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The Paid Inclusion Dinosaur

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A longer version of this story for Search Engine Watch members explains more about how paid inclusion was used to help search providers compete, touches on rumors of pricing changes and internal debate about paid inclusion at Yahoo and examines how paid inclusion technology might be a good, non-controversial way to expand paid placement listings.
Click here to learn more about becoming a member

In my first part of this series on paid inclusion, I wrote about how Yahoo sees paid inclusion as a solution to some of the problems crawlers have in gathering content from across the web. I'll examine that argument more closely later in the series. In this part, I'll look at the other major reason Yahoo likes paid inclusion: money.

Much of the screen real estate on search engines is unsold -- a surprising amount, some will find. To illustrate this, look at the chart below, which shows the number of paid versus free links for a search on "shoes" at several major search engines according to a check I did last week:

Links Yahoo AOL MSN Google Ask
Paid Links

8

8

9

10

11

Free Links

20

10

11

10

10

Total

28

18

20

20

21

% Free

71%

56%

55%

50%

48%

An important caveat. I didn't subtract any paid inclusion URLs that may have been mixed in among the "free" links. Identifying these is a complex task, as I'll explain more in another part of this series. Despite this, the free figure still serves as a useful starting point.

You'll see that "pure" Google has one of the lowest percentages of free material on its search results pages. Half of Google's major outgoing links are devoted to ads.

Of course, most of these paid links at Google reside in the less prominent ad area along the left-side of its results page. That's why Google doesn't feel so ad heavy. As for "sell-out" Yahoo, it devotes more of its search results page to editorial content than any of its competitors.

Why not simply have all paid listings and stop giving away traffic away for free? Because doing so might hurt relevancy. You can't earn at all, if people stop coming to search with you.

Enter the attraction of paid inclusion. Some search engines see it as a way to make money off their editorial results without (hopefully) hurting relevancy. But it's a gamble, and one that so far remains unproven.

Throw The Dice!

Until Yahoo's recent move, LookSmart had placed the biggest bet on paid inclusion. My article from 2002, The Bumpy Road To Maximum Monetization, explains how the company sought to earn attractive, recurring income by selling all of its commercial listings on a cost-per-click basis.

Verdict? MSN dumped LookSmart as a search provider last October, saying a big reason was that LookSmart's relevancy was poor. So there you have it, proof that paid inclusion hurts relevancy!

Were that it was so simple. It's difficult to be conclusive. For one thing, LookSmart's limited human-powered database might not have performed as well against a comprehensive crawler-based index, even if paid inclusion weren't involved. In addition, LookSmart recently fired back that had its US database been tested, rather than its UK one, the results would have been better.

The LookSmart experience is important, because Yahoo has embarked on a somewhat similar path. Its new program puts all paid inclusion listings on a cost-per-click basis. Potentially, that means good pages might disappear, if the owners stop paying. However, Yahoo assures that it will continue to carry the vast majority of its listings for free, including any good pages, regardless of whether they've paid.

Another part of this series will look much more closely at this claim and how the Yahoo paid inclusion system operates. For this part, we'll stay focused on paid inclusion as a revenue source.

Some Paid Inclusion Alternatives

Why did I call this part of the series "The Paid Inclusion Dinosaur?" Because paid inclusion evolved as a survival means for companies like Inktomi and LookSmart that "powered" search for others. They needed the income to subsidize the cost of providing results to partners who were pressuring them for better deals due to new competition from Overture and Google.

What made sense for Inktomi and LookSmart to do in the past makes no sense for Yahoo to do now. Yahoo operates its own popular search site, powered by its own search technology. It can subsidize the cost of providing "free" editorial results through the ads that it offers, just as Google does. There are simply better ways for it to increase revenue than follow the traditional paid inclusion model -- and ways that would avoid the mixed messages paid inclusion brings with it.

How? For one, Yahoo could have reduced the number of editorial listings it shows to 10, rather than the 20 it currently provides by default. That likely would have upped the paid listing clickthrough rate (and revenues), yet Yahoo still would have carried fewer ads than Google.

Alternatively, Yahoo could have increased the number of paid listings it shows at the top of its results page from the current four to more than this. That's what happens at Ask Jeeves. Ask will show up all the paid listings that its ad partner Google can provide, up to a maximum of 10. These appear above its editorial results.

Of course, there's a real danger that adding more paid listings "above the fold" could make searchers feel results are too commercial. However, at least the paid listings would still be well marked, and editorial results would still be present on the page.

There are even more creative and valuable ways Yahoo could have made money by partnering with content owners, which I'll explore later in the series. These include things such as centralized and approved rank checking, clickthrough tracking independent of paid inclusion or express support for crawler issues.

Unfortunately, the current paid inclusion program isn't creative, doesn't solve the mixed messages problem, and charging a per click fee for ALL types of paid inclusion was a giant step backwards.

Don't Meet, Exceed Disclosure Requirements!

Another revenue building solution Yahoo could have tried would be to segregate its paid inclusion listings entirely. Why not have a section of "Sponsored" paid placement results, followed by something like "Content Partner" listings, then ordinary web results after that? That would help many advertisers see value in doing paid inclusion yet keep things cleaner for the searcher.

Even more radically, why not give paid inclusion listings a ranking boost? After all, Yahoo's made a big deal that paid inclusion and its other content acquisition programs are supposedly ferreting out the best in content from across the web. So embrace this and reward this content, if you're proud of it. Again, that gives advertisers value. As for consumers, if the content really is better, then they'd be better served by such promotion.

It's important to remember that US Federal Trade Commission guidelines don't forbid paid inclusion listings from being boosted. They simply say that you should somehow provide adequate disclosure of how paid inclusion operates within your service.

Right now, Yahoo appears to be meeting those requirements through a "What's This?" link that appears at the top of its web search results section, next to the "Top 20 Web Results" heading. The link leads to a basic page that explains how paid inclusion works at Yahoo.

While Yahoo's doing what's required, I personally I don't think just meeting the FTC requirements is sufficient any longer. I'd like Yahoo to take a leadership role and exceed the requirements by somehow clearly labeling paid inclusion listings. It's a move I think would help improve the somewhat battered image that paid inclusion has earned over the past two years.

What exactly might Yahoo do? Why do it? And what does Yahoo think about such an idea? That's what I'll explore in the next part of this series.

Want to comment on this or other search stories? Come test our new Search Engine Watch Forums!

A longer version of this story for Search Engine Watch members explains more about how paid inclusion was used to help search providers compete, touches on rumors of pricing changes and internal debate about paid inclusion at Yahoo and examines how paid inclusion technology might be a good, non-controversial way to expand paid placement listings.
Click here to learn more about becoming a member


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