programs, believe all these URLs should be segregated from “regular” listings, as commonly done with paid placement results. To me, that’s not necessarily the best solution.

Even the best crawler-based search engines miss good content on the Web. Paid inclusion programs can be used by site owners as a way to ensure this content doesn’t get overlooked. It’s not fair to discriminate against this content, to assume because it is paid it isn’t useful or relevant.

Similarly, the paid inclusion programs run by Yahoo and LookSmart now require all sites that wish to be listed in commercial areas to pay a fee. Should these sites be discriminated against while other commercial sites, those listed before fees were required, might not have to be segregated?

Handling paid inclusion is a tricky issue, which the FTC recognizes. This is why it has not suggested paid inclusion listings be segregated, as it more strongly encourages in the case of paid placement. Instead, the emphasis is on better disclosure:

The staff recommends that if your search engine uses paid inclusion programs that may distort rankings or placement criteria, you clearly describe how sites are selected for inclusion in your indices. Also, consumers should be able to easily locate your explanation of the paid inclusion program you use, and discern the impact of paid inclusion in search results lists.

You might take this to mean that paid inclusion need only be disclosed if it involves a ranking boost. If so, all of the major search engines offering such programs would claim to be off the hook. This is because all of them continue to assert that their paid inclusion programs provide no ranking preference.

However, Forbes clarified the commission wants paid inclusion to be disclosed even if no ranking boost is provided. The “placement criteria” portion of the clause above is a reference to being placed in the index in return for payment, not for being placed in a particular position.

Indeed, Forbes says that any type of paid inclusion program really should be disclosed. And to date, the FTC is not happy with what it sees, as shown by the response to Commercial Alert:

Currently, although certain of the named search engines do, in fact, use paid inclusion, in the staff’s view none of them adequately discloses its usage or offers clear and conspicuous explanations of its impact on search results.

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