The FTC and Disclosure, Part 3

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. Part one discusses the FTC recommendations themselves. Part two examines disclosure issues for paid disclosure and paid inclusion. The series ends this week with more disclosure issues and the impact disclosure may have on consumers.

Disclosing Paid Inclusion

How better to disclose paid inclusion? The letter to Commercial Alert suggests the FTC would like the labels associated with “regular” results, which may contain paid inclusion content, to be clearer about this paid mix and lead to more detailed explanations:

Through the use of clear and conspicuous disclosures, consumers should be able to easily locate a search engine’s explanation of any paid inclusion program and discern the impact of paid inclusion on search results lists…. In the staff’s view, labels such as “Web Directory Sites,” “Results,” “Matching Sites,” and “Reviewed Web Sites” may not clearly convey that certain sites or URLs in the search result list, or perhaps all of the sites or URLs in the search database, are participants in a paid inclusion program, rather than being included based on some other criteria that may not involve payment.

It will be tricky to come up with labels different from those used for paid placement listings. For example, at MSN Search, the company calls paid placement listings “Sponsored Sites.” The next set of results often comes from LookSmart and may include a mix of nonpaid, noncommercial content; nonpaid commercial content; and paid commercial content.

The current label for this information is “Web Directory Sites.” As seen above, the FTC doesn’t feel this label is satisfactory. What should replace it? Perhaps:

  • Paid & Unpaid Results

  • Commercial & Noncommercial Listings
  • Paid & Unpaid Site Matches

None of these sounds particularly good. Given this, perhaps current headings will be deemed OK as long as disclaimers are associated with them, such as with the example below:

Web Directory Sites
Includes both sites that have paid to be include and those that are listed for free.

In that example, the explanation might be deemed prominent enough and placed close enough to the results to make up for the more generic title. I’d also see it linking to a help page providing the consumer more detail.

My pet preference has also been for search engines using paid inclusion to consider a mechanism of flagging these URLs with a discrete icon. I think it is important for consumers to be able to see at a glance whether the results they get in response to a search is dominated by “paying” content. This isn’t always bad, but if you are always getting commercial content coming up no matter what you search on, that can be an indicator a search engine is not being as inclusive of all good content across the Web as it may claim.

In conclusion, the FTC wants disclosure of paid inclusion, but it is leaving it “very flexible” Beverly Thomas, one of the principle FTC attorneys, said about how the search engines achieve it.

“We do not say that you had to identify every paid inclusion URL, but you could. We do not say that you have to segregate those URLs, either,” said Thomas. “We thought that consumers should be able to be informed that there is paid inclusion, how it operates, and what impact it might be on the results listed.”

Content Promotion, Partnerships, and Results From Others

The FTC did not address the issue of content promotion, where a portal site might list its own content over others in search results. For example, at Yahoo, a search usually brings up the “Inside Yahoo” matches at the top of the page. Yahoo’s own content is promoted over others.

Similarly, at MSN Search, the “Featured Listings” area may promote MSN’s own content, the content of advertisers or sponsors, or even content of good Web sites for free, if they editorially deserve to be there.

I asked Thomas and Dean Forbes (the other principle FTC attorney) for guidance. Their view seemed to err on the side of caution. Favoritism of any type should be disclosed to avoid consumer confusion.

This would also apply to specialized search services gained from others. For example, several search engines use the news feed from Moreover. In turn, Moreover does have deals where it is paid to carry some news content. That would mean search engines providing access to Moreover’s results should be looking at ways to disclose how inclusion is involved.

Similarly, shopping search engines that have deals to revenue share with merchants should be looking at how they disclose this information. And meta search engines — those that get results from other search engines — are definitely not excluded from the FTC’s recommendations, as is covered next.

Whom Does This Apply To?

The FTC sent the same letter of guidance to all the search engine companies named in the original complaint: AltaVista, AOL Time Warner, Ask Jeeves (owner of Teoma and Direct Hit), iWon, LookSmart, Microsoft, and Terra Lycos.

The FTC’s guidance isn’t just for these companies but for the entire search engine industry. That’s why letters have gone to Google, InfoSpace, Overture, Yahoo, and the Walt Disney Internet Group (which runs Go.com).

The letters do not indicate these search engines have done anything wrong. Rather, Forbes said, these services are known to have large audiences. The commission wants to ensure they’re made aware of its recommendations.

The FTC’s recommendations are posted on their Web site and are applicable to anyone in the search engine industry, Forbes said. All search engines should consider reviewing and acting upon the recommendations.

Must They Follow the Guidelines? And If So, What Are Those?

“This is not a threat letter but guidance and education,” said Thomas. But should the issues not be addressed, the FTC could take action.

“We didn’t want to impose specific rules, ‘Do this or do that,’ because we didn’t think that provided enough leeway,” Thomas said.

Instead, the FTC directs the search engines in its letter to look through an FTC guiding document published in 2000, “Dot Com Disclosures,” designed to help online advertisers comply with consumer protection laws.

Search engines have been invited to contact the FTC. Some had previously contacted the commission (no names were provided), but the FTC believes more will follow.

Do Consumers Care?

Is the FTC involvement necessary? Do consumers care about whether payment is involved with search engine listings? There’s been a lack of research on the topic, but the FTC response to Commercial Alert cited some interesting statistics from a new one.

A Matter of Trust: What Users Want From Web Sites” was conducted for Consumer WebWatch — a Consumers Union project — by Princeton Survey Research Associates. The survey covered 1,500 online users in the United States, interviewed between December 20, 2001 and January 7, 2002.

Nearly everyone surveyed, 87 percent, said she’d used a search engine to find information on the Web.

Those surveyed were then asked, “Have you heard or read about search engines being paid fees to list some sites more prominently than others in their search results?” Most had not:

  • No — 60 percent

  • Yes — 39 percent
  • Don’t know/refused to answer — 1 percent

The next question asked was, “If a search engine is being paid to list other sites more prominently, how important is it to you that the search engine tells you about this policy in the search results or an easy-to-find page on the site?” Responses were:

  • Very important — 44 percent

  • Somewhat important — 36 percent
  • Not too important — 11 percent
  • Not important at all — 7 percent
  • Don’t know/refused — 2 percent

The vast majority (80 percent) wanted to know. If told, would it influence their choice to use a particular search engine?

  • No difference — 56 percent

  • More likely — 10 percent
  • Less likely — 30 percent
  • Don’t know/refused — 4 percent

For nearly two-thirds, disclosure of paid listings wouldn’t prevent them from using a particular search engine. The remaining respondents’ opinions might have changed if they realized every major search engine displays some sites more prominently than others.

The survey didn’t go into such detail. Would opinions change if those surveyed were told paid listings are commonplace? Would the mix of paid to nonpaid content have an impact? More exploration would be useful.

They Don’t Read, They Don’t Click

Search engines will tell you despite the labels they place in results, users tend to ignore these. Although statistics indicate users want disclosure, in practice they appear not to notice when it’s provided.

MSN Search once had an “About” next to the “Featured Sites” heading that brought up its disclosure statement. So few people clicked that it was dropped. (Concern about better disclosure brought its return in a new guise, the “About Results” link.)

If no one reads labels or clicks links to learn about results, is that a sign people don’t care? The FTC argues perhaps not. Instead, it may be a sign search engines need to learn how to reach out to users.

“The company should probably do some consumer research to see what’s the best way to set this [disclosure] up on the site,” said Forbes.

I wouldn’t be surprised if even after conducting research, most users still failed to read labels or click to learn about results. It doesn’t matter. Some users do care and information should be provided.

Not everyone reads the ingredients in the food they eat, but those who do tend to be very interested indeed in what’s listed. In the search engine world, some people want to know more about the results they consume. Properly labeling results not only helps those people but is something the FTC now says search engines should do.

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