A few years ago, the idea of tainting search results with paid listings set off an industry fury. But in today's economic climate, what once was unthinkable by the most successful search engines is now being accepted as status quo and a means to eking out desperately needed online ad revenue.
Earlier this month, Yahoo! quietly unveiled a Sponsored Sites program in its B2B and Shopping categories. LookSmart recently kicked off a program for small businesses and another for major advertisers to sponsor search results. Last year, About.com launched a sponsored links program on its site called Sprinks, based on an auction model. Even Google, which doesn't accept banner ads, last year started selling relevant text ads in its search results.
The paid-listings model isn't new. GoTo.com pioneered auction-based paid listings when it opened its doors in 1997, and it licenses its services to numerous portals, including AltaVista Co., AOL Time Warner and Terra Lycos. But as more sites experiment with this revenue generator, paid listings are beginning to clutter up what had always been considered the unbiased search results space. A handful of sites even integrate the paid listings into editorially selected results, or those generated by a search engine, so that consumers can't tell which are paid and which aren't.
BIG ADVERTISER DRAW
LookSmart, for instance, late last year started selling its Subsite listings. So far it's lined up Amazon.com, Gap Inc.'s Banana Republic and The Gap and others, promising to promote the companies' products in thousands of category and keyword-search results. LookSmart licenses its services to sites including Excite@Home, Microsoft Corp.'s MSN and iWon.
Tony Mamone, VP-listing services at LookSmart, says the Subsite listing program is aimed at bigger advertisers who can't be bothered with monitoring search sites that rank results determined by whoever puts the highest bid on a particular keyword. Integrating the paid results (unmarked as paid) into its editorially selected ones, he says, is part of putting the result into context for users. "It gives a little less control to the marketer," said Mr. Mamone, explaining that editors control the copy an advertiser uses as well as the categories in which they are allowed to have their ads appear. For instance, a search for cashmere sweaters might pull up Banana Republic as one result, along with relevant sites selected by editors.
As the trend toward paid listings has caught on, it also has taken a variety of forms. In addition to LookSmart's model, there is paid inclusion, a revenue model adopted by search engines like Inktomi, which allows advertisers to pay to be reviewed by a search engine and be included somewhere in its search results. All of these models are "getting picked up by more and more marketers who want to market themselves efficiently," said Mr. Mamone.
Keeping things fuzzy for users is intentional, said Christopher Todd, an analyst at Forrester Research. "It's a double-edged sword," he said. "You don't want users to come to your site thinking the information is being weighted by whoever pays the highest price tag." On the other hand, he added, "It's a balancing act. You want to make sure Wall Street knows you're taking steps to diversify your revenue. The pressure to perform and hit your revenue targets is immense right now."
But many sites are holding fast on their editorial and advertising divisions, clearly marking which listings are paid and which aren't. Google marks its listings as sponsored, as does Yahoo!; About.com and GoTo also list how much the advertiser paid after each listing.
Yahoo! Editor in Chief Srinija Srinijavasana oversees the Sponsored Sites program and says it made sense to add enhanced paid listings to its B2B and shopping areas because it makes the areas "more robust" with information. Visiting those areas is akin to opening the Yellow Pages, she added. The enhanced listings will be clearly marked and won't change Yahoo!'s editorial inclusion of various sites. She said Yahoo! has "no plans" to expand the enhanced listings to other categories.
VIOLATING ETHICS LINE
Eric Bingham, senior VP-business operations at About.com, oversees its Sprinks site, a paid listing service targeted to small and mid-size businesses. It has grown from 2,600 advertisers last August to more than 6,500 today. While Mr. Bingham declined to break out revenue, he said it's become an increasingly important income source for the company.
"The direct-response advertisers are gravitating toward this model because it provides more control," Mr. Bingham said. "Advertisers who are trying to achieve high visibility are still trying to go into big integrated [online] campaigns."
However, unlike LookSmart's listings, Sprinks is kept completely separate from About.com's editorial listing, something Mr. Bingham said will remain that way. "I'm shocked" that LookSmart would integrate its listings, he said. "That violates what we consider a really important line between editorial and commercial."
But the paid-listings revenue model is becoming an increasing reality for many sites, and it's doubtful the sites will backtrack on this as the number of Web pages grows more immense daily.
George Nimeh, VP-search and special projects at iWon.com, thinks that even as some revenue experiments rise and fall, the Web will never go back to a completely free listings service because Web indexing has become a real expense as the size of the Web continues to skyrocket. The iWon search service pulls its results from LookSmart, AskJeeves and others.
"We're all after the same thing," he said. "We're all after helping users find what they want and the increased need to derive profitability from what we're doing without selling out."