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Paid Inclusion: More Than Meets the Eye

Posted January 9th, 2013 by Andrew Goodman

After a long dormant period, the issue of paid inclusion bubbled up to the surface of news about the business of search recently.

Danny Sullivan, an anchor of continuity in an industry that sometimes suffers from fragmentation and Attention Deficit Disorder, has patiently covered this intersection of the searcher’s user experience and search engine companies’ business models since the first debates about it over a decade ago. Sullivan, not shy about invoking the need for the FTC to investigate potential bias in search results, has generally advocated fuller disclosure of search and directories’ business models. Paid inclusion, he has typically argued, should be well disclosed — presumably because many users are under the impression that search results are unbiased and scientific.

As they should be.

Search engines and categorized directory driven companies often have a vested interest in the confidence consumers have in the unbiased nature of the results. Quite simply, “real” search is distinguished from advertising; both have a role, and both become most useful when people know which is which. Many search engine companies actually feel strongly about this.

Danny also gives equal time to the notion that “paid relationships can be good,” because they raise the bar on quality control standards — and that can help protect consumers.

That being said, it’s all too easy to oversimplify the business challenge of coming up with a business model that would support a great search engine or categorized directory company — or any useful content, for that matter. And in search, analysts, consumers, and gadflies have rarely dug into the details of how different approaches work. Rather — and surprisingly — critics lazily dismiss all paid inclusion models they don’t understand as simply biased or compromised.

Missteps and Abuses Eroded Trust

For their part, the search engines and directories made huge missteps when their “revenue teams” got out in front of the “I love the product” people. LookSmart, a categorized directory, lost credibility when it began charging for both directory listings and paid clicks within those listings. Yahoo’s directory merely charged for “premium listings” in its directory, but in the surface-level analysis we heard in those days, hardly anyone asked tough questions about how they rank-ordered results, how editorial standards worked, etc.

In hindsight, one thing we do know is that there were abuses. Anytime there is a way to “dominate” search results, there will be abuses. For a “short time” of about a year and a half, a single Payday Loan company easily dominated its Yahoo category by buying nine listings. That’s like the small town where the nine “different” dry cleaners are all owned by the same company. Not ideal, but certainly, stranger things have happened.

I believe many of those reading Danny Sullivan’s analyses of these matters over time probably had trouble believing such long posts were needed to explain such straightforward matters — long posts made even longer by the liberal use of screen shots. It’s a style some other analysts began to copy, on the mistaken assumption that the style was what made those posts helpful, rather than their substance.

The fact is, to properly and appropriately explain how some search listings and paid inclusion (or paid advertising near search results) work, it might take posts even longer than Danny’s.

The Relative Simplicity of the Yellow Pages Model

Remember the Yellow Pages? It was pure pay-to-play. Not only did you pay to be in there, but you could choose very large ad units, buy for multiple service areas and yes — even advertise in multiple categories! Certainly — though this was before the days of an “algorithm” that could mediate issues of relevancy and make editorial decisions seem to vanish, as we see today at companies like Google and Yelp — there would have to be some basic standards of relevancy at play. If there are “categories” in a directory, then you probably can’t allow a big fish to buy into every category in the book — even if they have the money.

But certainly there were incentives for ego-bidding, buying multiple service categories, and multiple service areas: if someone wanted to throw their money around, a relationship manager at the directory was there to handle their needs and to keep them happy. And those relationships really did get managed over the long term. In their declining years, no one had many good things to say about the yellow books, but one thing you never heard much of was one company complaining that another one was in there “unfairly”. Because the transaction was nearly *entirely* financial, it was all taken care of behind the scenes, with the cards ultimately being held by the directory publisher: if you’re really upset about something, you’re free to buy no listing. Hope your phone keeps ringing.

[In a more contemporary context, I recall coming into contact with a woman who was Director of Editorial at Overture, the pay-per-click search engine that later became Yahoo Search Marketing. I thought to myself at the time: she was utterly unsuited to the task of sorting out who should be allowed to advertise where across a massively scaled, keyword-driven advertising auction, as most humans would be. Google saw the handwriting on the wall there long before others did, and ramped up their development efforts on what would become the AdWords Quality Score formula, a formula that will necessarily be subject to endless refinement insofar as relevance, fairness, appropriateness and user experiences need to be balanced out with Google's business model.]

So: remember back to whether there were inter-company “squabbles” directed at the “mediator” Yellow Pages company. There was no social media to complain on, and no assumption that a nice helicopter-parent-ish “user experience company” would help you get business if you were the “most relevant”. Your competitors wouldn’t be called out as “spammers” or “cheaters” because there was no such thing.

Things are much better (and cheaper) for remarkable, strong word of mouth businesses, in this regard. Yet paradoxically, they complain more about the platforms that help word of mouth spread cheaply. Perhaps it’s because those platforms have set themselves up as paragons of virtue. Those who discover that “don’t be evil” is really just code for “be 10% less evil than the old boss,” and egged on by critics like Doc Searls and the people at Adbusters, who tend to cartoonishly lampoon and reject all advertising, forget (in their disillusionment) to build viable alternatives, or to respect that trial and error and business relationships built on choice and messes of all different shapes and sizes are epistemically preferable to naive, utopian visions dreamt up by well-meaning individuals.

Benefits of Search and Reviews

These kinds of extreme positions (about how evil Google, Yelp, etc. are) too easily forget how lame things were just fifteen short years ago, as the Yellow Pages era was declining.

“Search” isn’t sacrosanct: it’s a great way to be found. Fortunately for many businesses, Google has spent billions of dollars making it a credible enough source of information and advertising that consumers *willingly* come back in huge numbers daily.

“Reviews” are helpful but not gospel. Sorting out real from fake is a vital prerequisite for forward progress in a user-generated-content sector dominated by well-regarded publicly-traded companies like Yelp and TripAdvisor. Like Google, they invest serious resources into editorial oversight and more and more all the time into developing algorithms to improve trust and relevance. That’s a good long term bet, because consumers place far more value on unbiased information than on biased information.

That being said, they’re not out of the advertising business entirely. Without revenues, they wouldn’t be businesses at all. And things have improved greatly over the years.

When Yahoo was experimenting with its premium directory listings, coupled with (for example) Inktomi-or-Google-driven keyword search results, few sought to ask about the rules for buying in multiple categories, how relevance rules were enforced (they had editorial teams, probably an inefficiently high number of them cross-subsidized by Yahoo’s inflated early profits from ineffective banner ads), or how rank order should be determined when an advertiser was in a second or third category. Few were sophisticated enough to ask. And although there were a few online forums and so on, the amazing thing is there was no Facebook and Twitter (and no slavish fear of them so that every move a company makes needs to worry every day about “what everyone is tweeting”), so you did not have a lot of deep dives or food fights over how people’s listings showed up. Needless to say, things sucked much worse then, and people knew less.

Progress, Accountability and Transparency

The key difference today is that (1) things suck much less; (2) companies like Google, Yelp, TripAdvisor, and pretty much everyone else can’t help but hearing constant streams of input and feedback, much of it negative; (3) people think they know much more about information retrieval.

The problem is — with (3) — people think they know more about information retrieval because more people are using these sites and advertising on them. Unfortunately, few know any more about information retrieval than we knew a few years ago. Most every business is in the same mode businesses have been in their dealings with Google Search since 1999: if a competitor is doing better on Google Search, then Google Search must be broken, or corrupt. It’s just far easier to point out problems than it is to design a massive system geared to please everyone.

But search and directory companies are trying to improve as they attempt to balance revenues with ever more transparency, relevance, and trust. They will have to do so with 80% technology, and 20% editorial oversight. Consistent, published rules will be helpful, and must be applied to everyone without exception. Neither inter-advertiser fairness nor the user experience are subjective matters; both can be measured.

If search, directory, and review sites don’t follow through on those objectives, then users will leave. The services will become pure advertising, as the Yellow Pages were; services that few people would voluntarily use. These aren’t monopolies. Other services are only a click away, as Sergey Brin is fond of pointing out.

On a regular basis, business owners have useful and important feedback that helps change how search (etc.) companies deal with paid listings. Sometimes there are significant problems with a large publisher like Google abusing its power, and a groundswell is needed to force change, such as this Change.org petition to allow advertisers the old ad rotation option in AdWords. (I signed that one — I felt strongly about that issue. Naturally, there will be other petitions, as there are always going to be unresolved platform complaints. I probably won’t sign the next one, because I’ve been writing publicly to a wider audience as well as communicating with Google for years, not signing protest petitions. They don’t always listen, but I believe you aren’t heard anymore if you just complain about everything constantly, or stage “protests” on matters that should be taken care of with routine, respectful input.)

But for the most part, let me go against convention by rejecting the idea that it is fair to take to Twitter every time you don’t like how a competitor shows up in Google, how Yelp’s review filter affected *just your business*, etc., like social media is some kind of “higher court” that should be used to get a specific case looked at in more depth.

The really interesting questions are deeper ones of how these pop-up problems could be dealt with by handling them consistently over the long term — like how do categories work, how does relevance work, what do users find most useful, where are there exceptions that treat some businesses unfairly when other businesses take advantage of loopholes, etc.

Like I said, even the Yellow Pages stuff wasn’t quite as simple as it looks, in its day. “Categories” had to have meaning, and listings had to have some standards. But all of these squabbles took place behind the scenes.

Does anyone, to this day, remember how Yahoo used to rank-order the businesses paying for premium directory listings? No one gives it a thought, but you can be sure that someone at Yahoo could have (or should have, or maybe did) spent a fair bit of thought trying to sort this out, so that the user was given relevant results and the listing businesses (who all paid something) were treated fairly in relation to one another. But outside of those behind-the-scene efforts, no one appears to care very much. The listing businesses suddenly care when their competitor shows up more prominently.

All the hue and cry in the world (business owner tweets, negative press by those journalists who are squeamish about profit-making publishers who also provide great resources to the world) won’t change the missions of companies like Google, TripAdvisor, and Yelp. They do things that set them apart from the Yellow Pages, travel agencies, and the (probably bribed) concierge at the hotel.

HomeStars Seeks a Better Way

And as for HomeStars, which is what motivated me to post this in the first place: HomeStars is significantly different from the many “bought and paid for” contractor referral services that have come down the pike over the years. The core mission is to highlight real reviews from real homeowners, and the business model is supported by paid premium listings, which come with certain clear rules. Any home services business is eligible to list on the site without paying. Quality control on reviews must necessarily be achieved through a combination of editorial and algorithmic means.

To bring up one example of a thorny dilemma in how to implement multiple category membership: let’s say a business (an electrician) is listed in a single category [electricians] and doing well, and wants to upgrade to be included in a second category so customers in a related area [pools, which often require wiring] also see their listing (a privilege that comes with an extra fee). In the Yellow Pages era, the decision would be binary. Either they can pay to do it (period), and editorial says it isn’t too far out of the realm of relevance, or an editorial decision is a firm “no” (locksmiths can’t list under “cupcake stores”). In most cases, the price of the listing is going to take care of the decision. The total price tag for premium listings would climb to the point where irrelevant listings would be (mostly) self-policing.

In the online version of this, with review content, the decision isn’t quite so binary. Consumers demand superior relevance and more information about the business. Business owners may complain that a competitor “shouldn’t be in their category”. There is no black-or-white solution, but there are always ways to improve. HomeStars is considering ways of adding a separate form of feedback by consumers who found that the business wasn’t appropriate for their needs, and that they were misled by their presence in a certain category. If there is enough of that type of feedback, it could form part of the ranking algorithm, or cause the business owner itself to rethink their presence in a category which is too much of a “stretch”.

In any case, similar to Yelp, Google, et al., HomeStars can’t and won’t change its long-term mission just because one business is squabbling with another. That would defeat the whole purpose. Feedback is important to help HomeStars figure out how to do a better job of, for example, enforcing relevance in categories (not just counting reviews, but figuring out who can and should show up in multiple categories and multiple service areas… a seemingly simple matter, but not nearly as simple as it sounds… much harder than it used to be at the Yellow Pages… though as I’ve already argued, some of that complexity was buried behind the scenes in the pre-online world).

Even the mighty Google listens to constructive feedback, as the Change.org petition episode showed. Other kinds of feedback, out of necessity to the larger mission, have to get ignored in the noise of “me first” style beefs, and Doc-Searls-style out-of-hand rejections of all advertising. (The family of solutions that Searls proposes to allow customers to signal their intentions, thus obviating the need for intrusive advertising, ironically, just shift power from an interruption-based medium to a lead-generation platform; ‘winning’ business via such an ‘unbiased’ platform is no less likely, in the real world, to be free of bias, nor immune to rising costs and barriers to entry. Incidentally, HomeStars has been building an early prototype of a platform in this genre, called simply “The Project Tool.” It is currently free of charge.)

Google has shown (though Searls missed it in his book by forgetting that Google launched its CPC auction with relevancy scoring in 2002, not 2000, which was a CPM-based, fixed-price prototype) that categorized and keyword driven advertising can get better if they refine and iterate. That’s all we’re trying to do — get better. You can decide for yourself if that changes the world or not.



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