• by July 30, 2001

Paid placement within search engines is one of the emerging bright spots in the otherwise gloomy online advertising and marketing arena, Jupiter Media Metrix said in a report to be released today.

The Internet market research company noted that paid search engine GoTo.com Inc. has seen nearly 30% revenue growth between the fourth quarter of 2000 and the first quarter of 2001 while many ad-supported Internet companies have seen double-digit declines.

"As advertisers question the value of their online advertising spending, they are looking toward sites that are cost-effective and require low up-front investments," Jupiter Media Metrix said in its report. Two different revenue streams have developed. One, used by companies such as GoTo.com and LookSmart, calls for advertisers to pay on a per-click basis via auction to be as close to the top of the search engine results as possible.

The other model, which companies such as LookSmart and Yahoo Inc. are experimenting with, is having companies pay for inclusion in directory sections or editorial reviews, Jupiter Media Metrix said.

When consumers are looking for a product to buy online, 28% go to a search engine and type in the product name, according to a recent Jupiter consumer survey. In contrast, only 5% said they go to a search engine and look in the shopping channel.

The paid placement models, however, have raised some ethical and bias issues.

"I think we are seeing more and more of the search engines leaning toward paid search. Even Yahoo has expedited search listings and they have always been staunch opponents of these things," said Jupiter analyst Marissa Gluck, noting that there is some backlash against the practice.

- REUTERS