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ads are hot stuff
Ethically dicey, yes, but they do churn revenues
By Marty Beard
This may be among the worst ad markets in 40 years, and the web is certainly feeling it, but two search sites are holding up a lot better than most, and for an interesting reason.
They are GoTo and LookSmart, and their ad hook is the sponsored search result, where advertisers pay to have their messages come up with search results.
A recent Jupiter Media Metrix study sums up their value: "As advertisers question the value of their online advertising spending, they are looking toward sites that are cost-effective and require low upfront investments."
They appear to be finding them at GoTo and LookSmart.
Neither has experienced the steep drop-offs in ad revenue that such major properties as Yahoo, iVillage and Salon.com have.
GoTo’s revenues are actually up.
Between the fourth quarter of last year and the first quarter of this year, GoTo’s revenue increased by 29 percent.
GoTo is a no-frills search site that doesn’t offer the perks found on other portals, such as free email and stock quotes.
In the same time period, Yahoo’s revenue plummeted 42 percent, Salon’s revenue fell 57 percent, and iVillage’s revenue fell 33 percent.
LookSmart, a six-year-old directory and search site, also posted better-than-average revenues.
While the company’s revenues fell 6 percent between the fourth quarter of last year and the first quarter of this year, it was a significantly smaller dip than the other ad-supported internet companies experienced in that period.
Jupiter Media Metrix researchers credit GoTo’s and LookSmart’s sponsored search formulas.
In pay-for-prominence advertising, advertisers place bids to have their message or product displayed as near the top as possible in the search engine results.
In pay-for-inclusion searches, advertisers pay for placement in editorial reviews or directory sections. LookSmart deals in pay-for-inclusion searches.
Advertisers’ interest in sponsored search results is understandable.
A recent Jupiter Consumer Survey found that when they’re researching a specific product, 28 percent of consumers visit a search engine and type in the name of the product. But just 5 percent of consumers browse through online shopping channels when they have a particular item in mind.
But the line between sponsored search results and results from search engines where results are unbiased raises some thorny ethical issues, as Jupiter Media Metrix acknowledges.
Many consumers might not know the difference between sponsored and unsponsored links, even when search sites label them.
LookSmart runs three different types of sponsored results: the featured listings, which run atop the results; directory topics, which include pay-for-inclusion searches; and reviewed web sites, which also incorporate paid listings.
GoTo and LookSmart aren’t the only web sites that engage in the practice, although they are just about the only sites that rely on it exclusively.
Commercial Alert, a group founded by Ralph Nader, complained two weeks ago to the Federal Trade Commission about search engines’ sponsored search results practices. Eight search sites were cited: MSN, Netscape, DirectHit, AskJeeves, Hotbot, Lycos, AltaVista, LookSmart and iWon.
Commercial Alert contends that the sites may be violating federal laws against deceptive advertising by displaying disingenuous results.
"Changing the search results is unethical," says Jakob Nielsen, a web design expert and principal with the Nielsen Norman Group.
"It is dangerous for web sites to proceed any further down the road of compromising their user experience for the sake of short-term revenues."
But according to Jupiter Media Metrix, GoTo’s success indicates that consumers are willing to "accept paid search as a legitimate marketing vehicle."
As evidence, Jupiter Media Metrix points out that people spend more than twice as long attempting to pinpoint what they’re looking for on the search sites operated by the likes of MSN and Yahoo.
Specifically, consumers spent 140 minutes a month on MSN’s search site, compared to just 56 minutes a month on GoTo.com.
"As advertisers spent millions over the last few years for inclusion in portals’ shopping channels and banners related to key words, consumer behavior suggests it is the search results themselves that are far more important," the report notes.
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Quarterly
Revenue Growth |
|||||||
|
Site |
2Q99 |
3Q99 |
4Q99 |
1Q00- |
2Q00- |
3Q00- |
4Q00- |
|
Yahoo |
+21 |
+30 |
+14 |
+18 |
+9 |
+5 |
-42 |
|
CNET |
+11 |
+37 |
+14 |
+18 |
+8 |
+97 |
-32 |
|
CBS Market |
+45 |
+44 |
+24 |
+7 |
+1 |
+9 |
-19 |
|
Salon |
+37 |
+119 |
-14 |
-32 |
+25 |
+3 |
-59 |
|
GoTo |
+132 |
+58 |
+29 |
+22 |
+19 |
+59 |
+29 |
|
Look |
+27 |
+39 |
+16 |
+27 |
+22 |
-9 |
-6 |
|
iVillage |
+32 |
+80 |
+8 |
-7 |
+4 |
-8 |
-33 |
| Source:
Jupiter Media Metrix
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August 1, 2001 © 2001 Media Life
-Marty Beard is a staff writer for Media Life.
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