Labeling Ads as Ads

The FTC steps in to make sure consumers aren’t confused. It’s no secret that search sites have been providing largely misleading or inaccurate results since the birth of the Internet. Some have even said that the online advertising industry that exists today is a direct result of search engines’ inability to maintain accurate website listings on a large scale. To change that perception (and to make some money in the process), search sites have decided that serving ads onto their results pages was more efficient (and profitable) than trying to accommodate hundreds of thousands of constituents in listing formats. And in the last year, even search sites that were initially reticent to sell listing space have begun to accommodate this as the need for additional revenue streams arose.

By doing that, they may have gotten themselves into hot water with the FTC.

The issue is with the words used to describe listings on a search page. Last year, Ralph Nader’s consumer interest group Commercial Alert filed a complaint against seven search site companies, saying their paid listings weren’t labeled as ads, which is deceptive advertising. Named in the complaint were Alta Vista, AOL Time Warner, Direct Hit Technologies, iWon, LookSmart, Microsoft, and Terra Lycos.

The ads "look like information from an objective database, but they are paid ads in disguise," the complaint said. It argued that the listings must be labeled as ads so as not to confuse consumers.

The FTC finally replied to the complaint in late June, sending letters warning them to label paid listings with clear language like "sponsored links."

While "sponsored links" is an acceptable term, neutral terms that have been used, including "featured listings," "recommended sites," "search partners," "products and services," and "partner search results," are not. In a letter to Gary Ruskin, Commercial Alert’s executive director, the FTC said listings should be "clearly labeled as such using terms conveying that the rank is paid for."

By then, most search companies were already in compliance with Commercial Alert’s demands, but the issue has served to rile the sponsored search industry, which has moved into an adolescent stage of development, having established itself as a much more dexterous alternative to traditional search engine marketing. Major search sites Google and Yahoo! clearly label advertisements as such, with Google saying, "All ads are clearly marked as sponsored links and set apart from the objective, web-wide search results." Yahoo! labels the ads similarly. James Beriker, president and CEO of Search 123, a pay-per-click search engine firm, says the initial reason for labeling placement ads as sponsored links had nothing to do with informing consumers. "They listed them so other advertisers would know placements are available," he says. But with the FTC action, "they’ve been made to care about consumers," he says. "The labeling has to be less ambiguous or [the FTC will] consider taking action."

The industry has established itself, and it’s not as strictly profit-conscious as Commercial Alert suggests. Many paid search results syndicators stringently regulate these results for accuracy, content relevance, and even functional viability — a refreshing note for consumers. "Engines have become much stricter in the way listings are worded," says Dave Williams, president of, an interactive agency that operates 360 Traffic, a search engine advertising division. "They’re sensitive to the way you craft the description and want to make sure the way it’s worded is not too adsy. They must be accurate and consistent with the page they take the consumer."

At least one site deploys editors who review every submission to make certain it complies with myriad standards. Advertisers with search terms that are rejected find themselves back at the drawing board, though helpful editors may suggest alternative search terms or site content changes to achieve compliance. However, this process is not flawless, and words with multiple connotations are sometimes rejected because of irrelevancy.

Advertisers may not want these listings labeled as advertisements. Indeed, the benefit of marketing a website in this arena could be that it is perceived as an information resource rather than an advertising medium. According to Jeff Lanctot, chief media strategist at Avenue A, another interactive agency that purchases search listings on behalf of its clients, "Clients only care about conversion. If they respond they’ll continue to buy it. The sponsored link doesn’t inhibit response rates."

Another benefit to consider is timeliness. Imagine the joy of a search engine specialist who can now marry technology and marketing in a way that would make Ozzie and Harriet green with envy. A hotel chain can now change its search results in a matter of days to help prospective guests find the most recent special deal. An auto manufacturer can send model-specific keyword traffic into a microsite to reach users looking for their latest free financing. Discussions with search engines and agencies reveal that the industry seems eager to comply with the FTC and label ads as ads. Only time will determine if consumers don’t mind if the listings they are so eager to click turn out to be ads. Advertisers won’t mind if they’re labeled that way as long as prospective buyers keep clicking. Major search sites have continued a strong effort to control the integrity and ultimately the relevance of these search results. This self-regulatory process will inherently benefit them by maintaining the site’s credibility (and revenue) through producing relevant search results. Relevant and timely search results will ultimately enhance the user’s experience and, hopefully, keep them coming back. The FTC says it will continue to monitor the situation, but it may not have to act again if the industry follows through, complies with the agency’s standards, and maintains its own.

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