Kelly Britt, who runs the Autos.com site, was shocked when he discovered he'd been outbid for top positions at GoTo for a variety of auto-related terms in early December.
Britt had just given GoTo a list of about 150 terms, including unusual ones such as "hondaaccord," and asked GoTo to bid him one cent higher than any existing bids for these terms.
Shock turned to anger when Britt discovered that the company that outbid him, CarsDirect, was owned by idealab -- which also owns GoTo.
"When I ran the whois and saw idealab, that's when I started seeing red," Britt said.
Britt had two main complaints. First, the fact that CarsDirect and GoTo were sister companies left him with the impression that CarsDirect would receive favorable treatment. Second, CarsDirect had obviously been given access to terms that Autos.com had thought up, causing Autos.com to face additional competition for terms that might otherwise have gone unnoticed by CarsDirect.
GoTo is now instituting changes in the wake of Britt's complaints, and both parties consider the matter resolved. The company says there was no wrong-doing, but it is working to ensure that its advertisers are better information about its relationships and of the customer assistance they can obtain.
"We need to put in place a communication process so that everyone understands how GoTo works and what options are available to them are in terms of increasing the efficiency of their ads," said Jeffrey Brewer, president and CEO of GoTo.
Now when advertisers sign up, GoTo is disclosing that it may be related to other advertisers through a common investor, such as idealab. It is also reassuring them that these related companies are given no preference within the service over other advertisers.
There are no plans to ban these companies from advertising on GoTo, however, something Britt had originally suggested.
"It would not only be very complicated to track and administer, but it would be an unreasonable," Brewer said. "If we weren't able to do business with those folks in an arms length way, then we couldn't have a good product for searchers."
I'd agree that a ban would be overkill. Existing search sites already promote their own content and that of partners above others, in differing ways. If GoTo did the same, it would merely be following the well-established lead of others.
Moreover, GoTo isn't planning any favoritism. Instead, it simply will continue to allow these related companies to compete fairly with others for positions within its service.
In fact, Brewer points out that there are examples of other idealab companies which are not top ranked. Success depends on each company's own efforts, rather than any automatic advantage that GoTo gives them.
"eToys doesn't show up as high on the list," Brewer said, speaking of another idealab company. "They are not as keen in managing their account, compared to CarsDirect. CarsDirect sees GoTo as a great investment of their time. But eToys dedicates a relatively smaller amount of their time to GoTo listings."
Even Britt says that banning related companies is not a requirement to keep him doing business with GoTo.
"I guess ultimately the answer would be to not allow competing bids. But that is not such a big issue to me. In the back of my mind, I may still have a little unease, but it is not big enough for me to keep pressing complaints or to stop me from bidding," he said.
Britt's other complaint was over the fact that CarsDirect benefited from terms that Autos.com had researched. It turns out that CarsDirect was indeed given terms that indirectly came out of Autos.com own research. But this was not an act of favoritism. It is something that GoTo was doing for any advertiser placing a large order.
As a service, GoTo will have its editors work with large clients to develop lists of terms relating to their site, which they then bid upon. This list comes from editors researching what users are searching for and from examining the terms that other advertisers have bid on.
There's a real advantage to this assistance, in that developing appropriate search terms to target can be a mystical process for some people. But the obvious downside is that if an advertiser discovers a particular effective term that is being undertargeted by others, the act of bidding on it may bring it to an editor's attention -- and thus to the attention of other advertisers.
GoTo has temporarily suspended the use of bidded search terms when offering search term assistance through the end of January. But it will almost certainly resume the practice. Brewer explained that the company feels everyone, advertisers and users alike, benefit from when advertisers bid on as many terms as possible.
This goes back to GoTo's basic model, which is that economic competition provides the best relevancy. Thus, if advertisers bid on many terms, relevancy should rise, and users benefit. In turn, if relevancy is good, more users should turn to the service, which means more possible traffic for advertisers.
"Our job over time is to foster market competition where advertisers have relevant offerings," Brewer said. "We think that benefits the consumer, because the bidding process provides a valuable filter."
The big change will be to ensure that advertisers are aware that their search term suggestions may be used by others, and even more importantly, to level the playing field by ensuring that all advertisers know that assistance with developing terms is available, Brewer said.
GoTo's not alone in sharing keyword lists. Those purchasing keyword-linked banner ads on any of the major search engines can get a list of suggested terms, which will almost certainly have been developed in part out of past ad buys. But positioning at GoTo is a bargain compared to the major search engines, and each new advertiser that competes pushes the bid rates up a bit higher. So, the issue of sharing terms is more sensitive. Certainly Britt doesn't want to see it return.
"I don't think that terms should go into a publicly available pool for other advertisers. I hope they don't resume this," he said.
Pushing bids up also benefits one other important party, of course -- GoTo itself. Higher bids mean more money for the service, and it fully intends to ensure it maximizes revenue.
"They're taking an advantage of a market inefficiency," said Brewer, speaking of advertisers that discover important unbidded terms. "That's an inefficiency that should be our job to make go away."
Brewer does point out that GoTo is not completely mercenary. It doesn't set minimum bid amounts, nor require bids to increase in set increments, such as five or ten cents. It wants to make sure terms are being purchased, but GoTo leaves it to the market to determine the going rate.
"Advertisers say exactly what they are willing to pay, and we don't charge them more than that," Brewer said. "If there is someone willing to pay more based on their business model, we think that's a good indicator of the value to the consumer."
Britt agrees the service is a good investment, at least for the moment.
"Their model works. It's a good buy. They're getting traffic, and we get traffic from them. For the period we were bidding, it was a very good value. I don't know if it's going to stay a good value for the long term," Britt said.
But beyond value, there's also the issue of faith, which for Britt, was shaken by his recent experience:
"Certainly you want to have confidence you can place a bid without these kind of things happening, and that confidence was blown away."
But to GoTo's credit, its actions so far have restored some of his confidence.
"I feel a little better that they are paying more attention to these things and taking more responsible behavior toward customer support issues," Britt said.
You'll find a link to the original complaint from this page, which states that issues with GoTo have been resolved.
GoTo gives its side of the story.