Will the Government Intervene in Online Advertising?

[Garrett]

What are the major threats to growth in the online advertising marketplace?

This question was posed to a panel of experts during the “Search Engine Advertising” session of this week’s Search Engine Strategies conference in New York City, where online branding has been a popular topic of discussion.

SearchEngineWatch.com (http://www.searchenginewatch.com) editor Danny Sullivan was quick to reply by saying that the major players Google and Overture see absolutely no threat whatsoever. The audience responded to his statement with laughter.

Taking the question more seriously, SiteLab International’s Dana Todd shared her hope that search advertising doesn’t follow in the footsteps of banner advertising. Todd is interested in building banner networks based on the value she believes banners can still provide. She thinks the reason banners were dumped so quickly is because they were over-valued in the past. Now, she wonders whether search advertising is being valued too highly.

She also sees the government as possibly doing something that could affect the marketplace, especially in regards to direct feeds where it’s often difficult for users to tell which search engine results placements are paid placements.

Carolyn Griffin, Director of Search Engine Marketing at Carat Interactive sees another threat in the rising cost of paid placement. The big corporations can afford these higher prices but the small businesses can’t.

Juptier Research Analyst Niki Scevak says managing the expectations of advertisers is a potentially big threat to growth as well.

What do you think the biggest threat is to the advertising marketplace?

[Daniel Brandt]

The most immediate threat is to Google alone, from the FDA, the DEA, a Senate committee, and a House committee. This is because Google is still running ads for rogue pharmacies, where you can get controlled drugs without a prescription.

The FTC does not have jurisdiction over prescription drug advertising; this is done by the FDA. But the FTC has jurisdiction with over-the-counter drug advertising, and, as we all know, they are interested in potential deceptive practices regarding search engines, and how these engines present their results to consumers.

If the government steps in, I think it will be precipated by the search engine wars. For example, AskJeeves just dropped a PFI feed because they said it was skewing their index. This sort of statement from a big search engine is bound to raise an eyebrow at the FTC. And with respect to Google's rogue pharamacy ads, this cannot make the other search engines happy either, since they already stopped such ads months ago, leaving Google to collect all the money that such ads generate.

The bottom line is that the search engines are more of a threat to each other, than the government is a threat to search engines as a whole.

[xmx]

In my opinion the increased costs per click, due to the increasing of competition itself, are the real threat.

Some years ago, I mean 2000, advertising in goto, then overture, costed a fraction of today for important keywords, and combinations of two words were really cheap.

This has rather disappeared now, and many advertisers think twice before bidding for keywords at high prices and prefer to test different kind of advertising.

Once again companies with big budgets are making difficult for general internet small business to take their slices of the cake.

It seems to me that only the pioneer stage of a form of advertising can be high effective with low budgets.

[Daniel Brandt]

(Adjusts tinfoil hat....)

I don't want to be called a conspiracy theorist again, but I hate to leave it like I did above because I might be called naive.

There may be more to Ask Jeeves Inc. and their dumping of the PFI feed than meets the eye. Nearly half of Ask Jeeves' revenue in the second quarter of 2003 came from their AdWords partnership with Google. The contract is expected to last until September 2005, but either party can terminate it in September 2004.

Ask Jeeves and Teoma are running Google's rogue pharmacy ads. It's quite possible that Ask Jeeves cannot "just say no" to Google without putting the partnership in jeopardy. If the partnership is in jeopardy, so is Ask Jeeves' stock price. When Larry Page announces that Yahoo's PFI is something Google would never do, and Ask Jeeves says the same thing a day or two later, there may be a connection between the two announcements.

My final point remains, which is that the search engine wars will be more intersting to watch than government bureaucrats. The engines operate at lightening speed, while the government hardly moves at all.