Yahoo! could take a lesson from Google on paid search

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A leading web site announces it will introduce an advertising program but will not distinguish for its audience between the paid placements and independent content. Criticism is quick and harsh, with one columnist writing that the move "seriously undermined ... [the] credibility and integrity" of the site, "weakening the foundations of one of the most successful brands born and raised on the Internet."

This wasn't the decision last week by Yahoo! to tap a new revenue source by charging companies to guarantee that their sites are included in search results. It was a decision five years ago by Amazon.com to charge publishers for editorial reviews and placements on recommended reading lists, but not to disclose the relationship to book buyers. (I was the columnist.)

The unfortunate thing is that five years after Amazon's mistake, a prominent Web brand would again fail to recognize the importance of audience trust to business success, and the role ad programs masquerading as unbiased material can play in undermining that integrity.

Amazon moved quickly to repair the damage. Two days after its plans were revealed, the online retailer e-mailed users to say that it decided to label all paid placements "in a way that's easy for customers to identify." It also loosened its policy on returns so customers could send back recommended books if they were disappointed in them, "even if you thought the book was so bad you ripped the pages out." The quick action salvaged Amazon's brand reputation.

As this column went to press, Yahoo!, which reportedly could realize $100 million in revenue from the new program, had not reversed course. That's too bad.

Under the plan it announced last week, companies will have the option of paying Yahoo! to ensure their sites come up with relevant user searches. Yahoo! will mingle those paid placements with other results, but won't disclose that to users. The only way someone could even know that the results include paid placements is by clicking a "What's this" button that outlines Yahoo!'s search policies.

In embracing paid inclusion, Yahoo! is following a practice common to many search sites. But Google, which passed Yahoo! to become the most popular search engine, refuses to charge for search inclusion. Holding that stance could help it cement its lead over rivals even as Google prepares for a hotly anticipated initial public offering.

Google charges for paid searches, but those results are separate from its main search results and clearly differentiated for users, appearing in a distinct style under the heading "Sponsored Links." (Yahoo! does something similar).

"We feel very strongly that user trust is key to our success," Tim Armstrong, VP-advertising sales at Google, told me last week. (Armstrong was in New York and showed up conveniently in our offices for a pre-scheduled meeting the morning the Yahoo! news broke.) Users don't mind paid results if they're clearly disclosed and relevant, he said.

That's why Google goes a step further, stacking its sponsored links based not only on the cost-per-click an advertiser is willing to pay but on click-through rates, a model that rewards effective advertising. In other words, positioning is decided not just on price, but user relevancy. That's a signal of Google's devotion to the user experience and the level of accountability to which it's willing to be held.

It doesn't matter, in Armstrong's view, that the search ads are text-only and lack a certain sex appeal, so long as they work. Said Armstrong, "We've stayed true to what we thought the goal of advertising was."

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