We have covered many of the search ad keyword lawsuits aimed between competitors or directly at the search engines in the past. Nowadays, it seems like a new suit around this topic is filed weekly. Typically these suits go after trademark violations and the like, but a new suit is focusing on a privacy legality.

Suit over search-engine keywords tries new angle from the Associated Press reports Habush Habush & Rottier is suing Cannon & Dunphy for buying their name on Google and Bing. Habush Habush & Rottier is taking the privacy angle, where in Wisconsin there is the “right-to-privacy statute” that prohibits the use of any living person’s name for advertising purposes without the person’s consent. Yes, both firms are based in Wisconsin.

Robert Habush, the president of Habush Habush & Rottier said:

We believe this is deceptive, confusing and misleading. If Bill Cannon thinks this is a correct way to do business he needs to have his moral compass taken to the repair shop.

Cannon told the AP:

This is equally available to Habush if he weren’t so cheap to bid on his own name.

I am no legal expert, but this case does seem unique from all the other legal cases on search ads.

According to AllThingsD the MicroHoo search deal is nearing completion and “definitive agreement” status. Speculation that the deal was in trouble started happening when the two companies failed to meet their self-imposed October 27 deadline to finalize the complex agreement. However it appears the circumstances were just as reported in the parties’ 8-K filing with the US Securities & Exchange Commission:

The Letter Agreement specified that the parties would execute Definitive Agreements by October 27, 2009, but given the complex nature of the transaction, there remain some details to be finalized. The parties are working diligently on finalizing the agreements, have made good progress to date, and have agreed to execute the agreements as expeditiously as possible . . .

On the regulatory front AllThingsD reports that “several sources said, those government approvals are now nearing completion at the Justice Department, even though the Federal Trade Commission might still ask for more assurances on privacy issues related to online advertising and consumer data.” Europe must also approve the deal.

According to the most recent comScore search market share data, the combined reach of MicroHoo search would be 27.9% vs. Google’s 65.4%. Assuming the deal goes through up next for Microsoft would be a decision about whether to attempt to buy Ask, which IAC’s Barry Diller is open to selling, and whether to bid for AOL’s search-ad business when that deal comes up for renewal in 2010.

However a MicroHoo approval would potentially make a later Ask acquisition (or maybe even an AOL deal) harder because it would reduce the number of independent search engines in the market.

Just when you thought paid inclusion was finally dead with holdout Yahoo getting out of the space, it’s come back from the most unlikeliest of sources: Google. Below, a look at the experiment plus reexamining the FTC’s guidelines about disclosing paid ads. Does saying “Promoted Videos” on YouTube rather than “Sponsored Videos” meet these?

For those unfamiliar with paid inclusion, it is where advertisers pay to have their listings included within editorial results, rather than being listed separately from them as paid placement search ads. In paid inclusion, there’s also no guarantee that the ads will show in a particular position.

Paid inclusion is a dinosaur left over from the days when you had companies that would sell a search partner only editorial results, leaving it to that partner to outsource with someone else for paid listings. For example, Microsoft once had its search engine using editorial results from Inktomi and paid results from Overture. It is also a remnant from before the days when search ads generated so much revenue that there was no need to deal with “messy” paid inclusion.

Messy? Sure. Yahoo would tell the world how fresh and complete its index was. Yet to site owners, it would pitch paid inclusion as a way to ensure that your pages were getting regularly visited by its spider or not overlooked entirely. It’s also messy to explain to searchers that these paid listings integrated into editorial results aren’t “ads” simply because they weren’t guaranteed to rank.

Paid inclusion is so messy that Google’s founders took an extraordinary step of speaking out against it in their IPO registration document of April 2004 several times. I’ll come back to those statements, but let’s look at what’s happening on Google now

The folks over at Range Online Media spotted new ads that are integrated directly within shopping results. Below are some screenshots they also provided me:

The arrow points to the ads. Here’s another example:

Here’s a close-up of the ad integration:

I can’t see these, when I look at the same pages, such as here. That’s because it’s an experiment that Google confirmed to me is being shown only to a small number of people. These are also separate from the other Google Product Ads rolled out this month to everyone.

I asked about these being paid inclusion. In response, I was sent:

At Google, ads are always labeled to indicate that the information is sponsored. We’re currently running a test in which Product Listing Ads appear on the Google Product Search page when a user clicks to ‘Compare Prices.’ Like the product listings, these ads provide information such as prices and ratings, so when a user sorts the information, the list changes the order of both the listings and the ads. As always, the ads are labeled as advertisements, and this experiment is intended to help us understand whether this is a useful experience for our users. This feature is currently in a limited beta with a small number of U.S.-based advertisers, and as with all tests, we may make changes to our current experiment in the future.

Wow. That made me feel more than ever this was paid inclusion. See, even though there’s an ad label attached to the listings, the fact that they are integrated within editorial results themselves rather than being segregated from them is one sign. In addition, if you can sort the results, then the ads have no guaranteed placement, which again is a core element of paid inclusion.

Now let’s go back to what Google’s founders said about the practice in the IPO papers (I’ve bolded key parts):

Our search results are the best we know how to produce. They are unbiased and objective, and we do not accept payment for them or for inclusion or more frequent updating.

And:

We will do our best to provide the most relevant and useful search results possible, independent of financial incentives. Our search results will be objective and we will not accept payment for inclusion or ranking in them.

And:

Objectivity. We believe it is very important that the results users get from Google are produced with only their interests in mind. We do not accept money for search result ranking or inclusion. We do accept fees for advertising, but it does not influence how we generate our search results. The advertising is clearly marked and separated. This is similar to a newspaper, where the articles are independent of the advertising. Some of our competitors charge web sites for inclusion in their indices or for more frequent updating of pages. Inclusion and frequent updating in our index are open to all sites free of charge. We apply these principles to each of our products and services. We believe it is important for users to have access to the best available information and research, not just the information that someone pays for them to see.

And:

Froogle [the name for Google Product Search back then] enables people to easily find products for sale online…. Most online merchants are also automatically included in Froogle’s index of shopping sites. Because we do not charge merchants for inclusion in Froogle, our users can browse product categories or conduct product searches with confidence that the results we provide are relevant and unbiased. As with many of our products, Froogle displays relevant advertising separately from search results.

At best, Google could excuse the current experiment from being paid inclusion by saying that these advertisers are not being charged to be included. That if they want to be in those listings, that’s free if they put in product feeds. But paid inclusion overall was rarely pitched as a way only to be included. It was pitched as a way to guarantee fast inclusion and constant updates. And the unspoken benefit was that it put you right in the mix of the regular results.

When I spoke further with Google about the move, the company stressed that the ads all have ad disclaimers and that the testing will also look at putting the ads outside the regular results and also may not allow for sorting. What you see above isn’t final, by any measure.

Certainly the ad disclaimer helps, but as long as they’re integrated right in the regular results, with sorting, that’s paid inclusion in my book. It’s also paid inclusion according to the Federal Trade Commission, from its definition in 2002 (again, I’ve bolded the key part):

Paid inclusion can take many forms. Examples of paid inclusion include programs where the only sites listed are those that have paid; where paid sites are intermingled among non-paid sites; and where companies pay to have their Web sites or URLs reviewed more quickly, or for more frequent spidering of their Web sites or URLs, or for the review or inclusion of deeper levels of their Web sites, than is the case with non-paid sites….

In a related matter, I asked why YouTube’s “Promoted Videos” aren’t called “Sponsored Videos,” as they once were. “Sponsored” has been the search industry’s term-of-choice when it comes to indicating what’s an ad. It’s used by Google, Yahoo and Bing, and it was a word the FTC particularly seemed to like when it issued guidelines.

Google emailed me:

Whenever a Promoted Video appears on YouTube, it is marked as a ‘Promoted Video’ to indicate that it is an advertisement. This label is hyperlinked to the YouTube Glossary, which offers more information about the Promoted Videos advertising program.

OK, I knew that. But these were called “Promoted Videos” originally, then changed to “Sponsored Videos,” then changed back to Promoted, which to my ear doesn’t sound as ad-like. So why were they changed?

To that, Google noted a blog post from March saying:

We think “Promoted Videos” more accurately describes this program than “Sponsored Videos,” the original name.

I was also told that “Promoted” was determined to be more descriptive and appropriate.

Determined how? Google wouldn’t share that. So maybe there was some testing done to see if users understood that “Promoted” better explained that these are ads. Or maybe a product team decided “Promoted” got a better clickthrough than “Sponsored” because people did NOT realize these were ads.

Google has massively ramped up where and how it shows ads over the past year. As the company continues to grow, it also has people without a firm history of knowing why ads are separated from search results and why certain words have been used to indicate what’s an ad and what’s not. Calling something “Promoted” that’s an ad in one part of Google while it’s “Sponsored” in another isn’t consistent and generates confusion. Mixing ads into editorial results also potentially generates confusion. Neither makes me feel particular good, but hey, maybe that’s just me.

There’s a report from Reuters this morning that Microsoft and Yahoo are considering expanding the scope of their search deal “outside the United States”:

Microsoft Corp Chief Executive Steve Ballmer said on Thursday the company could look to extend its search engine partnership with Yahoo outside the United States, if it gets regulatory approval.

Wasn’t that already the intention? I thought it was a global deal already. European regulators wouldn’t be considering it if it didn’t apply to their markets; they wouldn’t have jurisdiction. So I guess I’m a bit confused I guess.

Regardless, if either the EU or US Department of Justice disapproves the deal it will kill the whole thing globally in all likelihood. I would expect approval although it’s also possible that limitations and conditions could be attached by regulators.

Reportedly Barry Diller, CEO of IAC Corp., wants to sell Ask — perhaps feeling he’s ridden the wave as far as he can (with some disappointment). If so, the most likely buyer would be Microsoft according to widespread speculation. It would allow Microsoft to grab some incremental but meaningful share of the market. The question would be at what price?

Timing is huge here. If Ying/MicroHoo were to gain approval from regulators, or the appearance of forthcoming approval were strong, the value of Ask to Microsoft is less than if the Yahoo deal were not to go through. In the latter case Diller could exact a higher price than in the former. There could be other buyers out there for Ask (e.g., News Corp., Comcast?) but Microsoft is the one with more to gain from adding scale.

According to comScore, Ask maintains a small but meaningful core following:

That respresents 718 million queries in September, according to the metrics firm. However iCrossing recently said it has seen referrals to its clients’ sites from Ask drop “precipitously.”

Postscript: The following was a clarification that I received in email from a Microsoft spokesperson:

[T]he Microsoft-Yahoo! agreement does apply outside the United States. As it’s written, it must be approved by regulators in the U.S. and Europe in order to go into effect. As soon as those regulators give approval, the agreement goes into effect worldwide, although implementation in a specific country is postponed if regulatory approval is required there and it is not yet obtained. But that will not postpone implementation in other places.

Facebook has been in an ongoing fight against spam and yesterday announced a significant victory in court. The company said it had obtained an eye-popping $711 million judgment against Spam King Sanford Wallace who had had posted unwanted messages on Facebook users’ Walls. Wallace, who is reportedly bankrupt may also face time in the big house. According to the Facebook blog:

While we don’t expect to receive the vast majority of the award, we hope that this will act as a continued deterrent against these criminals. Most notably, the judge referred Wallace to the U.S. Attorney’s Office with a request that Wallace be prosecuted for criminal contempt, which means that in addition to the judgment, he now faces possible jail time.

Late last year Facebook won an even larger, $873 million judgment against Canadian spammer, Adam Guerbuez and Atlantis Blue Capital.

Facebook implores users to identify and report spammers to the company. Keeping Facebook spam-free helps users but it’s equally critical for the continued health and usage of Facebook more broadly.

Get ready marketers: a credible new report with sweeping implications from the University of Pennsylvania and UC Berkeley is likely to be the nail in the coffin of self regulation of online advertising. Specifically I’m talking about behavioral targeting, which largely concerns online display advertising but does marginally touch search at Yahoo and Google.

The NY Times discussed the report, released today:

The study’s authors hired a survey company to conduct interviews with 1,000 adult Internet users. The interview, which lasted about 20 minutes, included questions like “Please tell me whether or not you want the Web sites you visit to give you discounts that are tailored to your interests.” The results were later adjusted to reflect Census Bureau patterns in categories like sex, age, population density and telephone usage.

Tailored ads in general did not appeal to 66 percent of respondents. Then the respondents were told about different ways companies tailor ads: by following what someone does on the company’s site, on other sites and in offline places like stores.

The respondents’ aversion to tailored ads increased once they learned about targeting methods. In addition to the original 66 percent that said tailored ads were “not O.K.,” an additional 7 percent said such ads were not O.K. when they were tracked on the site. An additional 18 percent said it was not O.K. when they were tracked via other Web sites, and an additional 20 percent said it was not O.K. when they were tracked offline.

Lawmakers have been ready to regulate “behavioral advertising” for some time and the FTC has signaled that it did not believe marketers were doing a good enough job with self regulation. However, the new economic and political climate, more favorable toward regulation, combined with public frustration and anger generally have set the stage for regulation of some kind.

Search will largely be exempted because of the way it works — keyword matching rather than data mining —  although the search engines’ data retention policies are implicated by the report (which I quote a bit more fully on my blog). Yahoo is using search queries as part of its behavioral targeting and Google not long ago implemented “Interest Based Advertising,” a euphemism for behavioral targeting.

However, Google’s privacy and preferences management could become a kind of model in some new regulatory regime.

Very soon lawmakers will introduce legislation to more aggressively protect consumer privacy. One member of Congress, Rick Boucher of Virginia, recently wrote:

Because consumers need an assured level of control over the collection, use and sharing of information about them, a statute providing those assurances is now called for. That goal should be achieved by legislation, which reflects best industry practices and requires that they be followed by all websites that collect information from Internet users. Legislation assuring Internet users that their online experience is more secure will be a driver of greater levels of Internet uses such as e-commerce, not a hindrance to them.

In my view all this points to “when” rather than “if” and the question is: what disclosure and data management burdens will imposed on marketers and publishers? As I said, I think search will largely be unaffected but display could be profoundly affected.

If people are required to be given an “up front” opportunity to “opt-out” of targeting a majority likely will: “Tailored ads in general did not appeal to 66 percent of respondents.”

Bloomberg is reporting this morning that the US Department of Justice has decided to look more closely at the MicroHoo search deal. Microsoft and Yahoo are to provide more information on their “ad pricing and product plans, a person familiar with the matter said.” This is not a surprise.

The companies must convince regulators that the deal will not harm competition or adversely affect SEM pricing. They must also do a similar dance in Europe, where a parallel process will take place. In the end, however, it’s likely the deal will be approved given broad US and EU concerns about Google’s market position and this deal as a possible counterweight to that dominance.

And in a CNBC interview Yahoo CEO Carol Bartz says she would have accepted the Microsoft takeover offer that then CEO Jerry Yang and the Yahoo board rejected. (That would have had a tougher time with regulators than the search-only deal now before them.) Bartz also asserted that Yahoo was still in the search business by controlling the search experience around Bing results.

Bartz also discussed many other aspects of Yahoo’s strategy and value to users. You can see the full interview below.

Eric Goldman updated us on a case where Yahoo was sued for showing spam and porn pages for a search on a person’s name. Beverly Stayart was upset that when you searched for her name on Yahoo, Yahoo returned some results that were not to her liking. So she sued Yahoo but the court wouldn’t have it.

Goldman explained that the court rejected her suit on three different levels. She sued Yahoo for Lanham Act false endorsement and it was denied by the court, as expected. The reason it was rejected? Goldman sums it up as follows:

The court denies Various’ 230 defense because its association with the banner ad was unclear. Having dismissed the federal Lanham Act claims completely, the court then declines supplemental jurisdiction over the state law claims. The court also rejects Stayart’s guffaw-inducing request for sanctions against the defendants for having the temerity of moving to dismiss her complaint.

It’s probably fair to say that the French have a love-hate relationship with American culture, companies and institutions. (The same could be said for some Americans; remember “freedom fries”?) The latest expression of the negative side of that equation in the Gallic world is disappointment over an apparently impending agreement between the French national library and Google to allow the latter to scan its books. The UK’s Times Online has the story of what one french journalist described as a movement by the library from “resistance to collaboration”:

The Bibliothèque Nationale de France (BNF) was reported to be on the verge of a deal with the Californian giant under which Google’s digital library would get even larger. “Google has won,” said the front-page headline in La Tribune.

According to the article the deal was a pragmatic concession to the cost of maintaining a separate and competing project:

The decision was purely financial, said Denis Bruckmann, director of collections at the library — which will be joining 29 other leading libraries in opening its shelves to Google’s project, including Oxford’s Bodleian. France provided only €5 million a year for digitising books for Gallica, the national digital library, yet the national library needed up to €80 million (£68 million) just for its works from 1870 to 1940, he said.

Back in the US, another party has lined up against the Google Book Search Settlement, Scott E. Gant, a lawyer-author and member of Washington law firm Boies Schiller & Flexner. He intends to file a “sweeping objection” to the settlement today. The reason that his involvement may be significant is that he’s advancing new legal theories and arguments against the deal:

Unlike most previous objections to the project, which focused on policy issues and recommended modifications to the settlement, Mr. Gant argues that the agreement, which gives Google commercial rights to millions of books without having to negotiate for them individually, amounts to an abuse of the class-action process. He also contends that it does not sufficiently compensate authors and does not adequately notify and represent all the authors affected.

Legal experts, who had not seen the filing but heard a description of it, said it could be the most direct attack on the agreement so far.

The embattled Book Search Settlement is also the subject of a formal US Justice Department anti-trust inquiry. As an aside the Boies of Boies Schiller & Flexner is David Boies, the lawyer who led the successful anti-trust case against Microsoft and who lost the presidency for Al Gore in unsuccessful arguments before the US Supreme Court in 2000.

A report (PDF) by LegitScript and KnujOn claims that of the prescription drug and online pharmacy search ads on Bing (i.e. adCenter), Microsoft’s search engine, 89.7% led to “rogue” Internet pharmacies. By “rogue” they mean Internet pharmacies that fall into the categories of:

1. Those that facilitate the sale of prescription drugs, including controlled substances, without requiring a valid prescription.
2. Those that sell drugs from sources that are not licensed as a pharmacy in any US jurisdiction.
3. Those that illegally source unregulated, unapproved prescription drugs from outside of the United States.
4. Those that are otherwise deceptive or misleading.

This study was done over the June or July 2009 months and only examined Bing’s search ads, not the organic listings. Microsoft currently has not commented on this report.

LegitScript is an Internet pharmacy verification organization identified by the National Association of Boards of Pharmacy (NABP).