Tuesday, June 3, 2008

Google Search Ads Rile Its Big Customers

As Google Inc. pushes to sell ads crucial to its
revenue growth, some of its largest advertisers are growing angry with
the way the company oversees its sponsored searches.

Felman, chief marketing officer for Mark Monitor, speaks to WSJ's Emily
Steel about a new, deceptive form of search advertising. (June 2)

The problem is a tactic known as "piggybacking," in
which smaller advertisers use major players' brand names, slogans or
other trademarked words in the text of search ads to lure Web surfers
to their own sites.

While Google
and other search engines have policies against this maneuver, some
marketers say the practice often goes unchecked. The brick-and-mortar
world has long-established laws in this area, but the legal situation
is less clear for the Internet and has only recently started to be
tested in the courts.

Tensions over piggybacking have been simmering for a couple of years. Companies such as Marriott International Inc., InterContinental Hotels Group PLC, AMR Corp.'s American Airlines and Northwest Airlines
Corp. say the use of their names and slogans in the text of other
companies' search ads confuses potential customers and increases their
cost of doing business. They are particularly upset with Google, which
is the dominant player in the search business. It controlled 71.2% of
the search market last year, according to research firm eMarketer Inc.

As a result, Google could face a backlash as it
attempts to grab a bigger share of other advertising niches, including
display advertising and video ads. Big advertisers say they may punish
Google if they aren't satisfied with the way the piggybacking dispute
is dealt with. "This does play into our decision of overall spending --
it has to," says Michael Menis, vice president of global marketing
services at InterContinental.

[google ad]
Some Google advertisers are upset their names are in ads for other sites.

Adds John Gustafson, director of distribution and
Internet strategy at Northwest Airlines: "If Google has an inability to
help us resolve issues about abuses of our brand, that would impact our
decision to participate in future forms of advertising."

Last August, American Airlines filed a suit against
Google in federal court in Fort Worth, Texas, seeking restitution for
damages caused by trademark infringement on the search engine. The
airline is asking Google to stop selling its trademarked terms to other
advertisers. This practice is "utilizing our brand that we've built for
more than 80 years for the benefit of someone else," says American
Airlines spokesman Billy Sanez.

Google says it is disappointed that the court denied
its motion to dismiss the lawsuit. It believes the suit lacks merit.
"Google's trademark policy strikes a proper balance between trademark
owners' interests and consumer choice and has been validated by prior
court decisions," a Google spokeswoman says.

Google acknowledges that piggybacking occurs and says
that when it gets complaints, it investigates the claims and tries to
stop the practice. "We have a long-running policy where we don't allow
advertisers to use trademarked terms in ad text to avoid creating any
user confusion," says Richard Holden, a product-management director at

The other main players in the search-advertising market are Yahoo Inc. and Microsoft Corp. Both say they have policies similar to Google's.

The way search-engine advertising works, marketers bid
on key words in a continuous auction. InterContinental, for example,
bids on millions of key words a day from Google in 11 different
languages. Among them are its own brand names, such as "Holiday Inn
Express" and "Crowne Plaza Los Angeles." When a consumer searches for
any of the words, the company's ad appears above or next to the
results, depending on the amount the company bids and an algorithm
Google uses to determine an ad's relevance to a search.

Companies only pay Google for the key words if someone clicks on their search ad.

For large companies, the frustration comes when their
names and other well-known phrases are used in the text of a search ad
leading to an unrelated site. A recent Google search using the words
"Marriott Atlanta," for instance, brought up an advertiser-paid link
labeled "Marriott Atlanta." That led to www.hoteltravel.com, a discount
hotel-reservations site. But a link on the site for a Marriott hotel
room in Atlanta ultimately led to an error page. Marriott says the site
isn't authorized to use the Marriott name in its online text.

Hoteltravel.com didn't respond to requests for a comment. The link on Google has since disappeared.

The piggybacking that Marriott, American and others
are complaining about is not to be confused with another practice known
as "conquest buys," in which marketers buy a competitor's term so that
an ad for their own product appears when a consumer searches for the
other brand. The difference is, the text of the ad doesn't contain the
competitors' name or slogan. While companies have also protested this
practice, Google's policies allow it, unlike piggybacking.

Piggybacking is a big problem for marketers that do a
significant amount of business online, experts say. If it is allowed to
continue, companies seeking online visitors will be forced to pay more
to advertise in search engines because rising demand will force up the
cost of key words, says Eric Clemons, a professor at the University of
Pennsylvania's Wharton School who follows the search-ad business.

The companies interviewed for this article say they
aren't able to put a dollar amount on their claims of lost business as
a result of the piggybacking. But concerns like InterContinental, which
spends more than half of its online marketing budget on search ads, say
they depend on these ads to generate sales. "Any research will tell you
search is the place where people research travel," Mr. Menis says.

A recent Google search with the words "Holiday Inn
Orlando" brought up a sponsored link labeled "Holiday Inn Orlando." It
led to LowFares.com, an online travel comparison-shopping site.
InterContinental Hotels, which owns Holiday Inn, says LowFares.com is
not authorized to advertise using the Holiday Inn name.

LowFares.com says it bids on millions of search terms
at any given time and often uses Google's automatic system to generate
its advertising copy. "What we rely on Google to do is to essentially
stay within its own policies so that if a given key word or a search
term that we are bidding on should not show up in the search ad, it
doesn't," says Steve Yi, senior vice president of Oversee Marketing
Services, which owns LowFares.com. LowFares.com says if it is notified
of a violation, it immediately takes down the ad.

Some advertisers are demanding that Google and other
search engines create an automatic system that will only allow
advertisers to use other companies' names and slogans in the text of
search ads if they have permission.

But Google says its system works. "We are trying to
balance advertisers and trademark owners and user interests," Mr.
Holden says.

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