• by Wendy Davis , Staff Writer @wendyndavis, June 10, 2005

There's no real question that the emergence of paid search, estimated to account for somewhere around half of all online ad dollars, has changed the Internet advertising landscape. Not only did sponsored search listings pull new media out of the dot-com bust, but pay-per-click listings have continued to surge even as marketers are again paying for online branding campaigns.

In fact, a search-bullish Merrill Lynch report released Thursday predicted that sponsored search would continue to grow this year, accounting for 47 percent of the online ad spend in 2005.

But, the same day as Merrill Lynch issued its report, Consumer Reports' WebWatch released a more sobering study. WebWatch stated that some prominent search engines, including Yahoo!, fail to adequately disclose paid inclusion--instances when marketers pay to be included in the results. Unlike other types of paid listings, paid inclusion links aren't listed in a separate section of the results page, but are mixed in with the organic listings--although sometimes with fine print indicating they've been paid for.

Unsophisticated searchers, or those who don't scrutinize that fine print, sometimes confuse the natural results, based on the engine's algorithm, with the pay-for-play listings. When consumers learn the truth, stated the report, they feel mislead.

The report specifically criticized Yahoo! for having changed its disclosure practices. Among other things, Yahoo! recently changed its bright red disclosure headings to the harder-to-see light gray.

It should be obvious that giving consumers reason to feel betrayed is a very bad idea. Consumers already are wary of ads. They're also wary of the Internet--thanks to spam, phishing and other online problems. As an industry, paid search depends entirely on consumers actively choosing to search--which, in turn, depends on their faith in the results.

If search, not to mention online advertising, is to continue making money, search engines are going to have to start doing a better job of differentiating the ads from the content.